Square And PayPal - Payment Technology Battle Continues

Over the past few years, more and more consumers have turned to the Internet to do their shopping. Amazon has managed to capture the mass majority of consumer spending, while PayPal and Square have worked diligently to capitalize on the money consumers spend. Although PayPal isn't directly linked to Amazon, it does work closely with eBay and other retailers online and it is widely considered to be the world's leading payment process. However, as of late, PayPal has experienced increased competition in the market, especially from the fairly new startup Square. Which company will emerge as the leader, once the dust has settled?

While Square has worked diligently to try and steal some of PayPal customers, PayPal has played the defense and has worked hard to enhance their services for consumers. PayPal's latest move will provide sellers with additional protection. On Wednesday, the company announced that they would be added Seller Protection for certain intangible items, including fashion attire, hand crafts, and even art. Seller Protection is generally designed to prevent buyers from filing fraudulent chargebacks, while hurting the business owner. The move will definitely will PayPal a few points with sellers, since chargebacks are an immense problem and cost businesses thousands of dollars each and every year.

Another thing to consider is investor confidence in both companies. While Square has barely managed to peak over the nine-dollar market, PayPal has continued to soar higher and higher over the years. And, analysts sincerely believe PayPal has room to grow, while many have doubts about Square's future and ability to grow profitable. Deutsche Bank reiterated their current buy rating for PayPal. Even more surprising is the fact that the analyst gave the stock a $44 price objective. At this point in time, PayPal's share price is right above $36. Analysts believe the company's stock has the potential to come quite a bit, before it hits its peak.

Another potential obstacle for both companies is the emergence of TransferGo. With such strong competitors entering the market, both companies will need to work harder in order to maintain their customers and continue adding more. Recently, a potential PayPal takeover by MasterCard has been discussed with great interest. Although the prospect is interesting, some speculate that the move wouldn't make sense for either side of the arrangement and could potentially destroy value for both companies. Nonetheless, the buyout is simply speculative and highly unlikely.

In fact, PayPal is often the brunt of such rumors. Just last year, it was rumored that AmEx was interested in acquiring the online payment processor. Nonetheless, PayPal is receiving the offers, while Square is simply hanging on by a thread. Square, a credit card payment processing company has been competing with PayPal for several years now. Since, 2017 Square has seen a gradual drop in earnings from $0.02 to $0.31 per share.

This is unfortunate for the company and analysts are having second thoughts. Square fees are slightly higher than Heartland Payment Systems, but it continues to take a loss on transactions. The company will need to rethink their business strategy, if it expects to overcome these losses