THE GOOD, THE BAD, AND THE UGLY
- J. Michael Bradley
- 13 minutes ago
- 16 min read
What Could Go Right and Go Wrong with a Potential Stripe Acquisition of PayPal
In late February, Bloomberg reported that Stripe — still private, valued at $159 billion, the undisputed infrastructure king of internet payments — had expressed interest in acquiring all or part of PayPal, whose market cap has cratered to roughly $43 billion. PayPal shares jumped nearly 7% on the news. Analysts scrambled. Mizuho called PayPal “deeply undervalued.” Truist maintained its Sell. Raymond James said a full takeout was unlikely, but asset sales weren’t.
The speculation around any possible acquisition of PayPal is not primarily about market share, processing volume, or competitive positioning in the traditional sense. It is about which company gets to own the identity and payments layer of the digital economy.
To me, there are two critical pillars to own the identity and payments layer: 1) access to consumer data, including behavior and 2) broadening the payments infrastructure layer beyond credit card rails and the existing Visa/MasterCard/AmEx triopoly.
And depending on how Stripe would conceivably play this — surgically or recklessly — it either accelerates that future by five years, or it inherits a mess that slows it down by the same amount or much more...
First, The Tumbleweed Scene: Background and Context
Before we can score this deal, we have to be honest about where each company actually stands.
Stripe is arguably the most dominant payment infrastructure company on earth. If you’ve built a business on the internet in the last decade, you’ve almost certainly either used Stripe or built on top of something that does. What started as a famously elegant seven-line API integration has scaled into a platform processing the equivalent of 1.2% of global GDP. The Collison brothers built something remarkable: a company that made itself invisible by design, so deeply embedded in digital commerce that developers don’t think of it as a vendor — they think of it as the digital economy’s power grid; plug in, and your business is “on”.
And recently, Stripe has been signaling very clearly that an industrial-level utility provider for digital merchants isn’t enough. The acquisitions of Bridge (stablecoin infrastructure, U.S. bank license), Lemon Squeezy (merchant of record for creators), and the buildout of Stripe Treasury, Stripe Link, and Stripe Terminal have indicated that it wants to own a greater share of the entire commerce stack — from bank rails to payment infrastructure to checkout to consumer identity. At a private valuation of $159 billion, they have the firepower and acumen to make big, bold bets.
PayPal is a more complicated story; let’s give the company its due before getting too critical.
PayPal invented the category of internet payments. Full stop. In the early internet era, PayPal cracked the code on consumer trust in digital transactions. Today it has nearly 440 million accounts, processes close to $2 trillion in annual payment volume, and is one of only four globally recognized payment networks alongside Visa, Mastercard, and American Express. That is a genuinely extraordinary franchise.
But — and this is the part that matters most — PayPal is strategically rudderless.
It is not a pure payments infrastructure company like Stripe or Adyen. It is not a pure consumer wallet like Apple Pay or Alipay. Its consumer app experience is clunky. Its sprawling acquisitions — Braintree, Venmo, Honey, Xoom, Paidy, Zettle, Hyperwallet — don’t talk to each other and arguably present totally incongruent solutions for their customers. Its branded checkout business is shrinking.
About 60–70% of PayPal’s $2 trillion volume does not come from people logging into a PayPal account. It comes from Braintree (acquired in 2013 by PayPal with Venmo included in the deal), PayPal's unbranded processing arm, which, ironically enough, is most similar in function to Stripe’s core business. When you pay for an Uber, book a stay on Airbnb, or buy a ticket on Ticketmaster, Braintree often processes that transaction. This "unbranded" volume inflates the TPV without requiring any of the 231 million PayPal MAUs to actually open their app.
Branded Volume: Only about 30% of that $2T (roughly $600 billion) is "Branded Checkout" (where someone actually clicks the PayPal button).
If we look specifically at the Branded Checkout volume (the money actually moving through PayPal/Venmo accounts):
Branded TPV: ~$600 Billion
Monthly Active Users: ~231 Million
Average Annual Spend: ~$2,600 per year (or about $215 per month).
Truist estimates it will contract nearly 2% per year through 2028. The stock has lost 41% over the past 12 months and is trading around $40–43 — roughly 7x estimated 2027 earnings, down from a 5-year average of 20x.
To put PayPal’s decline into sharper perspective: Visa (V) currently trades at a P/E multiple of 24.9x. PayPal at 8.6x. Boring old Visa is seen as almost 3x more valuable on a relative basis than the category inventor.
The new CEO, Enrique Lores — parachuted in from HP Inc. in early 2026 — is a known “asset rationalizer.” He’s the man who split HP into two separate companies over a decade ago. The market is watching and wondering: what gets sold, what gets spun off, and what gets kept?
Against this backdrop, Stripe’s reported acquisition interest isn’t surprising. It is, however, worth investigating a rationale that goes well beyond just “buying the competitor.” Let me break down what I see in a potential acquisition into the following: the Good, the Bad, and the Ugly.
