PayPal: The Next Chapter

Michael  Porter; Mark  Kramer; Annelena  Lobb

Case | HBS Case Collection | August 2020

PayPal: The Next Chapter

by Michael Porter, Mark Kramer and Annelena Lobb

Abstract

Can a social purpose and stakeholder capitalism confer a powerful competitive advantage in the age of COVID-19? For PayPal, the answer is yes. After spinning off from eBay in a 2015 IPO, the company declared its purpose as "democratizing financial services" by ensuring that low-income consumers and small businesses can efficiently and inexpensively manage their money. The company fully lives into this purpose, sending employees out into communities to experience firsthand the indignities and high fees imposed on the unbanked, dramatically lowering the cost of international remittances, enabling small businesses to access working capital without credit checks, and facilitating cross-border purchases for small merchants. The company takes the welfare of each stakeholder group seriously: achieving racial and gender pay equity, raising hourly worker pay and benefits to ensure a living wage, and building a diverse and inclusive culture; working closely with regulators and law enforcement to unearth signs of sex trafficking and terrorism; aggressively removing hate-group transactions; providing $4 billion in credit to hundreds of thousands of small businesses that would never have qualified for bank loans, especially those owned by women and people of color. Together these actions have built a high degree of trust that creates a competitive moat in the otherwise commodity business of online payments. During the pandemic, the company was able to get stimulus funds to individuals and small businesses far faster and less expensively than banks or the SBA, and committed $500 million to investments in black-owned businesses. In the 5 years since its IPO, despite intense competition from major banks and credit card companies, Google, Apple, and countless VC-backed fintech players, the company has more than doubled its users, increased profits and boosted the stock price 500%.

Keywords: Mission and Purpose; Finance; Business and Stakeholder Relations; Social Entrepreneurship; Competitive Advantage; Financial Services Industry;

Language: English

Format: Print

25 pages

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Citation:

Porter, Michael, Mark Kramer, and Annelena Lobb. "PayPal: The Next Chapter." Harvard Business School Case 721-378, August 2020.

Unilever subsidiary Dove soap became a "brand with a purpose" and created shared value when the company decided to launch a Campaign for Real Beauty to combat the artificial media-driven stereotype of female beauty that causes appearance anxiety in women and girls around the world. From as young as 6 years of age, girls develop concerns about their body image that affect their self-confidence, relationships, health and careers. Through research and evidence-based practices, Dove developed a global campaign including advertisements, school curricula, online resources, public events, policy advocacy, and training sessions that reached more than 35 million girls and women across 140 countries. Rigorous evaluations demonstrated positive impact in self-esteem and body image while driving a decade of consecutive sales growth for Dove, ultimately becoming Unilever's biggest brand. Yet the challenge of deciding how to allocate funds between advertising the product and conducting educational programs to deliver social impact remained. The company also faced criticism about other Unilever brands, such as Axe or Fair & Lovely, that contradicted the Dove campaign.

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PayPal: The Next Chapter

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