The Total Economic Impact of PayPal Checkout

Executive summary

The merchant payment provider market is complicated, filled with an ever-evolving mix of old and new technologies, strict regulations, and a revolving door of new mandates, players, and operating models. To keep up with this dynamic environment, merchants rely on their payment providers to stay ahead of the pace of change.¹ Merchants require a payment provider that can build customer loyalty and trust, offer seamless checkout experiences, provide ”buy now, pay later” options, and support global markets.

PayPal is a well-established and trusted brand in the payment provider market, which helps customers feel more secure and confident when making purchases. PayPal Checkout is a secure and convenient online payment solution that allows customers to make purchases using their PayPal account or guest checkout, providing a seamless and trusted payment experience across various merchants. PayPal Pay Later is a suite of financing options provided by PayPal that allows customers to make purchases and pay for them over time, offering flexibility and convenience with deferred payments and installment plans.

Key findings

• Incremental profit from increased conversion rate of 1 percentage point worth $28.2 million in profit. PayPal Checkout increases payment trust and security, provides a convenient and often improved checkout experience, and expands reach by catering to an international consumer base. As a result, PayPal drives a higher conversion rate for the composite organization than traditional payment options like credit cards.
• Incremental profit from increased PayPal Checkout AOV of 10%. PayPal is a well established and trusted brand, which helps the composite organization’s customers feel more secure and confident when making purchases. PayPal Checkout offers an enhanced checkout convenience and speed, allowing customers to pay with a few clicks and without the need to enter credit card details or shipping information repeatedly. The increased trust and user-friendly checkout experience contribute to higher average order values for the composite organization.
• Incremental profit from PayPal Pay Later and increased AOV of 35%. For the composite organization, PayPal Pay Later drives a larger average order value than both traditional payments and PayPal Checkout. Pay Later gives customers increased purchasing power by allowing them to spread out their payments over time, making higher-priced cart values more accessible. This leads to the composite’s customers being more willing to make larger purchases.
• Incremental profit from customer retention lift. Customers purchase more frequently with PayPal Checkout compared to traditional methods. By improving customer trust and loyalty, reducing payment friction, and offering enhanced security and payment protection, customers were more likely to purchase from the composite organization more frequently
• Reduced cost of payment acceptance. The composite reduces the cost of payment acceptance for all payment volume that goes to PayPal Checkout. This offsets the PayPal rate.

Analysis of benefits

Incremental profit from increased conversion rate

Interviewees cited that PayPal Checkout increased payment trust and security, provided a convenient and often improved checkout experience, and expanded reach by catering to an international consumer base. In turn, interviewees saw higher conversion rates with PayPal than with traditional payment options like credit cards.

Incremental profit from increased PayPal Checkout AOV

PayPal is a well-established and trusted brand, which helps customers feel more secure and confident when making purchases. Interviewees said that PayPal Checkout offered enhanced checkout convenience and speed, allowing customers to pay with a few clicks and without the need to enter their credit card details or shipping information repeatedly. The increased trust and user-friendly checkout experience contributed to higher AOV.

Incremental profit from PayPal Pay Later

Pay Later gave customers increased purchasing power by allowing them to spread out their payments over time, making higher priced cart values more accessible. This led to customers being more willing to make larger purchases.

In addition to the lift in average order value, the VP of e-commerce at one retail organization noted they experienced an increased frequency of repeat purchases when PayPal Pay Later was a payment option.

Incremental profit from customer retention lift

Several interviewees noted that PayPal Checkout drove greater repeat purchases and customer loyalty. By improving customer trust and loyalty, reducing payment friction, and offering enhanced security and payment protection, interviewees found that customers were more likely to purchase more frequently.

The senior manager of alternative payments at a retail organization noted they saw a 5- percentage-point increase in customer retention.

Unquantified benefits

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:

• Improved global reach. PayPal’s international operations, infrastructure, and reputation helped interviewees’ organizations enter new international markets.
• Reduced fraud. Several interviewees noted that they realized less fraud, saving them credit card chargeback fees and contact center operational costs.
• Strong vendor partnership and support. Interviewees praised the partnership and support they received from PayPal.
• Reduced risk of downtime. Incorporating PayPal Checkout gave interviewees’ organizations redundancies in case other payment options experienced an outage.
• Venmo integration. Interviewees said that they were exploring integrating Venmo into their payment options to provide more options, appeal to younger demographics, and increase conversion rates.³
• Marketing campaigns. Several interviewees used PayPal’s comarketing campaigns to drive further traffic and conversion.