Good afternoon. My name is Gabriel, and I will be your conference operator today. At this time, I'd like to welcome everyone to PayPal Holdings Earnings Conference Call for the Q4 and Full Year 2020. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Thank you. I would now like to introduce your host for today's call, Ms. Gabriel Repinovich, Vice President, Corporate Finance and Investor Relations. Please go ahead.
Thank you, Gabriel. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the Q4 and full year 2020. Joining me today on the call are Dan Shulman, our President and CEO and John Rainey, our Chief Financial Officer and EVP, Global Customer Operations. We're providing a slide presentation to accompany our commentary.
The call. This conference call is also being webcast and both the presentation and
call are available on the Investor Relations section of our Web the replay. In discussing our company's performance, we'll refer to some non GAAP measures. You can find a reconciliation of these non GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. Management will make forward looking statements that are based on our current expectations, our financial results and involve risks and uncertainties. These statements include our guidance for the Q1 and full year 2021.
Today's conference call. You can find more information about risks, uncertainties and other factors that could to our most recent annual report on Form 10 ks and quarterly reports on Form 10 Q the SEC and available on the Investor Relations section of our website. You should not place undue reliance on any forward looking statements. Today's conference call.
All information
in this presentation is as of today's date, February 3, 2021. We expressly disclaim any obligation to update this information.
Today's call. Thanks, Gabrielle, and thanks, everyone, for joining us today. I'm pleased to report that PayPal just completed the strongest year in our history, achieving record growth to the call to questions. Thank you, operator. Thank you, our shareholders.
Consumers and businesses of all sizes have embraced the new digital era, Erasing the distinction between online and offline. A digital first world is no longer our future. It's our current reality, and it will forever change the way we interact across almost all elements to our next question and answer session of our lives. At the beginning of the pandemic, consumers in lockdown had no choice but to do all of their shopping online. Today, the vast majority of consumers state that post pandemic, they will continue to shop online the next question and answer session.
Retailers to our shareholders. We are rapidly adapting to a new landscape, adjusting their strategy from encouraging consumers to visit their stores to Optimizing for Home Delivery. The pandemic has accelerated a digital wave of change our Q4 highlights these strengths. In the quarter, we added 16,000,000 net new active customers, our Investor Relations team, including an incremental 1,400,000 new merchants. For the year, we delivered a record 73,000,000 net new actives, ending the year with 377,000,000 active accounts, the call to Mr.
President of the call to Mr. President of
the call is up 24%. We now have over 29,000,000 merchants interacting the company's call with nearly 350,000,000 consumers. In 2021, we expect to add to another 50,000,000 net new active accounts. Equally important, our daily to our Q4 the Q1 of 2019. Our expanding scale and increasing engagement drove a record 4 point $4,000,000,000 transactions in the quarter, up 27%.
Our total payment volumes in Q4 to our Investor Relations segment,000,000,000 up 36% on an FX end basis. Our TPV, excluding eBay, was up a record 40% as we continue to gain market share. To our Q1 results. For the full year, our TPV was up 31% to $936,000,000,000 In Q2 of 2020, our quarterly revenue the call for the first time with our quarterly revenues growing by 23% to $6,116,000,000 to to $21,450,000,000 Our non GAAP EPS grew a record 31% to $3.88 and our free cash flow increased by 48% to $5,000,000,000 Venmo continued its strong performance with Q4 TPV our Investor Relations website at 47000000000 dollars up 60% year over year. Venmo's customer base This continued momentum reinforces our conviction that revenues will approach $900,000,000 in 2021.
In early January, eligible customers were able to cash their stimulus checks within the Venmo app for the first time. Our Venmo credit card will be available to 100% of our base. The call. And in the coming months, we will launch the ability to buy, hold and sell crypto via the Venmo app. And finally, our revamped
the replay of the Pay with
Venmo experience will launch in Q2, offering a best in class checkout experience. Today's digital reality is rapidly accelerating the need for a digital wallet a conference call that encompasses payments, financial services and shopping. This year, our digital wallet will change more than it has ever changed before, significantly increasing its functionality the call within a single integrated and beautifully designed app that should meaningfully increase consumer engagement. In 2020, we made significant progress in expanding the functionality of our PayPal and Venmo wallets. The operator to share our financial results.
