---
title: PayPal's Competitors Aren't Its Biggest Problem. Trust Is
description: PayPal is losing market share to Apple Pay, Stripe, and Google Pay. The branded checkout button is a symptom. The real problem is how PayPal treats merchants and consumers.
author: Darie Nani (Editor-in-Chief)
date: 2026-04-04T13:50:02.457Z
updated: 2026-04-04T14:29:08.948Z
canonical: https://www.sovereignmagazine.com/article/paypal-competitors-trust-problem
image: https://cdn.nanimediahouse.com/paypal-apple-pay-checkout.webp
categories: Business, FinTech
content_type: Editorial
region: Global
publication: Sovereign Magazine
about:
  - type: Organization
    name: Paypal
---

The [Los Angeles Times reported this week](https://www.latimes.com/business/story/2026-04-03/paypal-transformed-digital-payments-now-fintech-leader-is-struggling) that PayPal's core problem is its branded checkout button. Growth in branded checkout slowed to 1% in the fourth quarter of 2025, and since the button generates 65% of the company's transaction profit from just 30% of its volume, that slowdown threatens the entire business. The company is investing $400 million this year to fix it.

Having used PayPal as both a consumer and a merchant, I think that misses the point.

PayPal still processes nearly $1.8 trillion in payments a year. It has 439 million active accounts across 200 markets. Its stock has fallen roughly 85% from a July 2021 peak of $306.89 to around $45. Its board fired CEO Alex Chriss in February after just two and a half years, saying his "pace of change and execution" fell short of expectations. His replacement, former HP chief executive Enrique Lores, is the company's third leader since 2023.

The button is a symptom. The deeper problem is that PayPal has lost the trust of the people on both sides of the transaction, and no amount of investment in checkout UX will repair that.

## Why Merchants Are Turning to PayPal's Competitors

Ask any small business owner who has used PayPal for more than a year and you will hear the same stories. Funds frozen for weeks or months with no clear explanation. Dispute resolutions that default to the buyer regardless of what evidence the seller provides. Currency conversion fees buried inside the exchange rate rather than shown as a transparent line item. Account restrictions triggered by automated systems with no human available to review the decision.

PayPal holds a [1.2 out of 5 rating on Trustpilot](https://www.trustpilot.com/review/www.paypal.com) from nearly 38,000 reviews, with roughly 80% of them being one star. The Better Business Bureau has logged more than 28,000 complaints. The subreddit [r/PayPal](https://www.reddit.com/r/paypal/) reads like a support group for merchants whose livelihoods were put on hold by an algorithm.

I personally know of business owners who nearly went under because of PayPal's automated enforcement. One had their account frozen without warning for over six weeks. They could not pay suppliers, could not pay staff, could not fulfill orders. Every attempt to reach a human produced automated replies. It was only after threatening mass refunds against the entire account balance that anyone at PayPal actually intervened. The account was restored within hours. That is not a customer service failure. You cannot blame merchants for feeling as if this is a system designed to hold your money until you become loud enough to be a liability.

A [federal class-action lawsuit filed in 2022](https://www.engadget.com/paypal-lawsuit-freezing-customer-accounts-funds-073128563.html) described exactly this pattern at scale, with named plaintiffs who had $27,000, $42,000, and $172,000 [seized under PayPal's broad terms of service](https://www.classaction.org/media/evans-et-al-v-paypal-inc.pdf). The CFPB fined PayPal $25 million for deceptive practices as far back as 2015.

For years, merchants tolerated this because PayPal was the only real option for online payments. That is no longer the case.

Stripe now serves 5.3 million business customers, including 92% of the Fortune 100, and generated $18.9 billion in revenue in 2025. Adyen handles [enterprise payment management](https://www.sovereignmagazine.com/article/are-european-merchant-payments-splitting-into-competing-layers) for some of the largest retailers in the world. Both offer transparent pricing, dedicated support, and dispute processes that treat merchants as partners rather than suspects.

The shift is not just about better terms. It is about infrastructure. Through Stripe, a merchant can enable Apple Pay and Google Pay checkout from a dashboard toggle. The payment experience is faster, the fees are clearer, and the merchant never has to worry about a frozen account. PayPal is no longer the gateway to digital payments. It is one option among many, and increasingly not the one merchants choose first.

## PayPal vs Apple Pay: A Question of Trust, Not Features

On the consumer side, the shift away from PayPal is equally revealing. Apple Pay now accounts for 55% of US mobile wallet users. Google Pay reaches 55 million. PayPal's US user base of 92.1 million is projected to grow by less than 1% in 2026, while Apple and Google continue to add users at a faster rate.

The reason is not that Apple Pay has better features. It is that consumers already trust Apple and Google with their most sensitive information. Their photos, their messages, their location data, their biometrics. Adding a payment method to a device you already trust completely is a smaller leap than handing your financial details to a third-party platform with a reputation for poor customer service.

The friction gap matters too. Apple Pay is a double-tap and a face scan. Google Pay is built into Chrome. PayPal requires a redirect to a login page, a password or two-factor prompt, and then a redirect back to the merchant. In a world where [checkout abandonment rates](https://www.sovereignmagazine.com/article/payment-approvals-under-pressure-as-merchants-battle-rising-transaction-failures) climb with every additional step, PayPal's flow feels like it belongs to a different era.

