Klarna Expands Rapidly as PayPal Wallet Share Falls to 40%
PayPal’s digital wallet share dropped to 40% from 90% in 2017 and 50% in 2023, while overall digital wallets grow twice as fast as e-commerce. Buy now, pay later provider Klarna has expanded rapidly, capitalizing on market shifts and intensifying competitive pressure.
1. PayPal Digital Wallet Decline
PayPal’s grip on digital wallet checkouts has weakened, with its share sliding to about 40% today, down from 90% in 2017 and 50% in 2023. Guest checkout volumes have shrunk to 16% of e-commerce transactions from 44% in 2019, and desktop purchases continue to decline.
2. Klarna BNPL Growth
Buy now, pay later provider Klarna has expanded rapidly as consumers embrace alternative payments, contributing to competitive pressure on PayPal and traditional wallets. Digital wallets are growing at roughly twice the rate of e-commerce, highlighting a shift toward integrated checkout solutions.
3. Market Dynamics and Implications
E-commerce activity is increasingly concentrated, with Amazon, Walmart and Shopify accounting for 55% of volumes, up from 49% in 2023. Competitors like Apple Pay (20% share) and Shop Pay ($110 billion in 2025 volume) further intensify the market, presenting both opportunities and pricing challenges for Klarna.