We added the ability to buy, sell and hold cryptocurrencies, the option to buy now and pay later, direct deposit, our Investor Relations website. We introduced Venmo and PayPal QR codes for in store purchasing, our Venmo credit card. This year, we expect to work with our financial industry partners to introduce even more Optionality, including budget and savings tools investment alternatives, including but not limited to Crypto, an enhanced bill pay options. We also intend to fully integrate the entire suite of Honey's shopping the Q1 of 2019. We are now ready to
begin with our Q1 results,
including wish list, price monitoring, deals, coupons and rewards for use in the physical End Digital World. I'm very pleased with the early reception of our PayPal and Venmo QR codes, which are now accepted at over 600,000 retail locations. In 2020, we signed 29 large enterprises, including CVS, Foot Locker, Nike, 5 the Loews, Levi's, Bloomingdale's, Macy's and Uniqlo. And our early in store results are encouraging. Merchants are experiencing double digit increases in average basket sizes to consumers who frequently use our QR codes.
And we are seeing a 19% increase in TPV from consumers who use our QR codes. Across all of our in store efforts, the call. Including QR, tap and pay and cards, we processed over $20,000,000,000 SPV with almost 10,000,000 consumers using PayPal in store. We also saw an exceptional response from our crypto launch. Even with high initial expectations, to Cited to build upon this early success by allowing customers to use their crypto balance as a funding source whenever they shop at our 29,000,000 merchants.
We anticipate the rollout of that capability to begin late this quarter, and we hope to launch our first international market in the next several months. These initial steps are just the beginning of an extensive roadmap around crypto, the Investor Relations section of the financial results. We are already working with the regulators and central banks to re imagine and shape the next generation of the financial system as consumers no longer want to handle cash. To the next few quarters. A future where transactions should be less expensive to complete and a future that enables all people to be part of the digital economy, not just the affluent.
We are significantly investing in our new crypto, the Blockchain and Digital Currencies Business Unit in order to help shape this more inclusive future. I would also highlight the rapid growth of our buy now, pay later functionality. We saw tremendous and growing demand throughout the quarter and witnessed the fastest start to any product we have ever launched. Millions of consumers transacted at 100 of 1000 of merchants to the Q4 alone. As with QR codes, we are seeing a meaningful halo effect on overall transactions NTPV, including over $750,000,000 of TPV in our Q1 out of the gate.
It's exciting to see that each new service we launch drives incremental increases to our overall consumer lifetime value. Consequently, I would expect that our engagement levels will increase the replay of our business. I'm proud to see that the PayPal platform was especially leveraged during the pandemic our next call for philanthropic giving and community support, enabling over $17,000,000,000 the Q4 of 2020 and those in need. And we also put our $535,000,000 commitment the Black and minority owned businesses and communities into action. We have already invested over 50% to those committed dollars, and we plan to report on their impact as results come in.
Today's conference call. We have entered the next chapter
in PayPal's history. The efforts of our employees, Along with the investments we have made over the past 5 years have transformed our technical and compliance infrastructure, Enabling Rapid Product Development. We released more products and services in 2020 the next few years and we will step up that pace in 2021. The call. Merchants and consumers are turning to PayPal in record numbers as we accelerate into the digital age.
Our shareholders. Our opportunities over the next 5 years have never been greater. We remain focused our Investor Relations team on democratizing financial services, assuring that everyone has access and can thrive in the new digital paradigm. We intend to shape that future and in doing so become one of the world's leading digital payments, our financial services and commerce platforms. I look forward to expanding on this vision during our Investor Day next week.
Share. With that, I will turn the call over to John. Thanks, Dan.
I want to start off by thanking our customers, partners and employees for helping us deliver a record breaking year. 2020 was pivotal for PayPal and the broader payments industry, the Q1 of 2019 marked by rapid acceleration in digitization, cash displacement and e commerce adoption. These secular trends have been shaping our sector for some time. That said, the rate of change we experienced last year resulting from the Q4 of fiscal 2020. The widespread implications of the COVID pandemic was profound and transformative.
