How much of PayPal’s revenue comes from haram?

PayPal earns its revenue from the following revenue sources:

  • Transaction Revenues:

Paypal earns its revenue primarily by charging fees for completing payment transactions on its Payments Platform.

  • Revenues from other Services:

This segment includes revenue earned through partnerships, referral fees, subscription fees, gateway fees, and interest generated from lending capital to its customers. 

The contributions from each of PayPal’s revenue segments in their 2020 annual report were as follows:

An area of concern for Practical Islamic Finance is PayPal’s revenue generated from charging interest (riba) for its lending services. 

PayPal states in its 2020 annual report:

“Our revenues can be significantly impacted by the following:

The amount of our loans receivable outstanding with merchants and consumers.”

PayPal does not disclose how much revenue it generates from charging interest on loans.

However, since PayPal clearly states that revenue generated from charging interest can significantly impact its overall revenue, we’ll take their word for it.

Practical Islamic Finance concludes:

A material part of PayPal’s revenue comes from haram.

Does PayPal rely on interest to operate?

Year to Date
for the period ending
March 31, 2021
Fiscal year ended
December 31, 2020
Fiscal year ended
December 31, 2019
Interest Income$15,000$88,000$197,000
Total Revenue$6,033,000$21,454,000$17,772,000
Interest Expense$58,000$209,000$115,000
Total Expenses$4,991,000$18,165,000$15,053,000
Interest Income / Revenue0.25%0.41%0.76%
Interest Expense / Total Expense1.16%1.15%1.86%
*Numbers in thousands, U.S. dollars

Practical Islamic Finance concludes:

Riba is used but not relied upon in PayPal’s operations.

What is PayPal’s Environmental, Social, and Governance (ESG) impact?

Environment

According to PayPal, in 2020, the company matched 98% of its energy usage in its data center operations with renewable energy generation.

Social

In 2020, PayPal facilitated nearly $17 billion in donations to nonprofits and causes through PayPal’s Giving Platform, COVID-19 fundraising campaigns, employee giving campaigns, donations at checkout, corporate matching, and partner fundraising with other companies, according to its 2020 Global Impact Report. 

Additionally, PayPal has a high Glassdoor rating of 4.1 out of 5.0 from over 5,000 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.

Governance

No notable governance highlights. 

Practical Islamic Finance concludes:

PayPal has a net positive ESG impact.

Comfort Rating

From PayPal’s business, financial, and ESG reviews, Practical Islamic Finance rates PayPal stock as:

Uncomfortable to invest in from a Halal perspective.

Justification for our rating

The Prophet Muhammad (peace be upon him) cursed the one who consumes riba (interest), the one who pays it, the one who writes it down (documents the contract), and the two witnesses of the agreement, and he said: they are all the same (in sin).

It’s clear from this hadith that being involved in riba-based contracts is a serious sin that Muslims should avoid.

While Paypal doesn’t publish detailed numbers of how much it collects in interest, PayPal explicitly states that its lending business significantly impacts its total revenue. As a result, Practical Islamic Finance is uncomfortable investing in PayPal from a Halal perspective.

Sources

PayPal Holdings, Inc. Q1 2021 10-Q

PayPal Holdings, Inc. 2020 10-K

PayPal Reviews

2020 Global Impact Report