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What's going on?

PayPal left investors squirming late last week, with some painful quarterly results.

What does this mean?

It might have been the festive season, but last quarter’s spending won’t have anyone celebrating: after all, Visa and Mastercard both felt the chill of the lackluster holiday, and now it looks like PayPal’s wound up in the same, sad boat. The total value of payments made on the platform grew by a measly 9% last quarter, marking an even starker slowdown than analysts predicted. And sure, overall revenue did hit the mark, but consumer spending looks set to stay tight – leaving the firm with only one real option: slashing costs. So far, 7% of the workforce have been shown the door, which might be why the firm gave a hopeful profit forecast for the year ahead. But spooked investors were more skeptical, and shares took a tumble when the news broke.

Why should I care?

The bigger picture: Winning a losing game.
Squeezed consumers do present PayPal with one upside: more interest in its buy-now-pay-later (BNPL) services. Data out last month showed demand for BNPL offerings is on the up across all age groups, including a concerning rise among the elderly. The thing is, though, that’s not really the kind of business PayPal needs right now: offering interest-free loans is a tough gig, what with central banks on an all-out rate-hiking crusade. And that’s not to mention the higher risk of bad loans now that so many households are in dire straits…

Zooming out: A soft Affirm.
Pure-play BNPL firms certainly aren’t having a good time right now: late last week, US-based Affirm reported whopper losses that confirmed investors’ worst fears. The business said it’s planning to right things by cutting flailing crypto offerings and (surprise, surprise) axing jobs, but investors have been hearing that spiel a lot lately, and they lost no time in ditching its stock.

Originally posted as part of the Finimize daily email.

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