Shopify Vs. PayPal: Circle’s USDC Momentum Is A Gamechanger For Shopify At The Expense Of PayPal

Summary USDC’s rising momentum, backed by Circle’s recent IPO and regulatory progress via the GENIUS Act, is accelerating mainstream stablecoin adoption in commerce. Shopify’s recent integration of Coinbase’s Base protocol to support USDC payments across its global merchant network is expected to further this trend, while also securing improved take-rate economics for itself. Meanwhile, PayPal’s stablecoin exposure remains limited to PYUSD, which lacks broad platform adoption and has yet to benefit from frictionless commerce integration like Shopify’s ongoing rollout of USDC support. As stablecoin becomes embedded in e-commerce infrastructure, Shopify is emerging as a key beneficiary, gaining first-mover advantages that could shift share away from PayPal in the evolving payments landscape. Stablecoins have been regaining traction as of late as a result of the combined effect of Circle’s ( CRCL ) blockbuster IPO, regulatory progress, and meaningful industry partnerships supportive of use cases that can bolster longer-term adoption. Specifically, Circle – the issuer of the world’s second-largest stablecoin, USD Coin (USDC-USD) – has recently gone public to strong investor demand. Its shares have gained close to eight-fold since its IPO before paring some gains this week. Momentum for stablecoins has also picked up in response to the U.S. Senate’s recent endorsement of the GENIUS Act for further review and approval by the House of Representatives and President Trump. Progress on this front remains key to improving regulatory clarity over the use of stablecoins, facilitating further development of use cases to bolster longer-term adoption. Against this backdrop, Shopify ( SHOP ) has emerged as a surprising early winner. Despite its limited direct participation in the issuance and wallet storage of stablecoins, Shopify recently partnered with Coinbase ( COIN ) to integrate the latter’s Base protocol . The partnership would effectively allow Shopify to facilitate USDC payments across its global merchant network, positioning it at the forefront of stablecoin adoption in commerce settings. Based on recent disclosures from the CEOs of Coinbase and Shopify, this marks the first time “a large-scale e-commerce platform [is] adopting crypto payments”, effectively improving payment efficiency through faster transaction times and lower fees. This is expected to create a favourable economic loop for all of Shopify, its merchants, and end-market consumers as stablecoin usage – particularly, USDC – scales. Meanwhile, PayPal ( PYPL ) appears to trail the emerging tailwinds facing Shopify in the trajectory of stablecoin adoption. Although the payment solution provider launched its own stablecoin in 2023 , PayPal USD (PYUSD-USD), which is currently supported by Coinbase Commerce , it lacks the same reach and momentum displayed by USDC. PayPal also doesn’t yet offer payment solutions for its merchants to accept stablecoin payments beyond PYUSD at checkout, which further limits its participation in the evolving stablecoin economy compared to Shopify. Given Shopify’s stronger alignment to the leading USDC, and its much broader merchant network to propel the adoption flywheel, the company is not only positioned to capture a greater share of early stablecoin-driven commerce gains. It’s also slowly, but surely, outpacing PayPal in shaping the next phase of digital payments, which represents an additive opportunity to its longer-term financial trajectory. What are Stablecoins? Stablecoins represent a category of cryptocurrency that’s often pegged to the value of a benchmark asset, such as the U.S. dollar, to ensure stability of value versus other crypto assets like Bitcoin ( BTC-USD ). Since cryptocurrencies are typically subject to intense volatility, stablecoins are designed as an alternative to minimize exposure to price fluctuations, making them more attractive and applicable for everyday transactions in commerce, particularly cross-border payments. For instance, if Bitcoins were used at checkout for an item priced at 1 BTC, and the item needs to be refunded within a seven-day return window, then it’s likely the value of the 1 BTC at the time of refund has already changed significantly from what it was at the time of the initial transaction’s completion due to the cryptocurrency’s inherent volatility. Yet, stablecoins aim to eradicate that risk, which has been a key roadblock in crypto adoption for commerce use cases. USDC is currently one of the world’s most widely adopted stablecoins after Tether ( USDT ). It’s pegged 1:1 to the U.S. dollar, with each token fully backed by cash or short-term U.S. Treasury. Following its issuer Circle’s recent IPO , USDC has gained incremental mainstream visibility and institutional confidence. This has been further bolstered by recent regulatory progress pertaining to the use of stablecoins, making USDC an attractive alternative for use within the regulated U.S. market. And USDC’s growing role in commerce use cases is evident in its recent adoption by Shopify. This was made possible following the leading e-commerce host’s recent partnership with Coinbase and Stripe in creating and implementing the open source “ Commerce Payments Protocol ” based on alignment with improved regulatory clarity outlined under the GENIUS Act. In addition to USDC, PayPal also issued its proprietary stablecoin PYUSD in partnership with Paxos Trust Company, which is pegged 1:1 to the U.S. dollar as well. While PYUSD is supported by Coinbase Commerce, which can be implemented by any merchant to support stablecoin checkout, its usage remains largely restricted through the PayPal Checkout network. As a result, the level of scale, liquidity, and merchant adoption observed for PYUSD continues to trail that of USDC by wide margins. What is the Base Protocol? As mentioned in the earlier section, Shopify has recently joined hands with Coinbase and Stripe in developing