Crisis, to the call, which has led to hardship and suffering for so many, increase the urgency across our organization to serve our customers in new the next question and answer session. Notably, the isolation defined by lockdowns and working from home responsibility and ready to build on our strong momentum. Now to our 4th quarter results. Total payment volume grew 36% on a currency neutral basis. This is the strongest quarterly growth we've reported in history to the call and represents 14 points of acceleration from 2019.
Our merchant services volume grew 40%, another record to PayPal, accelerating each quarter in 2020. Volume contribution from eBay marketplaces continued to decline. We exited December with eBay representing less than 6% of our overall volume. Revenue in the 4th quarter the company's financial results. We are pleased to announce that we have a strong quarter on both a spot and currency neutral basis to 6,100,000,000 Relative to the Q4 of 2019, U.
S. Revenue grew 18% the call. And international revenue grew 29%, as the U. S. Has a greater proportion of revenue from credit in the travel and events verticals.
Transaction revenue grew 25%, representing 8 points of acceleration from last year on a spot basis. This growth was primarily driven by strength across our core PayPal business, including strong cross border activity. Our core payments platform continues to deliver exceptional growth with transaction revenue, excluding revenue from eBay, Growing 30% in the 4th quarter, also an acceleration of 8 basis points from 2019. Other value added services revenue increased 1% on a currency neutral basis, reflecting incremental Honey revenue the company's financial results, offset by lower interest income on customer balances and less credit revenue. Honey contributed approximately 1.7 points of growth to total revenue and approximately 20 points of growth to other value added services revenue.
In the 4th quarter, the call. Transaction take rate was 2.05 percent and total take rate was 2.21%. To
to the Q2
of fiscal 2020. We will now begin the Q2 of fiscal 2019.
We will now begin the Q2 of fiscal 2019. We will now begin the Q2 of fiscal 2019. We will now begin the Q2 of fiscal 2019. We will now begin the Q2 of fiscal 2019.
We will now begin the Q2 of fiscal 2019. We will now begin the Q2 of fiscal 2019.
To the Q1 of 2019 from foreign currency hedges. The 28 basis point decline in total take rate resulted from these factors the Q4, as well as lower value added services revenue. In the Q4, our volume based expense performance the conference call. These expenses delivered 2 16 basis points of leverage in the quarter, increasing 18 percent to $2,700,000,000 Transaction expense improved 12 basis points the Q1 of 2019 as a rate of TPV to 84 basis points, driven by both volume mix and funding mix. The call.
Transaction losses improved 5 basis points to a record low rate of 10 basis points. Credit losses were 3 basis points as a rate of TPB. Our credit loss reserve coverage ratio at the end of the quarter was approximately 23%, decreasing slightly from the 3rd quarter. The combination of strong revenue and volume based expense performance the call. Resulted in transaction margin dollars increasing 28% to $3,400,000,000 In the 4th quarter,
the call. We generated incremental
transaction margin dollars of $753,000,000 more than 2 times the incremental contribution last year. Non transaction related expenses grew 28%, reflecting increased investments in our our key strategic priorities as well as growth related to our acquisitions. This higher level of investment the call. Contributed to a 56% increase in sales and marketing expenses and a 27% increase to the Q1 of 2019. Leverage across customer support and operations and general and administrative expenses partially offset this increased level of investment.
On a non GAAP basis, operating income in the 4th quarter grew 29% to $1,500,000,000 Our operating margin was 24.7%, expanding more than 100 basis points to our shareholders and representatives of our shareholders. We continue to demonstrate our ability to deliver operating efficiencies to our shareholders and shareholders. Non GAAP
the call. Other income
declined by $62,000,000 relative to last year, driven by reduced interest income from lower interest rates and higher interest expense from our debt issuance last May. The negative impact on non GAAP EPS from the decline in other income was offset by a lower effective tax rate. For the Q4, non GAAP EPS grew 29% to $1.08 We ended the quarter with cash, cash equivalents and investments of $19,200,000,000 In addition, the call. We generated $1,100,000,000 in free cash flow, representing 50% growth from Q4 last year. I'd now like to discuss our guidance for the full year and the Q1.
