PayPal cuts Irish jobs as growth slows at online payments company

But why is PayPal cutting back now? A company spokesperson shed little light on the matter.

“We are looking at how we make changes that may be necessary to shape the business for the future, for our next wave of growth. So we’re making sure we have got the scale, that we can scale to meet the evolving needs of our customers.

“There is no one single aspect I can point to. It is not a particular response to an economic condition. We are looking at the business as a whole.”

Probing beyond the statement, which offers little insight, it would appear that the Covid-induced rush of new business at PayPal is fading fast.

As lockdown forced most of us out of the shops for the guts of two years, online commerce boomed – and PayPal was one of the major beneficiaries.

In 2020, the first year of the pandemic, it boosted total payment volumes by an incredible 31pc to $936bn and added almost 73 million net new active users.

Last year was almost as good, with total payments volumes growing by a further 33pc to $1.25trn and net new active users by almost 49 million. Flushed with its lockdown success, PayPal management predicted that the number of active users would hit 750 million by 2025 – a 76pc increase on the 426 million active users at the end of 2021.

However, the number of net new active users fell to just 2.4 million in the first three months of 2022, down from 14.5 million in the first quarter of 2021 and 20 million in the first three months of 2020. PayPal now expects the number of active users to increase by a net 10 million in the current year, a fraction of the 2020 and 2021 increases.

If this lower level of increase turns out to be the new normal, then PayPal will struggle to reach 500 million active users by 2025, let alone the previously-hoped-for 750 million.

Growth in total payment volumes has also decelerated dramatically, up 13pc in the first quarter with the company predicting a similar level of increase for the full year.

Still respectable growth, but way down on the runaway growth to which PayPal had grown accustomed during the lockdown years.

Just for good measure PayPal was forced to admit that it had identified 4.5 million accounts that “were illegitimately created”. While the fake accounts represented just over 1pc of the total number of PayPal active users, the announcement once again drew attention to the fraud problem that plagues the entire fintech sector.

The favourite method of PayPal scammers is to issue invoices, apparently on behalf of a reputable organisation such as a well-known company or charitable body. The recipient, wrongly believing the invoice to be legitimate, presses ‘pay’, transferring the money from their PayPal account to the fraudster’s.

Even though PayPal’s anti-fraud defences are generally reckoned to be best-in-class (its fraud rate runs at 0.17-0.18pc compared to an online money transfer and payments industry average of 1.86pc), that’s still an annual cost of more than $1bn.

While last week’s PayPal announcement has inevitably led to fears in Dundalk and Blanchardstown of further job losses in those communities, the IDA and the Government will be more concerned about what it says about the outlook for foreign direct investment (FDI) in Ireland as a whole.

With inflation having seemingly become deeply embedded, the war in Ukraine dragging on, and fears of a recession growing, will the job cuts at PayPal be the first of many among foreign-owned firms operating in Ireland?

I wouldn’t bet on it just yet. On the same day news of the PayPal job cuts broke, we also heard that Apple had lobbed in a planning application to expand its Hollyhill campus on the northside of Cork city. The scheme, if approved, could lead to the creation of up to 1,300 jobs by 2025 – on top of the 6,000 Apple already employs in this country.

The IDA is still positive about the outlook for FDI.

“IDA Ireland’s experience is that FDI continues to be both robust and resilient,” said an IDA spokesperson.

“2021 was a record year for FDI in Ireland, and despite an uncertain global landscape, the Irish economic outlook for 2022 is positive. That is most clearly evidenced in the number of announcements we’ve had in the latter half of last year and the first half of this year.”