Should You Buy PayPal Stock For Its Credit Business

PayPal (PYPL) has gained 27% over the past three months while the S&P 500 returned 0.7%. Over the trailing twelve months, the stock is still down 18.7%, so the whole gain is recent. A gain that recent still needs an operating reason to hold, and management points to what PayPal lends, not to the checkout button.

What Is Holding PayPal's Checkout Number Steady?

Online branded checkout volume grew 2% on a currency-neutral basis in the second quarter of 2026. That held the same rate for a second straight quarter. Management says the 2% came in slightly better than its own expectations, mainly from accelerating buy now pay later, Pay with Venmo, and faster growth in the U.S. Buy now pay later volume grew 26% in the second quarter of 2026, up from 23% in the first quarter of 2026.

Temu switched on buy now pay later in Canada, taking availability to eight markets. Another merchant in Canada began presenting buy now pay later offers before the checkout page. One exclusive agreement with a leading fashion retailer is the clearest case of that expansion paying off. Management says that account went from declining volume to close to 10% growth in the second quarter of 2026.

Is PayPal's Financial Services Arm Big Enough To Matter?

PayPal's financial services portfolio includes credit and buy now, pay later. Management says financial services already makes up close to 20% of the company's transaction margin and is growing at a double-digit rate. Its revenue is on pace to grow at least twice as fast as the company as a whole in 2026. On a business carrying $34.1 billion of trailing-twelve-month revenue, that mix shift compounds over years without transforming the company in a single year.

The push is meant to be self-funded. Management has committed to at least $1.5 billion of gross run-rate cost savings over the next two to three years, about $400 million of it identified so far. It intends to reinvest a significant portion of that in growth initiatives, and the CEO has said most of the investment will be self-funded this way. Management says PayPal will soon launch an integrated consumer lending partnership with Amazon for Germany and Austria.

How Would You Know The Lending Bet Is Working?

The doubt is earned. Analysts have pressed management on strategies and investments at PayPal that did not necessarily materialize. So far, buy now pay later has helped hold branded checkout steady. Acceleration in branded checkout has not arrived.

So watch one number. Management expects branded checkout growth to stay at about 2% in the third quarter of 2026. If buy now, pay later is the lever it looks like, that is the figure that has to beat management's guidance.

The stock still leaves room for that to pay. PayPal has a history of moving fast. It has gained more than 30% in two months eight times since it began trading in 2015, the earliest of them in 2017.

Management also raised its full-year 2026 guidance for transaction margin dollars and non-GAAP earnings per share. That is worth testing against other companies where guidance is already moving higher.

So Do You Buy PayPal Before The Lending Pays?

Perhaps, but only if you can wait. The payoff depends on a reinvestment cycle that runs for years. You would be paying for it today. Before you commit, be clear that the lending arm is already growing fast; it is the company-level payoff that asks you to wait. And if you would rather not make that call on a single stock, look at the Trefis High Quality Portfolio. That portfolio has a track record of outpacing the three major indices.