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PayPal Is Cutting the Baggage, and This Is Good


- By Nicholas Kitonyi

PayPal (PYPL), the worldas largest online money transfer platform, is dropping support for BlackBerry (BBRY), Amazon (AMZN) and Microsoftas (MSFT) Windows Phone as it seeks to optimize its business. The company will focus on supporting payments on gadgets that run on Android and iOS only as these two already dominate the mobile OS market with a combined share of 97%.

On the other hand, Windows Phone OS, Amazon's Fire Phone and BlackBerry OS make no economic sense. As such, PayPal is thinning the number of mobile operating systems supported by its flagship mobile payments app down to just two and as of June 30, the app will no longer be supported on devices that run these three operating systems.

PayPal serves as an acquirer and payment processor for online vendors, auction sites and other commercial users, for which it charges a fee.

So how positive is this going to be for PayPal?

First, PayPal does not need Blackberry, Microsoft Windows Phone or Amazon Kindle Fire to be successful. As mentioned, these three operating systems account for less than 3% of the overall OS marketplace.

This, however, does not mean that PayPal is changing its strategy for mobile payments; itas only making it better. The company's largest mobile payments users use either the iPhone or a Samsung smartphone. It is good to note that Apple (AAPL), the maker of the iPhone has its own mobile payments app, Apple Pay, while Samsung Electronics (SSNLF) has Samsung Pay.

Both Apple and Samsung look to disrupt the mobile payments market with their apps, which means that PayPal will soon be facing stiff competition from two of its biggest mobile payments partners.

While PayPal dominates the online payments marketplace, the mobile payments market remains pretty much up for grabs with most players still trying to divert some of their customers subscribed to other services and platforms into using their mobile wallets.

Therefore, PayPal will have to become more innovative on improving its mobile payments app for both iOS and android devices in a bid to ward off competition from Apple Pay and Samsung Pay. Nonetheless, it remains to be seen how positive the decision to discontinue supporting Blackberry, Windows Phone and Amazon Kindle Fire will play out in the long run, especially given the fact that now PayPalas largest partners are also its biggest rivals.

PayPal offered little explanation. "It was a difficult decision to no longer support the PayPal app on these mobile platforms," Joanna Lambert, PayPal's vice president of consumer products, said in the blog. "But we believe it's the right thing to ensure we are investing our resources in creating the very best experiences for our customers."

Also, the online money transfer company claimed that ending support for Windows will allow the company to innovate and make enhancements to its mobile experiences to give its customers athe best possible ways to manage and move their money."

However, Windows, Blackberry and Kindle Fire users will still be able to access PayPal via the mobile site while Windows outlook.com users can still enable the PayPal add-in to send payments from the email app. One the other hand, BlackBerry users will still be capable of sending money via the BlackBerry Messenger.

"We remain committed to partnering with mobile device providers, and we apologize for any inconvenience this may cause our customers," Lambert also added.

Meanwhile, Android phones running version 4.03 or higher and Apple devices running iOS 8.1 or higher can now use the updated app, which offers a simplified way to send and request money, as well as a new home screen with relevant transaction details.

This lines up well with PayPalas strategy of focusing on improving customer experience and enhancing features on its biggest mobile payments device partners. From an investing perspective, this could result in an improvement in the return on assets as the company seeks to optimize its business operations for maximum returns.

PayPal became an independent company again last year after spinning off from eBay (EBAY), and it has since become a bigger company than its previous parent.

This indicates that focusing on a particular segment of the market has helped it to invest more wisely, which more or less, justifies the decision to weed off redundant partnerships with operating systems like Blackberry, Windows Phone and Amazon Kindle Fire.

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This article first appeared on GuruFocus.