Good afternoon, everybody, and welcome. Dan, welcome.
Thank you, David.
I'm thrilled to have Dan here, who I don't think needs a big introduction, the President and CEO of PayPal. Dan joined PayPal in 2014 to lead the organization following the separation from eBay, and over that time, you know, you've grown PayPal into a leading two-sided payment network with more than 430 million consumer and merchant accounts. And so as always, I appreciate you being here, Dan, so thank you.
It's great to see you, David. Thank you.
Good to have you here. So earlier, this year, you announced your intention to retire at the end of 2023, and you recently announced your successor-
Yeah.
- Alex Chriss. So unfortunately, this is gonna be the last time I probably have the privilege of doing this, with you in a public setting. We've done it a number of times But this will be the last time. You know, under your leadership, obviously, you've grown the active accounts, I think, more than double, to over 430 million. I think that's a 13% CAGR. The payment volume, I think, is CAGR'd at about 25%. You've grown, you know, revenue and EPS in the high teens, you know, kind of annually. And so we can't, you know, we can't do a full walkthrough, you know, on all this, but I'd just, I'd just like you to reflect a little bit, kind of on the experience and where you are and kind of, you know, how you feel as you kind of pass the organization to the next leader.
Yeah. First of all, I'm glad you're doing my last interview as well. You're a good friend, and I couldn't respect you more, and so thank you. And it's great to be with all of you. Look, I think it's always hard doing a transition, but it was absolutely the right time to go do that. The board did a fantastic job in finding Alex. You know, the more I get to know Alex, and we talk you know multiple times a week, the more I find him to be an inspiring leader, and somebody that is gonna take PayPal to the next level. He's really truly a great guy and ton of experience.
I think, as I look back on PayPal, I think probably the biggest thing that we were able to do is go from being kind of a frenemy, with the emphasis on enemy, of financial institutions around the world when we first started, to really becoming the largest digital distribution channel for FIs around the world. That was really this whole idea of giving consumers choice on what funding instrument to use inside our wallet, as opposed to steering them to a low-cost instrument. It was a really controversial decision when we made it. A lot of people thought that our margins were gonna come down, that was gonna be a really difficult decision. But I felt like putting the customer at the center of everything we did had to be the right decision for us.
To your point, it unlocked everything. I mean, our revenues tripled from $8 billion- $30 billion. Our volumes quintupled from $300 billion- $1.5 trillion this year. Our EPS quadrupled. We did about $1.25 the first year we went public. This year, we'll do about $5 of EPS. Our free cash flow tripled as well, from about $1.5 billion to about $5 billion. All of that, by the way, while diversifying away from eBay.
Yeah.
You know, when we split from eBay, eBay was about 20% plus of our revenues, probably about 35%-40% of our profits, and today that's less than 2% of our revenues, less than 2% of our profits. So all of that happened while diversifying and really kind of unleashing customer growth and metrics that I don't think anybody really would have imagined would have been possible when we first started off.
Yeah. You know, it's... You know, one of the things that I know you've been focused on over the course of the last year is kind of focus on priorities, and you narrowed, you know, your focus to three strategic priorities, which we can go through, you know, a little bit: improve checkout, grow PSP, drive, you know, adoption in digital wallet. You know, I'm a big believer that, you know, that focus, you know, enhances, you know, the ability of big companies to execute. Before we kind of talk about each of these in a little bit more detail, why'd you decide to prioritize these three, and how do they complement or relate to each other?
Yeah.
How is that prioritization, you know, helping with better execution of the company?
Well, I agree completely with you, and I think most CEOs would agree as well. The more you can, you know, focus your organization, the better they're gonna execute. I mean, you know, big organizations don't do hobbies well, you know? They really need to focus on what are the important things, what are the key drivers, what's the bread and butter of your organization. It doesn't mean that you don't experiment, right? Like, we both try to innovate. Sometimes things work out, sometimes they don't. We do, you know, basically, 150-200 experiments a quarter, of which 1/3 work. 2/3 don't work, but that 1/3 that works starts to multiply, and, you know, the sum cumulative effect of that really plays out into your results. So you take innovation. Innovation is always a two-edged sword. Sometimes it works, sometimes it doesn't. That's what innovation is about.
Absolutely.
And by the way, when you don't, when it doesn't work, you shut it down. You do the same thing, and you know, that's one of the things I really respect about you. You take chances when they work, you double down on it. When they don't, you shut it down, and have the courage to go and do that. That's not always an easy thing to go and do.
