New PayPal (PYPL) CEO and Dan Schulman’s successor, Alex Kress, is walking into a hornet’s nest.

The past few years have not been easy for the payments giant.

At the heart of PayPal’s woes are poor margins — a problem that has dogged the company for years, popping up quarter after quarter — and visible but underperforming products. For example, Venmo, which is part of the company’s Braintree division, still has a long way to go in terms of monetize its large user base.

And just last year, PayPal was subject to a showdown with Elliott Management. Although, the activist investor has since backed off – this week reveal that it completely dissolved its stake in PayPal — the damage is done, and the concerns raised by Elliott remain, especially the margins around it.

So far this year, PayPal stock is down more than 16% despite a broader technological rally.

Here are the top three challenges Chris will face when he takes the helm at PayPal on September 27th.

It is difficult to find good growth

Although PayPal has often been successful in generating growth, it hasn’t always been the growth investors had hoped for.

Take PayPal’s second quarter, for example. The company experienced 11% overall payments volume growth, 7% revenue growth, and 8% growth in branded payments. However, the overall earnings figures did not follow, posting growth of just 1%. The company also lost an adjusted operating margin of 21.4%, given Wall Street’s estimate of 22%.

These concerns about PayPal’s ability to grow while improving its margins have kept many analysts cautious at best.

“We remain on the sidelines and await greater confidence in PayPal’s growth algorithm as we see concerns in the long-term EPS growth profile,” John Davis of Raymond James wrote on Aug. 2.

Competition from Apple and Square is heating up

PayPal has always benefited from being one of the first fintech companies ever, bringing together the way financial services and technology were before it was a familiar path.

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However, products from parent company Square Block (SQ) and Apple (AAPL) are gaining ground at a rapid clip, and the adoption process shows no signs of slowing. That competition has outpaced PayPal’s leadership in the space, including Venmo.

A 2023 survey by Deutsche Bank, based on responses from 1,708 consumers, shows PayPal has retained its dominance, but its lead is thin as adoption of Apple Pay and Block’s Cash app soar.

While PYPL remains the dominant mobile payment service with 71% of respondents having used the service in the past 12 months, both Cash App and Apple Pay have seen significant increases in adoption over the past year of 46% and 31%, respectively. Up from 31% and 23%, respectively, last year, Deutsche Bank analyst Brian Kane wrote in April.

Big shoes to fill

Chris — who’s been at Intuit for nearly two decades — will join PayPal as an outsider, and that will present challenges.

“Coming from abroad, whatever your credentials or accomplishments, you will be faced with suspicion based on fear,” said Miles Nadal, founder and entrepreneur at Peerage Capital. “No matter how urgent the need for change, people fear it. This is further magnified by external recruitment sending a signal that there is a desire for change at the highest levels of the organization.”

What’s more, Chris will be stepping in in place of Shulman, who is an iconic character in his own right. Even before PayPal, Schulman made his mark as the Founding CEO of Virgin Mobile, Formative CEO of Priceline, and Principal CEO at American Express.

In some ways, this is almost the equivalent of a new CEO taking over as CTO, as Schulman has become so indelibly associated with PayPal. Shulman Intervened At PayPal in 2014, as the company was spinning off eBay (EBAY), she was PayPal’s CEO throughout its time as a public company.

But PayPal (and its shareholders and activists) have spoken, and it’s time for PayPal to head in a new direction.

Chris’s first task on Sept. 27 will be gaining confidence — something that could be more complicated than filling Schulman’s shoes or getting the margins in order.

“The first challenge is to demonstrate the credibility, purpose and clear direction required to win the trust of internal and external stakeholders,” said Nadal. Then that trust translates into support.”

Ali Garfinkel Senior Technical Correspondent at Yahoo Finance. Follow her on Twitter at @tweet and on linkedin.

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