The Battle Has Moved to Payments and Identity from Supply Chain

One of the most exciting battles in eCommerce is being fought over payments. There are a few reasons for this, but primarily they have to do with omnichannel scenarios:

* Authentication. Understanding who your customer is means you can quickly authenticate that they are who they say they are: without pulling out their ID.

The experience with Clear in the airport is best in class, but in retail settings, Amazon's JWO shows that consumers don't just want to walk out; they also want "JWI" (Walk In). There is more to be done here.

* Identity and Membership. What groups are you a part of?

One of the key components to determining pricing is understanding who you are, where you are, and what groups you are a part of. Companies like Okta, SheerID, ID (dot) me are all in this space.

* Digital Wallet.

An electronic, omnichannel, payment vendor-neutral vault is becoming more important because omnichannel scenarios continue proliferating. As you browse and learn online, you want to discover pricing and where things are. Then when you walk into the store, if your payment credentials are on file, if you already have a credit.... true customer convenience means remembering that history.

Amazon, Paypal, Google, Apple, and Shopify are all players in the race to acquire more digital wallets.

What does this mean for Shopify and Paypal?

Shopify:

What Shopify needs most is alternative forms of distribution. Shop Pay is available on Facebook and Google, but beyond there it falls off a cliff.

Shopify is reporting approximately 100M+ buyers opted into Shop Pay at the end of Q4 2022 (earnings data).

Shopify is significantly underpenetrated in omnichannel scenarios at the moment, and so I would expect an area of growth would be either investments or acquisitions in both: payment processors (Enterprise) as well as POS systems.

Paypal:

* Has the most consumer recognition, which still gives it a huge advantage in the payments space. Although Shop Pay has made significant inroads.

* While everyone knows Paypal, what is not well understood is how much Paypal has been investing in eCommerce software and platforms like Shopware, Cymbio, Happy Returns (acquisition). These are areas not as accessible to Shopify.

Paypal's acquisition of Venmo (peer-to-peer) and Braintree (Enterprise) were inspired and necessary for the company to retain its relevance. Shopify does not have these kinds of assets today.

* Probably has been the most patient over the years and has remained relevant. Many brands I speak with continue to report ~25% Paypal payments penetration, which differs by geography.

Paypal reports ~400M+ Paypal users.

Expect more from Paypal in identity and membership, and eCommerce platform distribution deals.

Companies I expect to come off the table in the next few years: SheerID, ID (dot) me, NewStore, PredictSpring, among others.