So I think, you know, the fact that we focus on three things: growing our share of branded checkout, that's our bread and butter, that's our highest margin business. Doubling down on our unbranded or our PSP platforms, we're having tremendous success on that, which, by the way, kind of doubles down on our checkout again, because when we implement our unbranded or our PSP platforms into merchants, they automatically upgrade to our latest checkout integrations. And of course, having a digital wallet. We have over 200 million consumer accounts that use our digital wallets, one of the largest digital apps or digital financial apps in the world, perhaps the largest in the Western world. And there, you know, people use checkout 30% more. They churn 25% less. So really focusing on those three things, they both are intertwined and sort of inextricably linked together, and if we do well on one, the others start to accelerate as well.
Yeah. Because of your position in online checkout, you've got a great view across e-commerce, you know, globally, consumer spending trends.
Yeah.
What are you seeing in the current environment? How are you seeing consumer spending habits evolving?
You know, the consumer's been pretty resilient. I think everybody's seen that. But, you know, and you guys have been pretty, pretty bullish on it being a soft landing coming up. And I think the Fed's done an excellent job, actually, in raising rates in a controlled way. Inflation is starting to come down. But I do think the consumer is somewhat fragile right now, and I think that we still are not out of the woods by any stretch of the imagination. The pandemic benefits are running out. You know, people put those into their savings. Savings accounts are coming down quite meaningfully. Credit is at an all-time high right now. You're beginning to see credit defaults tick up a little bit. And so I would say the consumer is fragile. I would say the economy is moving in the right direction, but it's fragile here in the U.S. And I'd say, you know, the E.U. is still working its way through[crosstalk] just barely growth.
Certainly much more sluggish than here.
Yeah, exactly, and I think they've got a longer road to hoe. So I think in general, I think you're beginning to see discretionary spend begin to rise a little bit as inflation comes down. I think revenge travel, I think we've seen the peak of it, and I think as you look out into fourth quarter and into next year, I think you'll probably start to see travel, entertainment, ticketing start to slow probably a little bit.
Yeah. Yeah, it's not inconsistent with [crosstalk] with my, with my own view. You know, on branded checkout initiatives, and you've done a ton of innovation, constant innovation, constant iteration. You know, when you look at the innovation, the iteration, the tweaking, how is that affecting the customer and merchant—the consumer and merchant experience? Can you give some specifics around how you see that, you know, that impact?
Yeah. Well, as you know, there's never a one silver bullet [crosstalk] that fixes everything. Branded checkout is hundreds of things that you need to go do, and you need to do well. Basically, on branded checkout, we're basically trying to take friction out of the process. That is, you know, reduce latency, make sure that everybody has a one-click checkout, passwordless login, native in-app experiences, so when somebody comes in to a merchant app, they don't bounce out to the PayPal server farm and then bounce back in when they're checking out. That just adds time and confusion. You know, we're making slow but steady progress on all of that. 70% of all checkout now is passwordless outside of the E.U. E.U., you still have SCA, strong customer-
Right
... authentication, but we're rolling out passkeys hard and heavy into the E.U., and that will create biometric, passwordless, approval process in the E.U., as well. We've got 43 of our top 100 merchants now in our latest checkout. We said we'd be at 50% by the end of the year as sort of an aspirational goal, and we're in pretty good shape on that right now. We're rolling out, very aggressively, all of our PSP platforms, whether it be Braintree, and I'm sure we'll talk about that later, or PPCP, our unbranded platform for SMBs and channel partners. That's gaining a tremendous amount of traction, and everywhere we roll that out, you're automatically on our latest and greatest checkout solutions.
When you're on our most upgraded checkout solution, we either gain or hold, we either gain or hold share, worst case. Then we've got other things that we're putting into place, like Buy Now, Pay Later. We launched that 2.5 years ago. We're clearly a top-three player in the world. I'd argue we're probably the number 2 player in the world, in the U.S. I bet we're probably number 1 in the U.S. And everywhere we have Buy Now, Pay Later, especially when we have it upstream from the checkout page, we gain a large amount of share on that. So there's a lot of things we're doing on branded checkout, a lot more that we're gonna continue to do. We're thinking about-
Is there more innovation that you think can come there, a meaningful more?
Yeah.
Okay. Yeah, for sure there is. As I've mentioned, like, we'll do 200 separate experiments on, mostly on checkout this quarter alone. Again, I hope a third of them are successful, but each and every one of them, you know, moves the needle for us. And we've got some bigger things like, you know, we're combining on our app, both shopping tools as well as payments. You know, we have over 10 million consumers enrolled in our rewards programs right now, and their incremental volume is 32% when they do that. So these kinds of things, when you can combine them together, can make a real big difference in both how a customer looks at PayPal overall, how they shop, and their whole checkout experience.
