Report: PayPal Transcends ‘Niche’ Status

Dec. 28, 2010

A New York-based consulting firm found that 76 percent of American consumers have an active PayPal account, up from 55 percent two years ago. Auriemma Consulting Group (AGC) said the numbers indicate PayPal has completely eclipsed its humble niche as a way to pay for eBay transactions to become a mainstream payment product for U.S. consumers. PayPal’s changing demographics also point to the service’s evolution, according to AGC Managing Director Patricia Sahm. “PayPal has long been popular with young consumers,” said Sahm, “but it’s striking to find that 69 percent of respondents 45 and older said they have an active PayPal account. Many of our respondents say they feel more comfortable using PayPal rather than their credit cards for online shopping.” The company’s survey also found significant gains in frequency of PayPal usage, rising from an average of 10.8 purchases a year in 2008 to 14.0 annual purchases in the most recent study. Although PayPal still accounts for less than 10 percent of total online sales volume, Sahm said the seemingly inexorable growth of e-commerce drives more and more dollars to the payment service. Also, PayPal accounts are increasingly bypassing the credit card networks altogether. “We’re seeing substantial gains in consumer willingness to provide their bank account information to PayPal,” Sahm said. In 2008, AGC found 45 percent of survey respondents were “uncomfortable” with the idea of providing bank account information to an internet-based payment company like PayPal. In the 2010 study, that share had fallen to 31 percent.