By Ray Birch
SAN ANTONIO—By acquiring PayPal, Stripe wouldn't simply create a larger payments company—it could accelerate the emergence of a consumer financial powerhouse capable of competing more directly with banks and credit unions for payments, deposits and everyday financial relationships.
That's the view of Brian Scott, co-founder of RAI Partners, who said a reported $53-billion bid by Stripe and private equity firm Advent International deserves close attention from credit unions, even though significant regulatory and valuation hurdles remain before any deal could happen.
Reuters recently reported that Stripe and Advent offered $60.50 per share in cash for PayPal, valuing the company at more than $53 billion. The proposal would combine Stripe's dominant merchant-processing business with PayPal's more than 430 million consumer accounts, Venmo and digital wallet ecosystem, creating one of the world's largest payments platforms. Reuters said the combined company could process an estimated $3.7 trillion in annual payment volume, strengthening its ability to compete with Apple Pay and Google Pay.
PayPal's board reportedly believes the current offer undervalues the company and has not accepted the proposal, although discussions continue. PayPal, recently, also reported stronger-than-expected second-quarter earnings and raised its full-year outlook, reinforcing management's argument that the company is worth more as a standalone business.
Scott said the strategic logic behind the deal is compelling.
Move Makes Sense
"First of all, it makes all the sense in the world for Stripe because Stripe has obviously been very merchant-focused and PayPal, with PayPal Wallet and Venmo, has been very consumer-focused," Scott said. "It makes all the sense in the world for Stripe to acquire something like 400 million consumer accounts."
More importantly, Scott believes the combination could evolve beyond payments.
"The interesting thing here is the idea that you combine the two of them and they become more of a depository powerhouse," he said. "If you're using Stripe to pay a lot of merchants and you already have PayPal or Venmo in your wallet from the consumer side, you can start storing more funds in your PayPal or Stripe account."
Scott pointed to PayPal's reported pursuit earlier this year of an industrial loan company (ILC) charter, which would allow it to offer FDIC-insured savings accounts and gain more direct access to payment infrastructure.
"You combine that with Stripe, and there's a potential powerhouse brewing there," Scott said. "They certainly become a payments powerhouse when you combine PayPal, Venmo and Stripe together."
Why Credit Unions Should Care
For credit unions, Scott said the biggest threat isn't simply another payments competitor—it's another destination for consumer funds.
He compared the trend to Starbucks' prepaid app, where consumers collectively leave billions of dollars sitting in stored-value accounts rather than traditional financial institutions.
"This is another example of nickel-and-diming away credit union deposits," Scott said. "The money people have sitting in PayPal, Venmo, Cash App or even Starbucks isn't a lot individually, but when you total them all together, it is. All of those are deposits that credit unions are missing."
Consumers also lose potential earnings by keeping money in non-interest-bearing digital wallets, he added.
"Consumers are not getting paid interest on those deposits, so there's a financial impact to consumers as well."
Industry analysts have increasingly noted that stored-value balances and digital wallets represent a growing competitive challenge for financial institutions because they reduce both deposit balances and transaction activity that historically flowed through banks and credit unions.
Payments Are Becoming The Battleground
Brian Scott
Scott said the potential merger reinforces a broader trend that credit unions have been facing for years: payments are becoming the center of the consumer financial relationship.
"The payments are the key to the future of any financial institution," he said. "You can either take the initiative and be innovative, or you can have the market dictate to you what's going to happen. This is an example of the market potentially dictating how people pay."
His advice to credit unions hasn't changed.
"Do everything you can to build a moat around the core things you do today—primarily lending and deposits—and really hunker down and focus on those two things, because almost every fintech challenger out there is focused on those same things."
Significant Obstacles Remain
Scott cautioned that any transaction would still face major obstacles.
Because the combination would unite two of the world's largest payments companies, regulators are likely to closely examine potential antitrust issues. Scott also noted that PayPal's board appears to believe the current offer is too low, meaning price negotiations could prove just as difficult as regulatory approval.
Still, Scott believes the partnership with Advent gives the proposal credibility.
"I think this one has a real chance to happen," he said. "The fact that Stripe partnered with a private equity firm is important. Advent has enough capital to make this happen, and if they get to the right price, I think this has a real chance."
He added that private equity ownership could also speed integration by making difficult operational decisions more quickly than two public companies might otherwise manage.
Whether or not the acquisition ultimately closes, Scott said it highlights a competitive reality credit unions cannot ignore: the fight for deposits increasingly begins with who controls the consumer's preferred payment experience, not who offers the best checking account.