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Market Insights

PayPal - go woke, go broke

PayPal candlestick chart shows a downward trend.

The challenges continue for PayPal as the firm tries to find its feet after a series of disappointments. The difficult macro environment, breakup from ebay and a raft of new competitors have combined forces and sent PayPal tumbling.

As recently as June, PayPal was down 78% from the 2021 highs:


PayPal shares put in a rally from those lows, but ran into a brick wall recently when announcing a new policy, which proved hugely unpopular, sending the stock lower and wiping billions from the market value…

The payments provider updated their acceptable use policy to exclude “the sending, posting, or publication of any messages, content, or materials” that promote misinformation. Fair enough.

However, the company also included a line that would allow them to fine users $2,500 for each violation. The reaction was predictable. Users were outraged, and high profile figureheads piled into the debate, spreading the word and making the public aware.

Former PayPal president David Marcus summed up the sentiment:

“It’s hard for me to openly criticize a company I used to love and gave so much to. But PayPal’s new AUP goes against everything I believe in. A private company now gets to decide to take your money if you say something they disagree with. Insanity.”

Within no time, #PayPalCancelled was trending on Twitter, and there was a surge in searches for “How to delete PayPal” too.

Now, this wasn’t just a reaction to the updated policy. A couple of weeks ago, PayPal was in the British headlines for closing the accounts linked to Toby Young, his Free Speech Union & The Daily Sceptic projects.

UsForThem, a group which campaigned to keep schools open during the Covid-19 pandemic, also reportedly had their account closed.

When asked for comment, representatives responded that “PayPal regularly assesses activity against our long-standing acceptable use policy and will discontinue our relationship with account holders who are found to violate our policies.”

As is every company’s right of course. However, if anyone had concerns that PayPal could take it too far, the power to impose penalties would surely do little to alleviate those fears.

The company attempted damage limitation a couple of days later, with a spokesperson clarifying that “PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy”.

What’s the old phrase about reputation? It takes years to build but only a moment to lose…

Toby Young highlighted the risk: “PayPal’s software was embedded in all our payment systems, so the sudden closure of our accounts was an existential threat.”

Ironically, the policy change was published just a day or two before PayPal launched an all-in-one POS solution for small businesses in the US, overshadowing the release of their fully mobile checkout solution.

However, if users leave PayPal in droves, there’s a risk that investors will follow. The payments provider market is already saturated, and every competitive edge will likely be required in order to prosper. Focusing on social goals and clamping down on free expression are unlikely to win that race.

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Not investment advice. Past performance does not guarantee or predict future performance.