It was, of course, inevitable. The three credit card giants -- Visa (V -1.43%), MasterCard (MA -1.60%), and American Express (AXP 0.97%) -- have all piled into the e-payment space and are attempting to carve out some share. That, of course, will theoretically come at the expense of PayPal Holdings (PYPL -1.85%), the company most directly associated with this form of commerce.
That triple threat is scary, given the size and power of that multi-headed giant. But has the troika of incumbents yet managed to crimp PayPal's business in any significant way? Perhaps not.
Each card giant rolled out its e-payments solution relatively recently. Visa Checkout and MasterCard's MasterPass both launched in 2014, while American Express' Amex Express Checkout unlocked its register last year. None of these services are being aggressively marketed, in contrast to other initiatives from the three companies.
Meanwhile, the three do not (yet) break down the business of their e-payment solutions from their broader results; in fact, they hardly mention them at all.For example, Visa's 163-page 2015 annual report mentions "Checkout" a grand total of five times. The only hard data provided is that the service is available in 16 countries, has 9 million registered users, and "covers nearly $85 billion of addressable e-commerce volume."
But that doesn't tell us much about what the service is contributing in terms of revenue or profit. It's one thing to make it available and sign up willing cardholders; it's quite another to get people to actually buy goods with it.
I think the under-the-radar presence of the two services, and the shyness in breaking out performance figures, are revealing. They indicate that actual utility hasn't yet been significant. And that take-up number doesn't wow -- Checkout's 9 million sounds high, but we should bear in mind that Visa's brand name was stamped on 2.4 billion cards around the world as of the company's most recently reported quarter.
If we turn our attention to PayPal Holdings' latest (Q3 2015) results, it's clear the company still has a firm grip on the e-payments segment.
The company's total payment volume (which it defines as "the value of payments, net of payment reversals, successfully completed through our Payments Platform, excluding transactions processed through our gateway products") rose by a sturdy 20% on a year-over-year basis to reach almost $70 billion. That strongly outpaced the U.S. e-commerce growth rate of 15% for the quarter, so the company almost certainly picked up some market share.
Total transactions increased by 25% to over 1.2 billion, while the number of active customer accounts improved by 10% to hit 173 million.
That doesn't seem at all like a company withering under assault from competitors.
There are numerous reasons for this. First, PayPal has been established as the to-go online payments system for years now.
Compare that with the competition. Quick -- what leaps to mind when you hear the term "pay with (insert card brand here)"? Probably some sort of visual involving the retrieval of a plastic rectangle. In other words, Visa, MasterCard, and American Express are still firmly identified with the physical act of reaching for a credit or debit card and either presenting it to a merchant, or laboriously entering its digits into a form for an online purchase.
So the three incumbents have to get over the perception that they operate aging, somewhat cumbersome payment systems if they're going to make serious headway in the e-payments world. That's going to take some time, especially since none seem eager to make a strong marketing push at the moment.
At least they've nailed down the technology. Visa Checkout, MasterPass, and Amex Express Checkout are all well engineered to be as-few-clicks-as-possible solutions -- once a user registers his or her details, they only need to provide a username and password to subsequently use the chosen service on a partner merchant's site.
Except that PayPal's got the click minimization thing down too. In 2014, it rolled out its OneTouch service, allowing users who stay logged into its service to do fast click-and-buys whenever PayPal is presented as a checkout option.
A pass on Checkout
As a person who regularly writes about finance, not to mention a guy who likes buying stuff -- and as conveniently as possible -- I've signed up for both Visa Checkout and MasterPass (I use my Amex infrequently, so no Express Checkout, at least not now).
But I haven't used either yet, compared with the numerous times I've gone the PayPal route. Although Visa Checkout and MasterPass are connected to a score of merchants, they don't seem to show up at the sites where I'm shopping, while PayPal is a frequent option.
No doubt both will raise their presence, as will Amex Express Checkout (which, at the moment, only lists a handful of retailers as partners). And if the companies behind them are willing to commit the time and resources to the effort, they might be able to bite away at PayPal's market share.
But just now, that isn't happening.