PayPal Stock Is Down. This Could Be Why.

A German newspaper reported that banks in the country were blocking PayPal payments, citing an issue with security systems. (Courtesy PayPal)

Shares of PayPal Holdings declined on Wednesday following a report that German banks had blocked payments due to a technical issue.

German newspaper Süddeutsche Zeitung reported that banks in the country had been blocking PayPal payments, citing a failure in the security systems designed to weed out fraudulent payments. The outlet named Bayerische Landesbank, Hessische Landesbank, and DZ Bank as three banks that temporarily halted all PayPal transactions.

A person with direct knowledge of the matter told Barron’s that German banks were notified that there would be a temporary service outage as PayPal reviewed the health of its fraud detection systems. Issues were largely resolved by Monday, the source added.

In a statement, the German Savings Banks Association confirmed that “incidents involving unauthorized direct debits from PayPal to various financial institutions” had occurred across Europe, particularly in Germany.

PayPal stock was down 0.9% to $69.56 by midday Wednesday. Shares closed up 1% on Tuesday. Fellow fintech stocks Affirm Holdings Block were down 0.8% and up 0.9%, respectively.

PayPal confirmed that payment movement was “back to business as usual” in a statement to Barron’s. “We’re in the process of resolving issues with a limited number of accounts,” the company added.

PayPal, based in San Jose, Calif., operates in more than 200 countries. The Venmo owner posted strong second-quarter earnings last month, but shares fell as investor expectations remained high and the volume of branded checkout payments came in softer than expected. Its peer Affirm is set to report fiscal fourth-quarter earnings after the closing bell Thursday.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com