Yeah.
There's a lot more to do on that front.
I want to switch gears, talk about PSP, the PSP part of your business. You know, you mentioned, PPCP, PayPal Complete Payments.
Yeah.
Talk a little bit about what it is, and how big an opportunity this is for you, and why now?
Yeah. Well, it's a huge opportunity for me. It's a extremely large TAM. Most importantly, though, it is a market we have not really touched with products in a long time. We've spent years developing PPCP. We just rolled it out. Well, it'll be fully rolled out through Europe, as well as the U.S. and certain select markets in APAC. And it's our unbranded PSP platform for small businesses and channel partners.
Mm-hmm.
It's going right at Stripe. You know, that's been the PSP in that market. We've had a tremendous initial success there. We've got Shopify, WooCommerce, Adobe, 25 other channel partners signed up to roll out PPCP. We've got 2.5 million merchants that, you know, with one click, can move over to PPCP. We've rolled out our third wave of enhancements already. We rolled out the third wave just 3 days ago. And so it's a best-in-class PSP platform, tremendous opportunity for us. And downmarket, you have very high margins as well. And so when you're upmarket, especially in the U.S., it's pretty much commoditized on that payment side, very low margin business.
Now, there are ways of increasing margin on that, but downmarket, when you're in, even in the U.S. and especially overseas, it's a high-margin business for us.
Yeah. On the other end of the spectrum, you've got Braintree, you know, where you've got an unbranded platform for, you know, for big enterprise clients. You seem to be having a bunch of wins there. What's driving it? Better product, better pricing? You know, how do you think about the PayPal opportunity, you know, overall in that space?
Yeah. I mean, just to be clear, we are gonna drive hard on our PSP businesses.
Mm-hmm.
We are winning in the market. You can see it in the results of our competitors, as well. And the way that it typically works is we grab, like, 20% of, of a very sophisticated because Braintree is at the most sophisticated, largest, merchants or app providers out there. You know, the Ubers of the world, the Airbnbs, Spotifys, DoorDash, and you name it. Most of the big ones are using us now. We come in, we grab about 20% as an alternative provider, and then, you know, pricing is always competitive there.
Mm-hmm.
But pretty much everybody's in about the same place on pricing. And then, vendors or merchant partners evaluate you on uptime, they evaluate you on auth rates, and loss rates.
Mm-hmm.
Typically, what we find is we go in at 20%, our uptime is equal to or better than any of our competitors, and our auth rates and loss rates are better. They're just better. We have more data, more information, and we go from 20%- 40%- 60%- 80%-90% of the traffic over anywhere from, like, six months to a year. We're gonna double down on that, because the unbranded or the PSP business, one, allows us to have our best integrations, and we have our best integrations. Our branded checkout grows, and it, and so we stop losing any share that we might have, and we hold or grow. Second, we have a tremendous amount of data and information.
Our Braintree platform, its vault, has over 5 billion financial instruments in it. It is the largest vault in the Western world of financial instruments, over 1 billion tokenized instruments inside it. We have massive amounts of data, and in the age of AI, it's actually the companies that have the most unique data sets that can really utilize those models in ways that can create value propositions that are very difficult for others to provide. Like, one of the advances we're gonna do in checkout is, you know, when a merchant uses PayPal, 15%-20% of their checkout typically comes through us... but that means 80%-85% of their checkout is card entry or other-
Yeah
methods. When you use PayPal, your auth rate is, call it 85%. You know, the typical industry average is down at about 65% or so. What if we could take the other 80% of a merchant's checkout and create a one-click checkout flow for them using the data and information we have? And so we are gonna really try and redefine the whole checkout experience, the entire checkout experience.
Yeah
for merchants going forward, using the data that we're getting through our PSP platform. So it is both strategic for us, and it's also tremendously reinforcing of our brand at checkout.
Yeah.
We'll continue to be aggressive.
Okay, let's shift gears. Digital wallet adoption. You know, you've got a bunch of things that you're focused on that are driving more users, you know, into the wallet more frequently. Let's talk about Venmo. You know, how are you driving monetization of the app? When you look at the Venmo experience, the PayPal experience, how can you combine those experiences?
Yeah.
Talk a little bit about the evolution there.