the open-source Commerce Payments Protocol. This framework is based on Coinbase’s proprietary Base protocol, which is a commerce payments infrastructure developed on Coinbase’s Layer 2 blockchain, Base . The protocol is designed to ensure the use of stablecoin in payment transactions can unlock greater time and cost efficiencies under a secure environment on a chain through six key functions: Payment authorization – initiates and provides immediate feedback on approval or decline of the transaction; if the transaction is approved, then the buyer’s USDC consideration is immediately taken into an escrow account. The USDC leaves the escrow account only when the merchant captures them by confirming delivery of the service and/or shipment of the good, a refund is issued, or a void transaction is triggered on the chain. Void – facilitates cancellation of authorized payment before it’s finalized, whereby USDC held in escrow are returned to the buyer. This usually happens when an issue occurs, such as insufficient funds in the buyer’s wallet to complete the transaction. Reclaim – reverses uncollected or unfulfilled transactions, whereby authorized USDC held in escrow are returned to the buyer. Capture – immediately after the transaction is authorized, USDC leaves the buyer’s wallet but is held in escrow; it only leaves escrow when the merchant “captures” the payment by signaling acceptance of the transaction. Refund – if a refund is requested and approved within the refund window set by the merchant, then the funds captured are automatically returned to the buyer on the chain via the protocol. Final – marks payment completion with the USDC funds fully in the merchant’s possession; refunds are no longer an option on the chain once this stage is reached. It’s evident the end-to-end infrastructure support by the Base protocol through the broader payment cycle mirrors closely to that of card payment rails. However, it promises significantly lower fees and faster settlement times by eliminating intermediary layers often required in facilitating traditional card transactions. As a result, the Base protocol enables frictionless, borderless commerce, which aims to benefit all participants – spanning the operator (Coinbase), transaction processing partner (Stripe), platform host (Shopify), merchants, and consumers – on the chain. Shopify – A Key Beneficiary of Stablecoin Commerce As mentioned in the earlier section, Shopify’s direct participation in stablecoin developments has largely been absent to date. Yet through its recent partnership with Coinbase to implement the Base protocol and facilitate USDC payments across its platform, Shopify is poised to gain a first-mover advantage and emerge as a key beneficiary of potential mass market adoption of stablecoin use in commerce. The company has already started rolling out USDC payment support for certain merchants in early access , with broader deployment across its network to materialize over the coming year. The implementation of USDC payments at checkout in Shop Pay and Shopify Payments merchants is expected to represent an additive opportunity for Shopify’s operating unit economics. Currently, Shopify charges merchants about 2.4% to 2.9% on card purchases swiped through the Shopify Payments network. Meanwhile, the charge for USDC payments is comparatively lower, with early adopting merchants “in the U.S. and other select countries” subject to eligibility for a rebate of up to 0.5% on related transactions. Although fees charged on stablecoin transactions are typically lower than those observed on traditional card transactions, the net take-rate receivable by Shopify and merchants actually end up much higher. This is because USDC transactions, for instance, aren’t exposed to the incremental interchange, network, and web-hosting fees often observed in traditional card rails. Specifically, USDC transactions processed via the Base protocol are currently only subject to processing partner fees ( 1.5% ) to Stripe, protocol operator fees ( 1% ) to Coinbase, and other ancillary administrative costs such as consumer cash-back rebates ( 1% ) to Shopify. This accordingly results in superior net take rates on stablecoin transactions beneficial for both Shopify and its merchants, even if the gross fees collected are slightly lower than those observed for traditional card transactions. Adopting the Base protocol to facilitate USDC payments is also expected to expand the broader commerce addressable market for Shopify, especially given that stablecoin is currently the world’s second-largest holding within its asset class amongst users. And Shopify’s support for multi-wallet USDC payments offered to consumers, and zero FX or currency conversion fees charged offered to merchants only further strengthens the case – especially in cross-border transactions. This represents a key competitive advantage for Shopify in incentivizing adoption, especially given how critical the incremental cost-savings are for merchants amid rising macro headwinds and the impending threat of reciprocal tariffs. Shopify’s extensive reach into global commerce also represents another avenue for which it can become a key beneficiary of emerging stablecoin adoption in payments. Although the company no longer discloses the size of its merchant base, industry estimates currently put the figure at more than four million . With its global merchant base currently facilitating a quarterly GMV run-rate of about $75 billion based on the Q1 earnings disclosures, Shopify’s scale represents a key gateway in accelerating USDC integration across everyday commerce. Coupled with maturing stablecoin regulation with the U.S. Senate’s recent endorsement for the Genius Act, Shopify stands to become a key beneficiary in making crypto-native payment rails a staple in real-world transaction flows at scale. Taken together, Shopify’s facilitation of USDC payments is poised to unlock an additive revenue stream to further support its longer-term growth trajectory, while also improving