We've just completed the strongest year to our Q1 results in our history, achieving record growth in net new accounts, volume, revenue, operating income, earnings and free cash We delivered these results while absorbing meaningful macroeconomic headwinds affecting our credit business, the revenue and income effects of lower interest rates, idiosyncratic pressure on the travel and events verticals and the initial step down of volumes from eBay post operating agreement. These headwinds persist as we move into 2021. And yet, our core business continues to perform at unprecedented levels. Our addressable opportunity the Q1 of 2019 has never been more expansive, and we're confident we've never been better positioned to capture the benefits of this accelerated secular growth. We believe the effects of the pandemic on consumer behavior and business transformation are enduring and sustainable.
We also expect e commerce to drive continued strong payment volume and transaction growth globally. The call. While it appears that additional stimulus measures will support the path toward a more sustained economic recovery, the back drop continues to evolve and much remains uncertain. And as we've commented on several occasions over the past 9 months, our financial results. We're focused on balancing transparency with certainty as we develop our outlook.
It's with these considerations that we're providing full year guidance, which is our best estimate at this time. For the full year, our plans contemplate TPV growth in the the high 20 percent range. We expect to generate revenue of approximately $25,500,000,000 representing growth of approximately from eBay's managed payments transition. In addition, our current forecast contemplates an approximate 200 basis point impact to the Q1 of 2019. As the U.
S. Dollar has weakened relative to 2020. As we've discussed previously, in 2021, We will absorb the greatest revenue impacts from the loss of volumes from eBay. In the face of this pressure, we're pleased to be guiding spot revenue growth to the Q1 of 2019. Equally important, once we are beyond the eBay transition, we expect our rates of growth for to our Q1 results.
Thank you, operator. Thank you, operator. Thank you, approximately 17% growth in non GAAP earnings per share. This earnings guidance contemplates ongoing elevated levels of organic investment. We believe the structural tailwinds for PayPal Sustained investment in our business is critical.
Cost discipline together with our ability to efficiently scale our payments platform discuss our financial results. We will now begin the call to provide a brief overview of our financial results. In addition, discuss much of this margin expansion. For the full year, we expect to generate approximately $6,000,000,000 in free cash flow. Before I discuss our Q1 guidance, I'd like to contextualize how to think about the trajectory to our revenue and earnings performance for the year.
This year, there are several dynamics that we believe will contribute to more variability in our year over year growth rates to our historic trends. These include lapping our 2020 performance, this year's cadence of planned investments in product introductions, the roll off of eBay volumes and our timing expectations related to the the recovery of travel and events volumes and of a more normalized growth in our credit portfolio. Our financial results. Underlying our guidance for 19% revenue growth on a spot basis is our expectation that we will report our the highest rate of revenue growth for the year in the Q1, followed by relatively stable but more moderate growth in the second, third and fourth quarters of 2021. Our full year earnings guidance of 17% growth also contemplate delivering the highest rate of growth in Q1.
In the Q2, we anticipate non GAAP earnings to be relatively flat year over year, primarily due to the outsized EPS growth we experienced in Q2 last year, which exceeded 49%, the next question, as well as the expected timing of our investment spend. Then in the back half of twenty twenty one, we expect a meaningful and sequential reacceleration in earnings growth. Importantly, throughout the year, we expect the absolute dollar performance of our business to be very strong. As we move through the year, we'll keep you updated on how we're tracking relative to this expected cadence. Consistent with my earlier comments, in the Q1, we expect revenue growth of approximately 28% on a spot basis, our Investor Relations team with non GAAP earnings growth of approximately 50%.
In summary,
to
our business. PayPal has never been more relevant and needed than we are right now. Our industry, our company the next 5 years will be very different than the last 5, and we're striving to shape that outcome, the next question and answer session. A future where e commerce and digital payments are not just a fallback when one can't make it to a physical store or don't want to handle cash, But instead a necessity, a necessity that is sought out as the preferred way for people to transact every single day. It's a future where I expect that our scale, our brand of trust and security and our leading solutions for merchants and consumers alike our next question and answer session.
Thank you.
Thank
you. Your first question will come from the line of Jason Kupferberg of Bank of America. Please go ahead.
Good afternoon, guys. Congrats on
the results. I wanted to ask about the new growth initiatives and 2 part question here, maybe one for John and one for Dan. The Q1 of 2019. First part is, does your guidance assume that the aggregate revenue contribution of these new growth initiatives will be enough to offset the 4% eBay headwind in 2021. And then the second part is among the various new growth initiatives, which have surprised you the most to the the Q1 of 2019.
