What Went Wrong at PayPal? Growth Ambitions Collide with Merchant Reality

PayPal’s latest earnings reveal a sobering reality for one of the pioneers of digital payments: innovation alone does not guarantee adoption.

According to reporting by Lynne Marek in Payments Dive (Feb. 4, 2026), PayPal’s growth strategy has been undermined by slower-than-expected merchant adoption of its upgraded checkout technology. The disappointing performance triggered a leadership shake-up, with CEO Alex Chriss stepping down following missed growth targets and weaker-than-anticipated financial results.

Chief Financial and Operating Officer Jamie Miller acknowledged during the earnings call that the company had overestimated how quickly merchants would integrate its revamped checkout solutions. While PayPal invested heavily in modernizing a product it described as “stagnant and underinvested,” merchant uptake lagged — particularly among large enterprises requiring deeper integration support.

The company reported just 1% year-over-year growth in payment volume in the fourth quarter (currency-neutral), down from 5% in Q3, despite the holiday shopping season. PayPal attributed the slowdown partly to macroeconomic softness — particularly in Germany — and reduced consumer spending among lower- and middle-income segments.

Operational and deployment issues further slowed progress, as merchants prioritized competing initiatives. Meanwhile, competitive pressure intensified from BNPL providers such as Klarna and Affirm, as well as Apple Pay, especially in areas like biometric authentication and seamless checkout experiences.

PayPal has now withdrawn its previously announced 2027 outlook, shifting to one-year guidance while it refocuses on strategic merchant partnerships and biometric enrollment. Enrique Lores, former CEO of HP and current board member, is set to assume leadership as the company attempts to reset execution and restore momentum.

The situation highlights a broader lesson for fintech and payments providers: upgrading infrastructure is one challenge — convincing ecosystems to move with you is another.

Source: Payments Dive