Will Ripple Be the Next PayPal?

PayPal (PYPL -0.96%) is an experienced leader in the world of financial technology. Its digital-payment system has been the lifeblood of the e-commerce market for years.

The RippleNet blockchain network was designed to carry cash payments quickly, with low fees and across international borders. These features are powered by the XRP (XRP 1.65%) digital token, often referred to as Ripple, due to its close association with the payment system.

Many investors are wondering whether Ripple poses a threat to PayPal in the long run, thanks to their overlapping-use cases. Will the digital upstart steal PayPal's crown, installing itself as the king of international e-commerce payments?

What PayPal does well

PayPal's business is gigantic in every way. In the recently reported second quarter of 2022, it managed a payment volume of $340 billion, generating $6.8 billion of top-line revenue from payment fees. Payment volumes rose by 13% year over year on a currency-neutral basis. The most effective growth engine right now is the Venmo money-transfer app, where the commerce volume more than tripled from the year-ago reading.

This payment system benefits from robust economies of scale. Any challenger to this giant better bring its A game to the fight.

What Ripple does better

As powerful as PayPal is, its system still operates much like a traditional bank. PayPal holds more than $37 billion in customer accounts and funds receivable, balanced against $40 billion in funds payable and cash due to customers.