And which did you perhaps think would be seeing a little bit more adoption to date than they have been to date?
Hey, Jason. I'll start with
the first part
of your question and turn it to Dan, if that's okay. With respect to to the headwind from eBay. The fact that we're expanding or better said that our projected guidance suggest that we're expanding our operating margins. Would certainly indicate that we think between the momentum in the business and the additional initiatives combined that we can offset the pressure related to eBay. Certainly, the initiatives all initiatives taking a while to ramp up.
The bulk of our new initiatives are really we would expect the financial impact to be in the second half of the year. But when you combine that with the momentum in the business, it certainly allows us to offset that headwind.
Yes. And Jason, I'll Trying to answer your second question there. So that's like asking me to choose which of these My favorite kid. So, look, we put out a couple of big initiatives into the market from our in store to our buy now, pay later. And honestly, all of them surpassed to our internal projections and they all are creating a halo impact that is really I talked about kind of QR having a 19% halo effect.
Crypto started off with a bang and just kept going and is continuing to go. But in a surprise winner, to If I had the envelope, I would talk about buy now pay later honestly as surprising me most to the the site. Since I've been here, I've never seen a product launch with that kind of scale so quickly. I mean, we talked about moving into the U. S.
In October, we announced, and we had almost 3,000,000 customers using Buy Now Pay Later at 100 of 1000 of merchants. By the way, that's not the total number of transactions. We already saw in the quarter a 40% repeat rate on that as well. And so it's not just that you add customers in, I mean, they're just voting with their feet and moving forward. And we I think that we have a value proposition that is second to none out there.
First of all, we've got 350,000,000 customers that we can bring that trust PayPal. We know them and so our approval rates our shareholders. We think that anybody else out there when people sign up for buy now, pay later. 2nd, it is no incremental cost to the merchant. I mean, all of the other competitors charge a pretty significant incremental cost.
And for us, we're just charging the same take rate that the merchant has. To very, very light integration, which is why we saw well over 10,000 merchants integrate buy now, pay later up the funnel really on the product pages and not at checkout and beginning to see more and more of that as we come into the year. Another thing that is really interesting to me, Here the halo effect, by the way, very early days, the halo effect is about 15% increase in TPV. And we think all of that TPV So far, it's incremental, TPV for us. But the other thing is we're seeing a meaningful double digit reduction to In the cost of those transactions as well.
And so when you look at kind of the scale, When you look at the value proposition, the take up of merchants and that's continuing on into the Q1, this is clearly a home run for us to the next question and answer session. And it is not to dismiss any of my other favorite kids because they You all had great years, but buy now, pay later was probably the biggest surprise.
Okay.
Well, thanks for all the commentary. Yes, you bet.
Our next question will come from the line of Tien tsin Huang of JPMorgan. Please go ahead.
Thanks a lot. I really enjoyed the presentation here. I wanted to ask on M and A, if that's okay. I just wanted to check your appetite on acquisitions and especially at this point in the cycle, given that so many of these digital to the Q and A. Assets have been inflated in terms of valuation during the pandemic here.
Any change in your thinking around M and A? I I saw on the slide you had some great detail on your strategic investments, but how about M and A?
Tien Tsin, I'll start and maybe Dan will jump in. But I think there's 2 really important points to consider when we think about acquisitions for PayPal. The first is that we are somewhat unique in the FinTech ecosystem and so far as we enjoy outsized growth rates, but we also are extremely profitable and that results in the type of free cash flow generation with 20% plus free to this effectively an asset where we can go out and look at inorganic opportunities to complement what we're doing organically. So I think that's one important point to think about. The second and it really gets to your point around some where some valuations are, but we exercise a tremendous amount of discipline in the way that we look at this.
And from an overall capital allocation perspective, Our view is every dollar of capital has to compete with the other alternatives out there, whether that be organic, whether that be returning cash to shareholders or going out to acquiring a company. And so we will remain disciplined and really view our the acquisition strategy over a multi year longer term timeframe.