its net take-rate unit economics. More importantly, we see an opportunity for Shopify to benefit from a positive flywheel capable of driving sustained accretive upside through its facilitation of stablecoin usage over the longer term. With expectations for the latest development to accelerate mainstream USDC adoption in commerce, Shopify is poised to benefit from the ensuing economic gains to its earnings outlook. In turn, the additional resources unlocked are expected to help further scale stablecoin payment facilitation beyond USDC across Shopify’s global commerce network over the longer term. This is likely to reinforce stablecoin adoption in commerce, which will further solidify Shopify’s reach into related opportunities and ensuing unit economic benefits over time. PayPal – Trailing in the Stablecoin Commerce Opportunity Although PayPal has been integrating stablecoin-driven commerce capabilities within its ecosystem since its launch of PYUSD in 2023, the company has yet to demonstrate material participation in related transactions. This shortfall is expected to become especially prevalent following Shopify’s recent integration of the Base protocol to facilitate USDC payments across its global commerce network. As mentioned earlier, PYUSD is currently supported by Coinbase Commerce for integration across Coinbase’s merchant partners. It’s also supported by PayPal Checkout, giving PYUSD exposure to the company’s very own merchant base. Yet, adoption across both platforms remains largely nominal compared to USDC, which is in the process of being integrated across Shopify’s merchant base of more than four million. As a result, this is expected to further diminish PYUSD’s appeal and widen its distance from USDC in merchant integration and consumer familiarity, representing a marked challenge for PayPal’s foray into stablecoin commerce opportunities. Admittedly, PYUSD can be conveniently converted to USDC, since it’s also a Dollar-pegged stablecoin, which technically allows PayPal’s alternative to ride on the coattails of impending momentum in USDC adoption. However, the process entails added friction at checkout across Shopify’s extensive USDC-supported merchant base, nonetheless, which is expected to significantly deter PayPal’s participation in mostly impulsive purchases. Specifically, recent industry estimates predict that up to 80% of e-commerce transactions are a result of impulse purchases, highlighting the potential of lost participation for PYUSD in global commerce without direct support at checkout. PayPal’s limited participation in stablecoin commerce is further limited by its current support for PYUSD at checkout only. Recall from the earlier discussion that the only stablecoin PayPal accepts within its payment solutions ecosystem is PYUSD. Given PYUSD’s scale is significantly smaller than USDC’s, this narrow approach inadvertently represents an inherent restriction to PayPal’s participation in stablecoin commerce flows. Taken together, PayPal’s benefit from the emergence of stablecoin-driven commerce remains comparatively indirect and delayed against Shopify’s approach underpinned by the direct facilitation of USDC payments. Specifically, limited merchant and consumer use of PYUSD and PayPal’s inherently restricted exposure to stablecoin commerce within its network today represent an inherent curtailment to its participation in the new payment rail’s promised unit economic improvements. And this challenge is expected to further, considering the intensifying competition posed by Shopify’s ongoing rollout of USDC payment facilitation at scale across its global merchant base. Coupled with the recent improvement in market sentiment for stablecoin usage, backed by regulatory support, PayPal’s backfoot positioning in related opportunities could represent a near-term headwind that shouldn’t be dismissed. Final Thoughts The accelerating momentum in USDC adoption, reinforced by Circle’s successful IPO, regulatory progress, and Shopify’s implementation across its global commerce system, marks a potential inflection in stablecoin-driven commerce. We view Shopify’s staged rollout of USDC support at checkout as an emerging tailwind that shouldn’t be dismissed, as it underpins its potential to become the most immediate beneficiary in stablecoin commerce. By integrating the Base protocol and facilitating USDC at checkout across its global merchant network, Shopify is poised to gain a first-mover advantage in participating in the improved unit economics promised by the stablecoin payment rail. Not only is this expected to improve Shopify’s take-rate profile, but the facilitation of USDC payments is expected to represent a scalable, additive revenue stream to its longer-term growth profile. More importantly, every USDC transaction facilitated through the Shopify network is expected to amplify the adoption of stablecoin commerce, cementing the company’s role as a key enabler of the technology. In contrast, PayPal’s comparatively modest and restricted approach in supporting stablecoin commerce observed to date risks ceding ground at a critical inflection point in payment solutions. The absence of broader stablecoin payment solutions beyond PYUSD in PayPal’s network, and inherently limited use of PYUSD amongst merchants and consumers, represent a bottleneck for the company for now. This accordingly puts PayPal at a disadvantage compared to Shopify, especially in an environment where merchants and consumers are increasingly seeking cost efficiencies to mitigate impending cyclical headwinds facing commerce. Taken together, USDC’s momentum represents more than just a breakthrough for Shopify. It also marks an emerging shift in digital commerce and payment solutions infrastructure that PayPal has yet to prove it can materially capitalize on. As Shopify deepens its role in driving USDC adoption in global commerce across its network, it stands to benefit disproportionately from the structure efficiency and network effects that follow.

Source: Seeking Alpha