The thought just a few months ago was that nothing could stop PayPal Inc. (NASDAQ: PYPL) from being the ultimate FinTech provider. PayPal has become completely free from the shadow of eBay Inc. (NASDAQ: EBAY). The payment provider owns Venmo for payments, as well as offering the traditional PayPal everyone has known for 20 years. PayPal was getting into crypto, and it was even expected to become a trading platform for stocks. And the Buy Now Pay Later platform surged in spending by 400% on Black Friday alone.

That was then. PayPal has seen its shares get gutted heading into the end of 2021 and it has continued its slide in 2022. With the shares hovering around $120, there is a growing possibility that perhaps American Express Co. (NYSE: AXP) could be one of the next challengers for PayPal. This report may not be geared entirely toward collectors, but it cannot be overlooked how much collectors use PayPal.

All of those positives above have become concerns. BNPL, the modern day replacement to layaway, grew enough it could pose a credit loss risk. Crypto fees are high, transfer fees can be high, and PayPal sometimes holds funds for long enough that a person making the transaction cannot spend the cash they received quickly because of extended holds.

So, how on earth could an old legacy player like AmEx actually act as more pressure on PayPal? AmEx recently launched Amex Rewards Checking, which is a digital checking account for consumers. The timing of that launch looked faster than expected to the research team at Bank of America, and they have some insight consider how much Visa business they do for BofA. This move was also on the heels of AmEx launching a business digital checking account last year, as well as building its debit capabilities globally. While BofA isn’t goin after PayPal in the report, look at what their report says:

Given the potential to earn rewards on debit card spending, we think there is potential the new Amex card could become a top-of-wallet debit card for many consumers. This should drive sticky deposit growth and deepen AXP’s relationships with its customers while also boosting billings volume/revenues and providing additional information on consumer spending habits.

The new effort may also boost card member engagement with AmEx and its features are deemed to be highly competitive. Consumers using the new digital checking accounts will earn AmEx membership rewards points on debit spending at a rate of 1 point for every $2.00 spent. Again, that is on debit spending and not just credit card spending where the card holders may be paying a massive interest rate on carrying balances on their cards. BofA also said in its fresh report:

This should appeal to existing card members, while also not cannibalizing spend on Amex credit cards which typically earn at least 1 point for $1.00 spent. However, given most debit cards do not earn any rewards, we think AmEx’s offering is likely still differentiated enough to draw incremental debit spend to its network. This could improve card member retention, even on the credit side – if consumers are building more membership reward miles and redeeming rewards, they are more likely to stay with AmEx and pay fees on credit cards. AmEx will also have more data on its consumers which it can use in underwriting and marketing.

Again, BofA does not directly mention PayPal as the prime target here. The firm sees AmEx potentially offering better deposit rates (already at 0.50% initially) versus other online-only digital banks, which could be important as rates rise. Debit spending is also not subject to Durbin Interchange caps like many of its large bank rivals who utilize the Visa and Mastercard networks.

American Express admits that its customers want more from it. Eva Reda, head of Consumer Banking for AmEx, said with its new announcement:

Our members want more banking products and services from us. And they want more from their checking account, without giving up the benefits that are important to them. That’s why we built Amex Rewards Checking to deliver more value for Members with the powerful and trusted backing of American Express. It’s digital checking without compromises.

PayPal offers a pay with rewards, it offers credit cards, and it allows for a checkout with crypto feature. Will consumers (and collectors who actively spend money on their hobbies) opt out of PayPal? Or will they just lower their activity with PayPal? That remains to be seen.

PayPal has been suffering a dismal ride since its peak last year. Its shares are down more than 60% from last year’s highs. And its stock is down 36% for those who decided to buy into the story right at the first of 2022 thinking the worst was over. Wall Street analysts have been talking down their expectations handily since the start of 2022. What is amazing is that almost every one of the ratings remained positive and the handily lowered price targets are still almost unbelievably high for a $120 stock price. This is the downgrade history and slashing expectations history just since the start of 2022:

• Raymond James cut its target to $229.00 from $264.00on January 11, and on February 2 Raymond James removed its positive rating entirely.
• Jefferies removed its Buy rating and cut its target to $200 from $255 on January 12.
• KeyBanc cut its target to $250 from $325 on January 14, only to cut the target again to $200 from $250 on February 2.
• Morgan Stanley cut its target to $217 from $265 on January 20, only to lower its target again to $190 from $217 on February 2.
• Barclays cut it target to $250 from $277 on January 21.
• Mizuho cut its target to $200 from $225 on January 25, and it again cut the target to $175 from $200 on February 4.
• BTIG cut its target to $270 from $345 on January 26, and then it downgraded its rating to Neutral on February 2.
• Citigroup cut its target to $235 from $250 on January 26.
• Rosenblatt cut its target to $216 from $227 on February 2.
• Deutsche Bank cut its target to $200 from $260 on February 2.
• Wedbush Securities cut its target to $170 from $220 on February 2.
• JPMorgan cut its target to $190 from $272 on February 2.
• JMP Securities cut its target to $198 from $260 on February 2.
• Credit Suisse cut its target to $190 from $250 on February 2.
• DZ Bank downgraded PayPal to Hold from Buy and came in with only a $140 target on February 3.
• Barclays cut its target to $200 from $250 on February 3.

One serious issue that exists with old financial companies and new financial companies is that consumers have figured out that changing providers may not be the end of the world. The younger generations are not exactly holding huge trust for the old banking giants, and AmEx isn’t exactly their first choice in digital offerings. That said, these huge financial institutions have a long history of being able to expand their offerings and keep smaller more nimble companies from eating up their share of the financial pie.

PayPal just has that much more competition from very strong and well-financed hands now.