Yes, I'd just add to that, Jin Ji. If you think about our need for acquisition, that weighs against like what is our pace of organic Innovation. And in 2020, we put out more products and services than we've ever put out before. The call. I said in my remarks that we're going to step up that pace in 2021 and we're going to go do that.
When I look at all the investment we've made Over the past 5 plus years in our tech infrastructure, in our compliance and risk management, What that's enabled us to do now is pretty radically accelerate the amount of software releases that we have. We put out last year between config releases and software releases, some 60,000 releases. That was up 30% year over year in a time where we're all working from home. Yes, so our productivity has gone way up. Our developer toolkits are much improved.
We're using modern programming language. We have a service the Q1 of 2019. And by the way, all that's happening while the number of bugs has gone down 25% to take innovation and our ability to deliver products and that takes away a lot of our need to do acquisition. Just Bill, on John's point, we obviously have a strong balance sheet, strong cash flow. We will be acquisitive the Q and A But we're going to look at that, as John said, in a very disciplined manner.
We're going to look at talent type of acquisitions, where can we do maybe smaller acquisition to bring in great talent in a particular area. We'll look at geographic Texas acquisitions where we may want to go after geography And there may be a player or 2 there that could help us leapfrog into that market, and we'll look at that carefully. The operator. And if there's a real capability that not that we can't develop and do, but it's going to take us too long to get there because of what we're trying to do on our roadmap, to the call. And we would take a look at that as well.
Those are kind of the basic areas, I would say. So I think we've got a good one two punch to between what we can do internally and what we can do from an inorganic perspective.
Yes. It's very clear. It's going to be fun to track the organic products for sure. Thanks a lot guys. Yes.
Thank you. Yes.
Your next question comes from the line of James Faucette of Morgan Stanley. Please go ahead.
James, are you there? I won't be the first one to say this, but are you off mute? James there? Why don't we go to the next question and we can put James back in the queue, a little bit later, Gabriel.
The operator. So your next question will come from Darrin Peller of Wolfe Research.
Congrats on the year also. To Look, your expectation for adding $50,000,000 net new accrues in 'twenty one was clearly an impressive number when looking at the $72,000,000 you guys just add it and then the pre pandemic normalized levels around $35,000,000 I think per year, right? Does that I guess first, does that underscore the incremental adds your confidence that the incremental adds in 2020 will really not pull forward, but they're just new demographics. And just looking off of last
to
Yes, Darren, I think when we look at the cohort of net new actives from last year, It's clearly incremental people coming on. The over 50 the next question. Demographic, 50 years old demographic, one of our strongest growth vectors that we've had. So you're really seeing the next question. New demographics come onto the platform, but what's really interesting to me is the next question.
The engagement metrics of that cohort are also up substantially. We have double digit increases In value for net new active, our 90 day engagement rates are up If you look at a normalized transaction per active spend, this kind of gets a little bit lost because we're including Honey Net new active is in the denominator and we also, as you said, we put on 72,700,000 to the next question. Net new access last year. If you normalize that to $37,000,000 that we would put on, on a typical year, because when you put somebody to the platform. They don't have all the transactions because they all didn't come in on January 1.
They come in throughout the year. And so that puts pressure on it. But our TPA, which is a real measure of engagement, on a normalized basis, would have grown 11.5%. That's above any trend line that we have, up to about 45.1 times a year. And so our churn rates in general because of that are coming down.
And when you have a base as big as ours right now, It is as much, maybe even more about the churn rate than it is the new ads coming in. There is plenty of demand to come on to our platform. But when we see churn reduction like we're seeing right now because of increased engagement
the call. And that increased
engagement is coming because people are just moving online and because we have these new products the next question that are out right now that people are just using a ton of more like crypto is a great example. Everyone who signed on for crypto is opening up their wallet app 2 times the level of what they did previous. And so I think that $50,000,000 We're seeing a lot of really encouraging trends in the underlying cohorts that we're bringing on, which gives a lot of confidence to that 50,000,000 number.
To That makes sense. Really helpful, Dan. Thanks. Yes.
Your next question comes from the line of David Togut of Evercore ISI. Please go ahead.
Thank you. Good afternoon, Dan and John. Could you discuss the drivers of operating leverage, both at the transaction expense and the other OpEx level? And in particular, are you seeing a sustained volume mix shift toward the branded PayPal Wallet versus Braintree and P2P the next question. Thanks, David.