Younger consumers have noticed. Apple Pay is especially popular with Gen Z, who do more shopping on their phones than any previous generation and expect payment to be invisible. PayPal's checkout is the opposite of invisible.

## The Service That Automated Away Its Own Value

PayPal's original promise was trust between strangers. In the early 2000s, it was the safe way to pay someone you had never met on eBay. That trust was built on responsive customer service and a dispute resolution process that, whatever its flaws, at least involved human judgment.

As PayPal scaled to hundreds of millions of accounts, it replaced that infrastructure with automation. Dispute resolution became algorithmic. Customer support became a maze of chatbots and help articles. Account restrictions became automated triggers that could freeze a merchant's entire revenue stream based on patterns, not evidence.

The automation saved money. It also destroyed the one thing that made PayPal different from a credit card processor: the sense that someone was looking out for you.

Merchants learned that PayPal's dispute process was stacked against them. Consumers learned that when something went wrong, there was no one to call. Both sides reached the same conclusion: PayPal was not on their side.

When Apple Pay and Google Pay arrived with the implicit backing of companies that already handled people's most personal data, the trust comparison was not close.

## Three CEOs and a Structural Problem

PayPal's leadership instability reflects the depth of the challenge. Dan Schulman led the company through its pandemic peak and stepped down in 2023 as growth decelerated. Alex Chriss came in with a plan to transform PayPal from a payment company into a commerce platform, resetting merchant pricing and launching new products like Fastlane, a one-click guest checkout tool.

Fastlane showed promise. Guest shoppers using it converted at roughly 50% higher rates than other guest checkout methods. But the board wanted faster results across the entire business. Chriss was removed in February 2026.

Enrique Lores, who spent his career at HP, takes over a company that cut roughly 12,500 jobs since its pandemic peak, announced a [$300 million restructuring plan](https://www.paymentsdive.com/news/paypal-embarks-on-300m-restructuring/756453/), and is migrating its entire infrastructure to the cloud. He has spoken about "executing with greater speed and precision" and investing in AI.

None of that addresses the core issue. PayPal's problem is not speed of execution or the lack of AI features. It is that the company spent a decade treating its users, both buyers and sellers, as interchangeable data points in an automated system. The competitors that are winning did not just build better products. They built relationships that PayPal actively dismantled.

## What PayPal Has Left

There are bright spots. Venmo, PayPal's social payment app, has more than 100 million active accounts and generated $1.7 billion in revenue in 2025, growing at roughly 20% year over year. Debit card usage among Venmo users surged 50% in the fourth quarter. But Venmo still does not monetize its core peer-to-peer payment feature, and Cash App is steadily taking share in the same space.

PayPal Complete Payments, the company's play for small and mid-sized merchants, is meant to bridge the gap between Stripe's developer-focused tools and traditional enterprise processors. The strategy is sound on paper: use unbranded payment processing to build merchant relationships, then convert those merchants to branded PayPal checkout.

The question is whether merchants who have already been burned will give PayPal another chance. Trust, once lost at scale, does not come back because a new CEO says the right things in an earnings statement. It comes back through years of consistent, visible change in how a company treats the people who depend on it.

PayPal built the infrastructure for online payments. It defined the category. But it assumed that being first and being everywhere would be enough to keep people loyal, even as the service got worse, the fees got less transparent, and the alternatives got better. That assumption is now costing the company roughly $250 billion in lost market value.

## FAQ

**Q: Why is PayPal losing market share?**
PayPal is losing market share because of declining trust on both sides of its platform. Merchants have grown frustrated with dispute resolutions that favor buyers, frozen funds, hidden currency conversion fees, and a lack of human customer support. Consumers are shifting to Apple Pay and Google Pay, which offer faster, frictionless checkout and the implicit trust of companies that already manage their personal data. Meanwhile, Stripe has made it simple for merchants to accept those alternative payment methods without needing PayPal at all.

**Q: Why do sellers avoid PayPal?**
Sellers avoid PayPal because of longstanding complaints about its merchant policies. Common issues include dispute resolutions that default to the buyer regardless of evidence, funds held for extended periods without clear explanation, punitive account restrictions triggered by automated systems, and currency conversion fees embedded in the exchange rate rather than shown transparently. Combined with limited access to human support, many sellers have moved to processors like Stripe and Adyen that offer more predictable terms and dedicated account management.

**Q: Does PayPal have a future?**
PayPal still processes nearly $1.8 trillion in annual payment volume and owns Venmo, which has more than 100 million active users and is growing at 20% year over year. Its Complete Payments platform targets small and mid-sized merchants. However, the company faces structural challenges: its branded checkout button, which drives the majority of its profit, is growing at just 1%, and its third CEO in three years must rebuild trust with both merchants and consumers while competitors continue to gain ground.

**Q: What are common complaints about PayPal?**
The most common complaints from merchants include frozen or held funds, dispute outcomes that favor buyers without reviewing seller evidence, hidden fees on currency conversions, automated account restrictions with no human review, and poor customer support. Consumer complaints tend to focus on the checkout experience being slower and more cumbersome than alternatives like Apple Pay, difficulty reaching support when transactions go wrong, and concerns about account security after unauthorized access.