Yeah. Venmo's a huge asset for us. It really, you know, has captured a whole generation that use that platform. I would say we've done a reasonable job of monetizing it. It's well over $1 billion of revenues. It's profitable for us. When we first came in, it was losing money hand over fist, as it was just P2P and no revenues. But I think we've got a couple of areas. One, obviously Pay with Venmo is gonna be a huge opportunity for us. You know, we're in Amazon now, McDonald's, Starbucks, Xbox, a lot of-- And every time we put out our PSP business, people automatically move into Pay with Venmo as well. So Uber has it, others.
And so you're gonna start to see Pay with Venmo really start to take off, and we're already beginning to see, I think, volume go up 70% or so, and I, I would, I would think that's probably one of our biggest opportunities there. Cards, attaching cards, whether it be debit primarily and credit, into, Venmo, so people can use Venmo both online and offline, will be a big opportunity for us. Interoperability on between PayPal and Venmo in terms of P2P, that will be coming out later this year. Any time you can expand a network in a network type of business, you'll have a lot of opportunity. We're gonna add things to P2P, like the deal we announced with Hallmark, where you can do gifting automatically that we can monetize.
Finally, we have 2-3 million merchants who are on and using Venmo, and connecting them more closely with the consumers on Venmo is another big opportunity for us. I think Venmo's got a really long runway ahead of it, but we've got to keep executing on that.
Keep working on it. Yeah. How about Buy Now, Pay Later? Talk a little bit about the strategy there and the growth opportunity there.
Yeah. Probably one of the most successful things we've ever launched-
Mm-hmm
... on it. And it's because we have the best value proposition in the market. I mean, we don't charge merchants anything to accept it, which is radically different than all of our other competitors. We have the highest auth rates in the industry because we have 400 million consumer accounts. We know the people coming in, and when you know somebody coming in, your auth rate is 90% plus.
Mm.
When you don't know them, it's like 60%-65% auth rate.
Mm.
So we know way more people coming in than our competitors know coming in. When somebody uses Buy Now, Pay Later, their checkout volumes, their TPV goes up by 30%. Their churn goes down by 10%-15%. It's. And then you start moving Buy Now, Pay Later from the checkout page to the product pages.
Mm-hmm.
When somebody is looking at a product, they can buy right there. They don't even go to the checkout page. So you have 100% share when you're upstream in that, because somebody doesn't even go... By the way, if another Buy Now, Pay Later player has upstream presentment, they also gain share. And that's why we've been very, very aggressive in rolling out Buy Now, Pay Later. You know, a lot of people were buying placement for Buy Now, Pay Later. That's no longer in vogue. People can't afford to go and do that, and we are coming heavy at that and winning quite handily in the market. It's a. That's a really strong product for us.
Talk about your stablecoin, PayPal USD, how does that fit into the broader strategy?
Well, you and I have talked about this a lot.
Talked a lot.
A lot. And we've had really great conversations around it. I'm a very big believer that the financial system needs to upgrade its infrastructure, and I think that CBDCs or stablecoins, and probably a combination of the two, will add and maybe redefine a lot of the financial system. It may be, it may be that five years from now, we look back on our stablecoin launch as one of the most important and innovative things that we ever did. Because if you think about digital currencies, and I'm not talking about Bitcoin, I'm not talking about. Like, people conflate things together, right? They think about cryptocurrencies, different than a digital currency or a representation of the U.S. dollar. And so if you do this the right way, do it hand in hand with the regulators, which we've obviously done.
When I say regulators, I also mean, you know, working with FinCEN and OFAC to look at illicit financing, being able to both freeze and seize, you know, bad actors if they, if they start to use this, fully transparent accounting for that, having a, a, accounting firm every single month look at it, report publicly what the holdings are so that the stable coin truly is stable. Only look at overnight repos, treasuries, cash in those positions. The way that you should think about stablecoin is that initially it will be, you know, kind of a, a Web3 to fiat conversion so that it's seamless to go and do that. That's, that's like step one.
Mm-hmm.
But step two, three, four, five, six, step two, international remittances, you can redefine, you can do micro payments, you can do B2B for small businesses, and they fundamentally, at 1/100th the cost, at transaction speeds that are seconds, not days or weeks to go and do. And eventually, you have merchants accept things like your Stablecoin at a radically different exchange rate.
Yeah
... that goes on, or a discount rate that redefines how the industry looks. And we want to be, you know, one of the innovators in that space, one of the definers of that space, work hand in hand with regulators. And, you know, we got a lot of really positive response when we launched, unlike some others who have done that. But that's because we've spent years developing this, years talking to regulators, talking to everybody, in D.C., about this. And, and I think a lot of people are really excited about it, and we all wanna learn from it.
