Is PayPal’s Next Big Thing Already Here

A reported $60.50-a-share offer from Stripe and Advent in July lifted PayPal (PYPL) stock, but the bidders walked away in late August without a deal, according to Bloomberg. Without a buyer, investors need a catalyst from the business itself, and that is difficult to find given that branded checkout, where shoppers pay with PayPal online, recorded just 2% growth in payment volume during fiscal Q2 2026.

However, management says a newer line of business is on pace to grow revenue at least twice as fast as the whole company in 2026. Which business is that, and is it working yet?

PayPal's Loans To Shoppers Are Already Growing

That business is financial services: the credit and Buy Now Pay Later loans offered across PayPal and Venmo. Management noted on a July 28 call that Buy Now Pay Later continued to take share from other payment methods, with its payment volume growing 26% in the quarter.

Merchants are providing early signs of traction. Temu added PayPal's Buy Now Pay Later in Canada during the quarter, meaning its shoppers can now use the service in 8 markets. Executives also highlighted an exclusive Buy Now Pay Later deal with one leading fashion retailer, where PayPal's payment volume shifted from a decline to close to 10% growth in the second quarter.

Further expansion is underway. Management announced on the same call that PayPal would soon launch a consumer lending partnership with Amazon for Germany and Austria.

Can Lending Move A Company As Big As PayPal?

Management believes it can over time. Executives expect financial services to become the largest driver of future growth in transaction margin, which is the money PayPal keeps from its revenue after transaction costs and losses. The company now expects PayPal's total transaction margin to reach about $15.6 billion in 2026.

Lending remains just one part of a vast enterprise, and the reported figures do not break out its standalone size. PayPal reported $8.68 billion of revenue in fiscal Q2 2026, up 4.8% from a year earlier. Given that scale, a fast-growing unit typically serves as a gradual addition to the overall business rather than a sudden transformation.

The market currently prices PayPal well below the broader index. At the October 15 close, PayPal stock traded at 10.2 times its earnings over the past twelve months, compared with 22.7 for the S&P 500. Yet its revenue has grown about as fast, averaging 6.1% a year over the past three years against 5.9% for the S&P 500. That multiple has risen from 7.8 at the end of June. The takeover reports lifted the shares in July, and they have held that gain even after the bidders walked away. Over the past year, the stock lost 15.4%, while the S&P 500 gained 18.8%.

What Has To Go Right For PayPal's Lending?

First, shoppers must continue repaying their loans. Management cited continued strong credit performance among the quarter's drivers of transaction margin.

PayPal also has to prove its new spending will yield returns. Executives highlighted the Amazon lending deal as a good example of the investments the company plans to make. On the July 28 call, management was asked what made this plan different, given that past strategies and investments had not necessarily materialized. The company's timeline requires patience: management expects momentum from its new investments to build in the second half of 2027 and continue through 2028.

When the company reports its third quarter, PayPal's revenue growth in financial services relative to the whole business will be the key figure to watch.

Does This Mean You Should Act On PYPL?

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