Sure, David. You packed in a lot in that question. So let me just I'll take them in reverse order. We still are seeing elevated levels of debit, and that's assist with what others have said across the ecosystem, although not at the levels that we saw in 2Q And likely driven by the impact of stimulus measures at that point in time. Braintree continues to perform very well for us, but it really suffers the brunt of the impact from the travel and events vertical, Which was down 50%, five-zero percent for us.
And so that's a pretty meaningful impact when you consider that that's the business. So I think we'll continue to see strong core PayPal trends, PayPal volume. To the next question. And those tend to come at a higher transaction margin. By the same time, we've seen record performance discuss our financial results in transaction expense and transaction losses.
And those transaction expense will be impacted more by the mixes in our business, but We expect those will be below the levels that we entered this pandemic with and we expect transaction losses to stay at these levels. We're performing Very well there. But as you think about the remainder of our income statement, if you will, and all of the other sort of non volume related expenses, We've invested a lot obviously in the back half of last year and our guidance assumes that as well. To But we also demonstrate the ability for our business to scale very efficiently. And so if you just we don't give expense guidance for the year, check and back into it based upon our revenue and earnings growth.
And that expense growth that we're assuming in 2021, to the next question. About 75% of that is related to investments we're making in the business, discretionary go to market initiatives, all of the things we're doing to help accelerate or continue these trends. And so that leaves the remainder 25%, which is really just demonstrating the scalability of our model. And I'll end my question with one data point that I think is reflective of how successful that model is. And so, David, I often talk about the incremental margins in our business.
And meaning, for every dollar of revenue that we brought in, in the quarter, what was to. And in the Q4, the organic incremental operating margin was 32% for PayPal. So for every new dollar of revenue we're bringing in, it's got a higher margin on it than what the rest of the business does. That's a model that we find very appealing and one that we want to continue to keep our foot on the gas on. And that's why that even in a year like 2020 to
Thanks so much and congrats, John and Dan.
Thank you. Thank you.
Your next question comes from the line of James Proustett of Morgan Stanley. Please go ahead.
Hey, thank you very much. And to I wanted to ask John and Dan, obviously chime in where appropriate, but you alluded and mentioned specifically, take your questions. John, kind of your guidance and that kind of thing for this year. If we think back just over the last few months, even of the 4th quarters, There's been just a huge amount of volatility in closures and what consumers were doing Could do or couldn't do, etcetera. So how are you trying to think about like all those puts and takes as you formulate your full year 'twenty one outlook today.
And what are the things maybe that you've seen as we've gone through, particularly latter few months of 2020 that kind of give you confidence in, all right, our forecasting methodology is pretty sound, at least from where we stand right now.
Sure, James. Look, the revenue guide of 19% growth for the year, to the call. We sit here in February of 2021 and there's still uncertainty. There's uncertainty with the level of stimulus measures, the pace of the vaccine rollout. But There are some things that we've seen that certainly give us a lot more confidence than where we stood 9 months ago.
Sort of at the peak of the concern and trepidation that people had around what could happen to the economy and the impact on everyone's respective company. To Some of the trends that we're seeing that Dan talked about in his prepared remarks, they're definitely sustainable. And There's this movement to digitization and the pull forward of e commerce that certainly Stans to benefit us and others in this space. But we provided sort of an approximate number, right? We said to There's not a range around it like we normally do because quite frankly, that range would be Somewhat artificial or arbitrary.
There are a wide range of outcomes that can happen, but we feel pretty good top what we see in the business. And I think it's important to note that we are a pretty diversified portfolio of products. And so we're not just reliant on one thing. And I'll give one example before I close my answer, but the travel and events were So I mentioned that in an earlier answer. Like our baseline assumption on that 19% revenue growth to the next question.
As people begin receiving vaccines, there's pent up demand to travel. People want to take that summer vacation in 2020 that they missed. And so we're assuming that we start to see a rebound in travel and events in the Q2. And that certainly stands to benefit the Braintree side of our business. To the operator.
