Deep Economic Moat

Choose ONE company and identify how it has established a Deep Economic Moat, or sustainable barriers to entry. Be very specific in terms of each barrier or unique position, provide substantive justification.

 NOTE: the following companies are not allowed for this Memo: Any company discussed in M Porter's article: What is strategy, Apple, Walmart, Intel, Samsung, Microsoft, and any airline, carbonated soft drink, nor electric power company.

A Deep Economic Moat is the competitive advantage that a company has over other companies in the same industry. By having a well-known brand name, pricing power and a large portion of market demand, a company with a wide moat possesses characteristics that act as barriers against other companies wanting to enter into the industry.

PayPal Holdings, Inc. is one such example. Paypal is an American company operating a worldwide online payments system. Online money transfers serve as electronic alternatives to traditional paper methods like checks and money orders. This company has achieved strong competitive advantage through the following means:

1. Paypal has a global reach. It has the ability to attract, retain and engage both merchants and consumers with relatively low marketing expense.
2. Paypal has the ability to show merchants that they will achieve incremental sales by offering PayPal services to their customers. By facilitating a store that never closes, it provides convenience to customers of transacting business anytime (24 hours), anywhere, on any platform, using any device (computer, tablet, mobile phone, etc.)
3. Paypal guarantees security of transactions and the ability for consumers to use its products and services without sharing their financial information with the merchant or the party they are paying.
4. If there is a problem with a transaction, Paypal operates a Dispute resolution center aimed at assisting both merchants and consumers in resolving these disputes. It also offers buyers and sellers protection programs.
5. Customer service
6. Paypal has a strong brand name, well known as one of top five internationally recognized brands used in online payments: PayPal, American Express, MasterCard International, Visa or Western Union.
7. Paypal’s Website, mobile platform and application onboarding is relatively easy to use and access to sign up is offered free of charge.
8. Paypal’s system reliability and data security.
9. Paypal’s cutting edge technology and quality of developer tools such as its application programming interfaces and software development kits make it a leader in its industry. It has the ability to establish services across numerous business channels, including mobile payments and retail point of sale purchases.

https://investor.paypal-corp.com/secfiling.cfm?filingID=1633917-15-52&CIK=1633917