Stripe, Advent suspend their pursuit of PayPal

• Key insight: Stripe has reportedly ended its attempt to acquire PayPal for $53 billion.
• What's at stake: PayPal is one of the largest payment companies in the world, though its growth has slowed in recent years.
• Forward look: PayPal has not ruled out an acquisition, though it has said it's committed to its growth plan. 

After PayPal's cool response to Stripe and Advent's $53 billion acquisition offer, a potential deal is reportedly off the table. 

The two firms have ended their attempt to acquire PayPal, Bloomberg reported, adding it would have been the largest deal to date in the fintech industry.

Stripe and PayPal did not comment on the report, which apparently stalls a long pursuit. Stripe has been linked to a potential acquisition of PayPal for nearly a year, with buzz increasing this summer before PayPal balked at the offer.

In a research note, Troy Hooper, co-head of ECM Americas for Mergermarket, said: "With Stripe and Advent out of the picture, PayPal's turnaround now rests squarely on [PayPal CEO] Enrique Lores and his leadership team. PayPal needs to win back market share in its high-margin branded checkout business, where Apple Pay and Shop Pay have gained traction, while developing new products that deepen merchant engagement and create additional revenue streams."

Stripe's summer

Stripe's pursuit came as the company has been stocking up on financial technology. Stripe earlier this summer agreed to acquire OpenRouter for about $7.5 billion. That deal gives Stripe  a platform for researching and switching between various large language models at a time when some financial firms are looking for ways to cut their growing AI costs.

The OpenRouter deal was distinct from Stripe's quest to buy PayPal, which would have given Stripe considerable scale, particularly among consumers — Stripe's traditional business model has focused on supporting payments for merchants and other businesses.

PayPal has about 430 million active accounts. Acquiring PayPal would have grown Stripe's payment volume to $3.7 trillion, or nearly double. Stripe would also get a Luxembourg bank license, boosting its international reach and scale in consumer payments.

Other benefits for Stripe would include inroads to expand enterprise payments and infrastructure for agentic payments.PayPal has a range of properties and capabilities that were also attractive to Stripe, including a merchant acquiring portfolio, PayPal's Braintree payments technology gateway, core wallet and checkout offerings that have significant global presence and could complement Stripe's existing offerings that power wallets for platforms.

And having Stripe as an owner would give PayPal an expanded framework to sell its services to small and medium-size businesses.

Why PayPal was on the block

During its most recent earnings call, PayPal's leaders did not rule out an acquisition, though they said they're focused on their current growth plan.

"PayPal as a company still has significant strengths — a trusted brand, a large user base and a comprehensive payments platform — but it continues to trade at a substantial discount to peers and its own historical valuation levels," Hooper said in his research note. "Management now needs to prove that its turnaround strategy can translate into stronger growth and earnings."

Despite its status as one of the first major payment technology companies, PayPal has struggled in recent years. Lores took over for former CEO Alex Chriss in March, and has since embarked on a restructuring program.Lores announced a full company reorganization including three units: checkout solutions under PayPal, consumer financial services under Venmo and merchant payment services and crypto under Braintree.

A decline in branded checkout growth has contributed to PayPal's slump, a challenge the company has tried to address though investing in AI-powered checkout. PayPal's turnaround plan includes a potential sale or shutdown of the company's venture capital unit, which will not continue in its current form.

PayPal Ventures was founded in 2016 and it has invested in digital asset fintechs such as Anchorage Digital and financial technology firms such as Plaid. It has invested more than $850 million in more than 80 companies.

An OG fintech

Any major change in PayPal's ownership structure would add a new chapter to one of the most interesting financial technology stories of the past quarter century.

PayPal's roots date to the late 1990s. X.com, Elon Musk's former online bank, in 2000 combined with a tech firm Confinity to form PayPal, and Musk became part of a group of entrepreneurs called the PayPal Mafia.

As X.com evolved into PayPal, Musk avoided turning the company into a bank. The then 29-year old Musk told American Banker in 2000 that he preferred X.com to focus on the nascent and unproven digital payments market, relying on the banking industry as a distribution network.

As PayPal took off in the early 2000s, it drew attention from the banking industry as a potential threat. Before eBay bought PayPal in 2002, the online marketplace partnered with Wells Fargo on a payment system called Billpoint.

The idea was to undercut PayPal's fees and keep payments flowing through a major bank. Despite eBay owning 65% of Billpoint, just 15% of eBay sellers were using it by 2001, compared with PayPal's 60% — and unlike Billpoint, PayPal could be used on any website.

PayPal kept ownership of the X.com brand name and tried to revive it in 2009 by using the X.com domain as a hub for developers. In 2011, it relaunched as X.commerce. PayPal split from eBay in 2015, and Elon Musk purchased the X.com domain in 2017.
–Daniel Wolfe contributed to this story.