The company says transaction data from its 400 million customers will let retailers identify and target potential customers with more effective ads.

PayPal, which has facilitated billions of online transactions since 1998, now hopes to derive more revenue from the retailers whose digital purchases it processes. PayPal announced Tuesday it is adding an advertising services platform to its core digital payment business and its Venmo unit.

The company will analyze the data it collects from its approximately 400 million customers' transactions, and share that with retail businesses trying to improve the effectiveness of their targeted marketing campaigns. In a prepared statement, PayPal described its offering as a chance to harness a trove of buying histories to "help make merchants smarter to sell more products and services effectively, as well as enable consumers to discover more of what they love."

Let's see how all the people getting ads for the electric pink bow ties they bought on some past--and in hindsight regrettable--whim feel about the innovation.

Since traditional credit card companies have tracked consumer buying to provide individual purchasing profiles to clients for years, what took PayPal so long to follow suit? For starters, the availability and quickly developing power of artificial intelligence (AI) applications to facilitate the task. Meanwhile, it's a new business activity other companies are also just starting to pursue.

Last month JP Morgan Chase announced it will use its customer purchasing information to provide targeted ads for businesses through its web and app purchasing platforms. UK-based pay processing service Revolut and other fintech companies are reportedly preparing to do likewise.

Their objectives in crunching their users' purchasing data will be twofold: identify consumers likely to be interested in particular retailers' merchandise, and then help its ad platform clients craft more effectively targeted marketing messages. That might include tailoring ads by income, age, or buying frequency, and delivering them through what their histories suggest are most appropriate channels--online, through an app, or via smart TVs or other devices.

By using the data power contained in the 6.5 billion transactions it facilitated for 427 million customers in just the first quarter of 2024, PayPal says it can provide "insights to build a dynamic, truly personalized platform that will drive better advertising spend performance for merchants while delighting consumers with compelling offers."

Former Uber advertising general manager Mark Grether will oversee construction of the new PayPal Ads business. That platform's use of AI, meanwhile, follows PayPal's introduction of its "advanced offers service" in January. That enables retailers to tailor cash-back offers, discounts, and other rewards to clients based on their past purchasing activities. Its other attraction: store owners using the AI-enhanced service don't pay for it unless it generates additional sales.

In addition to helping retail clients stoke increased consumer spending through targeted promotions and ads, the innovation is designed to create a new revenue streams to pump up PayPal's sagging growth in payment processing revenues over the past few years. 

In January the company cut 2,500 jobs, nearly 10 percent of its workforce, and said it was expanding its use of AI to improve efficiency and cut labor costs. That cost-slashing move hasn't really boosted PayPal's share price, which has lost nearly 80 percent of its value since its peak price of $308.53 in July of 2021. Executives now new revenue streams from the ad server platform will do the trick.

If it does, PayPal can expect company beyond JP Morgan and Revolut. Specialized marketing and digital payment news site The Drum says experts forecast additional fintech and banking companies to mount new targeted ad services in coming months--possibly taking large swaths of business from traditional media networks.

"Companies like Chase, PayPal, Revolut, and surely more to come have incredibly deep and broad views of customer retail and commerce behaviors due to their position down-funnel after the actual purchase," Edik Mitelman, general manager of analytics firm AppsFlyer Privacy Cloud, told The Drum.