Nearly 20 years later, the company is still going strong, although the days of sliding by on consumer demand are long gone. Competition from sites like Craigslist, Etsy, and CafePress has made a sizable dent in eBay Inc (NASDAQ:EBAY)’s customer base. With eBay Inc (NASDAQ:EBAY)’s earnings report this week disappointing investors, the company’s one bright spot, PayPal, is drawing more attention than ever.
Boosting revenue
Revenue for eBay was good, coming in at $3.9 billion. This was a 14.1% increase from last year’s second quarter. $1.6 billion of that number was from the company’s PayPal division, which helped boost revenue 20%. Investors’ disappointment came from eBay Inc (NASDAQ:EBAY)’s guidance, with the company adjusting projected profit to between $0.61 and $0.63 per share, a number that was below expectations.
PayPal is a cash cow for the company, claiming 60% share of the online payments market. So far, competitors have failed to unseat PayPal as the preferred method of online payment, especially with eBay Inc (NASDAQ:EBAY) building PayPal into its process.
Google makes it easier
But, despite eBay Inc (NASDAQ:EBAY)’s efforts to allow customers to pay directly on its site, PayPal still requires an excessive number of steps for each payment. Google Inc (NASDAQ:GOOG) has simplified the process through its Google Inc (NASDAQ:GOOG) Checkout service, which processes transactions in a shorter time frame.
Yet, Google Checkout still lags far behind in popularity with customers, coming in as the fifth most popular online payment method behind smaller names like Authorize.net and usaepay.com. It’s important to note that Google Inc (NASDAQ:GOOG) doesn’t have to take PayPal down to succeed. The company’s ad revenue from its many services helps contribute to its annual earnings.
As the company attempts a move toward mobile, it brought in $14 billion in revenue in its last earnings report. But the big news was in its cost-per-click, which fell 4% from a year earlier while the number of paid clicks rose 3%.
Checkout is one of the many offerings from the search giant. All of its divisions work together to help Google Inc (NASDAQ:GOOG) achieve its ultimate goal: heavy use that increases its ad revenue. Through its checkout, Google Inc (NASDAQ:GOOG) allows shoppers to purchase goods through Android phones, collecting data on each shopper that can help provide more targeted advertising.
Other payment options
But, the real competition for PayPal comes from the likes of Bank of America Corp (NYSE:BAC), whose revolutionary services may beat PayPal. PayPal has made no secret of its plans to venture into the bricks-and-mortar business, but will stores go along?
Currently, Bank of America Corp (NYSE:BAC) customers can deposit checks, receive “shop safe” numbers to keep credit card numbers safe, and pay for items purchased on every website on the Internet. But, tech analysts are pushing for revolutionary payment methods, including the ability to pay for store purchases using a smartphone app.
PayPal’s push includes that capability and the company plans to have partnerships with two million merchants by the end of 2013. But, Bank of America Corp (NYSE:BAC) is working hard, too, with customers already able to pay without swiping using its “contactless payment” option. The company is also rivaling PayPal Here with a Mobile Pay on Demand feature that lets customers accept payment via smartphone or tablet.
Bank of America Corp (NYSE:BAC) witnessed a 70% increase in earnings in its most recent quarter. While the company is still recovering from its 2008 acquisition of Countrywide, its handling of the fallout has been an example of how to cope with a crisis. The company has scaled back, laying off workers and closing branches to combat its losses.
But, the company’s revenue was up only 3%, proving it needs to continue to be innovative to truly compete. As Bank of America Corp (NYSE:BAC), PayPal, and Google Inc (NASDAQ:GOOG) Checkout compete to revolutionize payments at cash registers around the globe, it’s hard to ignore the favorable odds for Bank of America. Because it already has a presence in bricks-and-mortar locations, Bank of America Corp (NYSE:BAC) has less ground to cover in shifting from swiping a credit card to paying without even removing a wallet.
The article Can PayPal Continue to Compete With Big Banks? originally appeared on Fool.com and is written by Stephanie Faris.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Bank of America, eBay, and Google. The Motley Fool owns shares of Bank of America, eBay, and Google. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