If that's not the case, then likely there's been other concerns that result to people sort of lacking mobility that still stands to benefit us on the core PayPal business. So, it's I know it's 11 months out that we're projecting here, but as we've moved through this, we've gotten more confident with some of the trends that we're seeing and feel really good about that guide.
Your next question will come from the line of Colin Sebastian of Baird. Please go ahead.
Great. Thanks, guys. Good afternoon, everyone. A lot of good stuff here, but hoping you could provide a little more color on the strategy to build out the presence in China,
Thanks very
much. Thanks for the question, Colin. So obviously, we're really pleased to that we now own 100 percent of GoPay. And we're the 1st and so far the only the company to operate a full domestic payments business in China. And that obviously gives us a very strong the legal foundation for the business we have there and for the business that we intend to drive.
To Very recently, Deputy Governor Pan from the PBOC had an article in the Financial Times. That was really kind of this clear statement of China's commitment to trying to strike the right balance between Innovation along with prudent regulation. And that plays right into what we want to to Inside the Market. We really want to work with the regulators there on both of those objectives and assure that we've got both safe and secure digital commerce. And we really have, 3 goals over the next couple of years in China.
To China. The second is to really leverage all of our cross border expertise and that goes in 2 directions. First, We want to significantly increase the amount of cross quarter to the next question. That Chinese merchants can get from the 350,000,000 consumers we have outside of China. We have outside of China.
Both of those are already growing elements and we think that those can grow quite nicely in the years to come and take a look at the future. The third thing though is that we do want to work within the ecosystem inside of China to the company. With companies like China Union Pay, with the banks there, with the tech platform companies there as well, to drive new types of payment services or incremental payment services inside the domestic market. Like that could be payouts, could be some unbranded full stack processing. It could be QR codes.
For instance, I'll just give you an example. The next couple of years. There are going to be a tremendous amount of visitors going into China. To the call. And we want our QR codes to be deployed so that people coming into China don't necessarily have to download to WeChat Pay or Ant, can use their PayPal wallet inside China to make purchases at merchants.
And I think there's a lot of ways that we can leverage CYS at Merchants. And I think there's a lot of ways that we can leverage our strengths, the strengths of our partners to Chip that we have right now to both grow cross border and then to start to slowly but surely add incremental services into the domestic market as to
Very helpful. Thanks, Dan.
Yes, you bet.
Your next question will come from the line of Dan Dolev of Mizuho. Please go ahead.
Hey, thank you for giving me a great quarter.
A question for Dan, really to looking into the long term. It looks like PayPal is increasingly becoming sort of, in my view, the world's best super app, especially now that you're offering Bitcoin QR, buy now, pay later accounting. Can you maybe talk a little bit what you're seeing in terms of engagement that brings PayPal closer to becoming an everyday super app, maybe touch on your broader engagement strategy given the 73,000,000 accounts that you added in 2020. And what are your long term digital wallet ambitions
to.
Yes. Dan, that's a great question. Kind of goes at the heart of a lot of our strategy. And we're going to be talking discuss a lot about that at our Investor Day next week as well. So, let me just very quickly We are seeing engagement levels already.
I talked about it. To the next question. If you normalize for Honey and all the incremental net new actives that we brought in that are bending our traditional curves, we've never really been above 9% or 10%. Normalized, we're at about 11.5% of growth. Our churn rates are down all to the next question and answer session of the new functionality that we've put into place, whether that be crypto, whether that be buy now, pay later, the Venmo card QR codes are adding to usage.
They're adding incremental TPV, they're adding incremental transactions. One stat I didn't mention is that people who use PayPal product in store. And again, these are early days on this, but those that are using it in store, we're seeing, Dan, 54 incremental transactions that are just in store that don't displace the online. It's just It's basically doubling the number of transactions we have. And so as we start to build out our digital wallet really into this super app the call to questions.
That transcends across payments, commerce and financial services, all of that on a common platform, all of that leveraging common data elements and machine learning on top of that to give next best recommendations. The historic rate of engagement. And it's going to be all around that super app functionality and that digital wallet Moving well beyond just payments. So I think Dan, thank you for that great kind of closing question. I want to thank everybody for your time today.
And I really hope that all of you and your families are safe and healthy. And we are looking forward to speaking with all of you again next week at our Investor Day. So thank you for your time, and everybody take care.