Yeah. That's great. Just quickly on AI, the acceleration of those technologies, if you were to highlight one or two ways you think it massively impacts what you do at PayPal, what would you put forward?
I think AI is on two sides. One is on efficiency-
Mm-hmm
... and the other is on value proposition. On efficiency, look, we're working with Amazon, Microsoft, and Google, whether it be CodeWhisperer, CodeAssist, Codey. And what we are seeing using those tool sets, and this is just kind of the beginning of it, is we're seeing 20%-40% productivity improvements in our developer tool sets and our developer life cycle. That is massive. That is massive. I think that AI is gonna redefine software development. I think it is going to do what, for that, which has been a stubbornly high cost-
Mm-hmm
... is gonna automate a ton of it. And so you also, obviously, in customer service and AI chatbots and tool sets, it's gonna redefine that. It's gonna redefine every element of the functional areas, and it's gonna redefine legal, it's gonna redefine law firms. It's gonna change everything, and I think people are probably underestimating-
Yeah
... the impact of AI on the efficiency side. We're at the very beginning of that. That's one of two things. You're either gonna put out a heck of a lot more code, or you're gonna be able to put out code at less cost as well.
Yeah. Yeah.
That's one side.
Sure.
On the other side is value proposition. And I think... Look, there are a lot of people talking about AI. AI models will be available to everybody. It really is, what is your unique dataset? You have unique datasets. We have unique datasets, and I think those firms that have that scale of data and unique datasets will be able to take AI into their value proposition. For us, we will use it to redefine checkout.
Yeah.
We will put a PayPal assistant right into our app, where somebody can ask any question and immediately be answered. We're experimenting with that, already, from an employee beta, right now. So I think, AI is gonna affect both efficiency and value proposition, in pretty massive ways going forward.
Yeah. Agree with that. So I look at you, and I think you're a super young guy. What's, what's the next chapter? What are you, what are you looking forward to in the next chapter?
Yeah. Well, first of all, I'm really excited about Alex coming in, as I mentioned. You know, the board did, I know some thought it took too long, but they did a thorough search, and they did their job, and I tried to give them as much time as they needed to do that job. You know, I told them last year that I wanted to retire at the end of this year, and I wanted to do that, so we had all the time to find the right person, and we found it in Alex. He knows small business inside and out. He knows product inside and out, and he's an inspirational guy. And so I personally think that PayPal has many exciting chapters ahead of it and should be able to accelerate from where it is right now.
He's got a foundation to build on. Like, we've got to, you know, we've got massive customer base, massive amounts of data. AI is playing right into what we wanna go do. Our infrastructure is modern, and that has not been an easy task over the past nine years. We went from monolithic C++ old libraries. I mean, it was very, very difficult. We're fully service-oriented right now, hybrid data center, public clouds, latest developer language sets, almost all API sets. And so he's got a lot to build on, and I feel like on all my conversations with him, he's thinking about this all the right way.
Let's give him a little bit of time so that, you know, he can come up and articulate his strategy, but everything that I see and hear from him gives me great confidence for PayPal's future, and that is something that obviously I care deeply about. I mean, you're obviously right. I mean, I am leaving PayPal, but I'm not retiring. There are clearly a lot of opportunities in front of me right now that I'm juggling. I've told everybody, thank you, but, you know, my last day at PayPal is the end of this month, and I'm gonna give every single thing I have until that last day.
I'm looking at everything from senior government roles to potentially other CEO jobs, to private equity, venture, to loads of different boards that I think I might be helpful with those companies. There's a lot out there.
Yeah.
I just gotta take my time and think about it, and also spend time with the people I love and care about, that, as you know, from these jobs, you just don't have time-
The same.
They're 24/7.
Yeah. Just to close, you know, it's been a great run.
Thank you.
The one thing that you're really proud of, that you wanna highlight?
I think the one thing I'm most proud of is I think that PayPal is a responsible global corporate citizen. I think the private sector and the public sector need to work together to address a lot of the problems that we face in our society. I don't think we should ever shirk from that duty. I think it's our responsibility, and I think, we've done our part on driving financial health for our employees, thinking about, you know, how do we help in climate change, and how do we help the communities around us? And I, I'm proud of what we've done there.
That's great. Well, it's been a great run. I look forward to seeing what's next. Thanks, Dan. Thanks for being here.
Thank you, David.
Feel privileged to wrap it up.
Yeah. Thank you.