Breakingviews: PayPal would slot well in a different wallet

After 25 years of muscling in on mega-finance, PayPal should benefit from outside help. A six-month CEO search led to Alex Chriss at Intuit to replace retiring Dan Schulman. The $70 billion company’s struggles, and the incoming chief’s credentials, set the stage for a transaction of some sort.

PayPal has become the most trusted place, beyond banks, for consumers to store their money, according to research firm Euromonitor. Earlier this month, however, its quarterly results disappointed investors again, sending its stock down another 12% and bringing the decline to 80% since a July 2021 peak. Chriss ought to be able to help in one trouble spot, small-business loans, considering his responsibility for such customers at $140 billion Intuit. He also spearheaded its $12 billion purchase of marketing service Mailchimp in 2021, which could augur a deal.

Old-school lenders are probably watching closely. Payments fit nicely with their existing designs on dominating consumers’ spending options. Few could afford such a big acquisition, however, and those that can face obstacles. JPMorgan has partnered with PayPal already, but as the biggest U.S. bank, would have a tough job convincing watchdogs to bless a deal. Citigroup is still on regulatory probation for past slipups.

Facebook parent Meta Platforms is also a plausible suitor. The social network’s own payments system hasn’t gained much traction. And an operation like PayPal’s could help CEO Mark Zuckerberg challenge potential cage-match opponent Elon Musk and his super-app ambitions at X, formerly known as Twitter.

Such a union, however, might create a headache like the one PayPal experienced under eBay’s control. It was precluded from working with the online auction site’s rivals, curbing growth opportunities. The same would be true with Stripe, which otherwise could solve its own plans to go public with a reverse merger instead. The U.S. Federal Trade Commission under Lina Khan probably would stand in the way, too.

A more palatable option would be for PayPal to unite with Fiserv. It provides valuable plumbing, as Visa and Mastercard do. PayPal and Fiserv also have similar market capitalizations, which would facilitate a merger. The biggest hangup might be leadership, considering Chriss’ fresh arrival; Fiserv CEO Frank Bisignano is a JPMorgan alum who was running First Data when Fiserv bought it in 2019.

It also would be a more conservative route for a payments pioneer that spawned the PayPal Mafia, which includes Musk and venture capitalist Peter Thiel. Sexier super-apps might take a backseat, but the combination would nevertheless give the company a chance to expand its financial-technology clout. Given PayPal’s massive slump, Chriss will be under pressure to restore the luster, or to slot it into another company’s wallet.