Games are key to PayPal's life after eBay

PayPal is ditching eBay. The online-auction company is spinning off its payment subsidiary, and game-related transactions are one of the big areas where the payment processor may look to grow.

More than 153 million people have active digital wallets with PayPal, and the company processed $200 billion in payments in the last 12 months. But despite those huge numbers, PayPal faces intense competition from companies like Apple and Google. To ensure its future as it goes independent, PayPal could make immediate gains and ensure its future by focusing on gamers, according to intelligence-firm SuperData Research. The total gaming market reached around $93 billion last year, which is a lot of payments that PayPal could take part in.

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“Among top European markets, well over half of digital gamers have an active PayPal account,” SuperData analyst Joost van Dreunen wrote in his report. “And despite the incumbency of credit cards in the United States, PayPal accounts for 26 percent of digital game transactions, by volume.”

Those figures include PayPal payments on platforms like Valve’s PC digital-distribution network Steam, Microsoft’s online Xbox Games Store, and Sony’s PlayStation Network.

Above: SuperData finds that PayPal plays a role in a huge number of digital-gaming transactions.

Image Credit: SuperData

The company is already a big part of the massive gaming market, but it may start to experience issues as more of the money shifts to mobile platforms. Android and iOS both support PayPal, but credit cards, carrier billing, and Apple Pay/Google Wallet are all competing for those same transactions. SuperData notes that PayPal’s best chance to stick out when it comes to mobile, especially in up-and-coming regions.

“In one of our recent studies, we found that PayPal has room to grow in markets that recently opened up,” said van Dreunen.

This is where gamers will “lead the charge,” according to van Dreunen. Poland and Russia spend a combined $1.5 billion every year on mobile and free-to-play games. In China, 44 percent of digital-game transactions are through a PayPal-like e-wallet. PayPal could work with game companies looking to get into emerging countries around the world.

“Having earned it stripes in Western markets, PayPal has a leg up on localized payment options for digital games markets,” said van Dreunen. “[As publishers want] reliable payment processors when entering new geographic markets.”