Why PayPal is Underperforming the 2025 Market Rally: Operational Stagnation and Market Share Erosion

The digital payments sector has experienced explosive growth in 2025, with the global market valued at $111.2 billion in 2023 and projected to surpass $193.7 billion by 2028. Yet, despite this tailwind, PayPal, the sector's long-dominant player, has struggled to keep pace with the broader market rally. While competitors like Stripe and Adyen have surged ahead with aggressive innovation and operational efficiency, PayPal's market share and growth metrics reveal a troubling pattern of stagnation. This analysis examines the structural challenges undermining PayPal's performance, focusing on market share erosion and operational inefficiencies.

Market Share Erosion: A Relative Decline Amid Expansion

PayPal's dominance in the digital payments space has been a hallmark of its success, but its market share has shown signs of relative decline. In 2024, PayPal held 45% of the global payments market, a figure that edged up to 45.52% in 2025. While this slight increase might suggest resilience, it masks a critical trend: PayPal's growth rate has lagged behind its peers. Stripe captured 17.15% of the market in 2025, up from 20.8–29% in 2024, while Adyen's enterprise-focused strategy has driven consistent revenue growth, including a 20% net revenue increase in Q3 2025.

The divergence is stark when examining transaction volume. PayPal's total payment volume grew a modest 3% year-over-year in Q1 2025, while Stripe's TPV expanded 16% to $1.05 trillion. Adyen, meanwhile, processed €1.29 trillion in TPV in 2024, reflecting a 33% year-over-year increase. These figures highlight PayPal's inability to match the rapid scaling of competitors, even as the overall market expands.

Operational Stagnation: Slower Growth and Efficiency Gaps

PayPal's operational performance in 2025 further underscores its underperformance. The company's revenue growth has slowed to mid-single digits, with Q2 2025 revenue rising just 5% year-over-year. In contrast, Stripe's 2024 TPV growth of 38% and Adyen's 33% TPV increase demonstrate a sharper focus on scaling infrastructure and capturing cross-border opportunities.

Operational efficiency metrics also reveal PayPal's struggles. Adyen, for example, processes a staggering €1.29 trillion in TPV with approximately 4,000 employees, generating significantly higher revenue per employee than Stripe, which achieves similar volumes with 8,000 employees. PayPal's efficiency improvements-such as a 19.6% operating margin in Q1 2025-are commendable but pale in comparison to Adyen's 50% EBITDA margin. While PayPal has reduced operating costs by 4% year-over-year through automation, its cost-to-income ratio remains opaque, and its focus on cost discipline has not translated into the same level of profitability as its rivals.

Innovation and Strategic Missteps

Innovation has become a key battleground in the digital payments sector, and PayPal's recent initiatives, while notable, have failed to disrupt the status quo. The launch of PayPal Open in 2025-a platform consolidating payment tools and financial services-and Pay with Crypto, which allows U.S. merchants to accept over 100 digital currencies-reflect efforts to diversify beyond traditional payments. However, these moves come late to a market where Stripe and Adyen have already established strong footholds.

Stripe's dominance in enterprise adoption-62% of Fortune 500 companies now use its services-and Adyen's AI-driven RevenueAccelerate engine have set a high bar for innovation. PayPal's reliance on its legacy brand and transactional model has left it vulnerable to competitors offering more integrated, developer-friendly solutions.

Conclusion: A Ticking Clock for PayPal

PayPal's underperformance in 2025 is not a sudden collapse but a gradual erosion driven by operational stagnation, slower innovation, and efficiency gaps. While the company maintains a 45.52% market share, its inability to match the growth trajectories of Stripe and Adyen raises concerns about its long-term competitiveness. For investors, the key question is whether PayPal's recent cost-cutting and strategic pivots-such as its push into crypto and commerce platforms-can reverse these trends. Until then, the broader market rally may continue to outpace PayPal's progress.