PayPal's dominance in digital wallets is rapidly eroding as competitors capture market share. Bernstein estimates PayPal's share has fallen to about 40% today from roughly 90% in 2017, with rivals like Shopify's Shop Pay and Apple Pay gaining significant ground. The shift comes as e-commerce growth slows and checkout preferences evolve.

While overall e-commerce has grown at about 7% annually since 2023, PayPal's U.S. branded volumes have risen at a slower low- to mid-single-digit pace. Shop Pay has emerged as a direct threat, reaching an estimated $110 billion in volume in 2025 and expanding at about 30% annually. Buy now, pay later providers like Affirm and Klarna have also expanded quickly, further fragmenting the market.

Digital wallets are growing about twice as fast as e-commerce overall, meaning future gains will increasingly come at the expense of incumbents rather than from guest checkout. Amazon, Walmart, and Shopify together now account for about 55% of e-retail volumes, up from 49% in 2023. This concentration, combined with PayPal's historical exposure to desktop purchases and weaker mobile visits since 2024, could pressure the company's pricing power and weigh on gross profit in its branded checkout business.