Morning and welcome to PayPal's 1st Virtual Investor Day. My name is Gabrielle Rabinovich. I'm Vice President of Corporate Finance and Investor Relations at PayPal. We're thrilled you're joining us today here from PayPal San Jose, California campus. We'd hope to meet you all face to face for this event.
But given current circumstances, we've reenvisioned the program with everyone's health and safety in mind. To start the day, Dan will take us through our vision for PayPal's role within this new digital paradigm. From there, I'll bring you a conversation with Peggy Alford and Jim Maguette about how we're winning and deepening our relationships with merchants through an expanding value proposition. After that, we'll take a short break. Then I'll speak with Jonathan Auerbach and Daryl Esch for a deep dive on some of our strategies for reaching 1,000,000,000 daily consumers.
And from there, John Rainey will take us through our medium term financial outlook. Finally, following a second break, we'll close the day with a Q and A session with our equity analyst community. Please note that all sessions with the exception of our Q and A session were prerecorded late last week early this week. Before we get started, a few housekeeping items. Today's presentations include forward looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties.
Our actual results may differ materially from these statements. You should not place undue reliance on any forward looking statements, and we assume no obligation to update these statements. Please visit the disclaimers tab in the event website or our Investor Relations website at investor. Pypl.com for information regarding forward looking statements. In discussing our company's performance, we'll refer to some non GAAP measures.
You can find the reconciliation of these non GAAP measures to the most directly comparable GAAP measures in the presentation materials, which will be available on our Investor Relations website after the event. With that, I'll turn it over to Dan Schulman, our President and CEO to kick off the day.
Beyond powering payments for businesses big and small and developing innovative solutions that make financial services more affordable and convenient, speaking as a proud employee. At PayPal, it's about
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The racial wealth gap is the same today as It was back in the 1960s, the last civil rights event. And it's why PayPal decided to do a Not just in the short term, but over the long term as well.
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We all live The same community, there are a lot of cultural wars, but that doesn't absolve us from taking values based So that people struggle less, then I think people have the ability to listen more, Think about others. And I think that can only lead to a more peaceful Hi, everyone, and welcome to our 2021 Investor Day. So glad to be here with you. I wish we could all be in person, but Obviously, that's not doable. And so I hope all of you are well and healthy.
And this format, I think it's going to be quite engaging and informative. The last time we were together was almost 3 years ago in 2018. And at that point in time, we put a 3 year vision together for you and we put in place Metrics associated with that. And here we are today, and I'm pleased to announce that all those Guidance that we gave 3 years ago, we've exceeded, whether it be revenues, whether it be earnings, whether it be margin expansion, All of those, we've exceeded. And today, we're going to talk about what our journey looks like over the next 3 to 5 years.
And obviously, the world has changed dramatically. We've leapfrogged into a new digital era. And these trends all greatly benefit PayPal. We need to execute to assure that we take advantage of all of those trends. But if we do, We have a very exciting plan in place.
John will share with you most of those metrics, and we feel very comfortable. And we've spent a lot of time thinking about that, so that you can take those metrics and incorporate those into your thinking about the PayPal of the next generation. Any presentation needs to start off with an acknowledgment that everything we do Involves our employees. I am so proud of what our employees have done over the last 5 years And they are led by this management team. And this is my senior team.
I've handpicked pretty much every single one of them. And they are all as individually talented as can be. But what sets this team apart is how much They respect each other, how aligned we all are in our vision and our go to market activities. And when we say we are going to do something, we do it. We really hit our stride in 2020, And I'm so excited about what we plan to deliver and what we are going to deliver this year and in the years to come.
Now John will spend a lot of time talking about really kind of all of our metrics and what we've accomplished the last 5 years. But I want to spend some time and quickly flip through some slides on what we've accomplished because I think it sets the foundation For everything we want to do in the next 5 years. And so the first thing that I would point out It's obviously we've grown our scale substantially. We've gone from 180 or so 1,000,000 active accounts In 2015 to $377,000,000 exiting 2020. This is the first time we're going to talk about a metric, But I'm very excited that over the next 5 years, we believe we can grow this 377,000,000 to 750,000,000 active accounts on our platform.
And the reason we feel so confident about that Is that we are seeing engagement levels increase dramatically throughout our base, especially with the new products that we've put out. Over the past 5 years, we've seen engagement levels grow by 1.5 times. But given the success we've seen with the introduction of things like cryptocurrency, our Offline or in store strategies are buy now, pay later capabilities. We are seeing historic engagement curves start to bend and accelerate. And that's Especially important because those do 2 things.
1, they obviously increase the average revenue per user And we expect that to grow substantially over the next 5 years. And at the same time, it also reduces our churn rate. And as we get larger and larger, the more our churn rate reduces, the more our net new active cohorts can grow. And so that combination of scale and engagement is very exciting for us as we look forward. The reason That that's been happening and the reason we've had such dramatic increases in the past 5 years and expect even more going forward is the breadth Of our product portfolio.
When we were together 5 years ago at our very first investor meeting and I showed our product portfolio, It basically consisted of PayPal checkout and our P2P capabilities, our peer to peer capabilities. 5 years later, due to the tremendous performance of our product teams and our engineering teams, As well as all the acquisitions we've made, we have a robust portfolio of products and services across Our consumer and merchant portfolios. And this is just the beginning. We introduced more product than ever before in 2020. We intend to increase that pace in 2021.
And part of the reason why we can increase The pace of our product development is that we've invested in foundational capabilities. Our risk management and our compliance teams are now world class. When I first came to PayPal, some six And a half years ago, we had only a couple of 100 people in our risk management and compliance functions. Today, we have almost 4,000 people in our risk management and compliance functions, and I consider that investment To be a competitive advantage, if you look at some of these headlines, you can see the things that we've been able to accomplish. And we are now able to work hand in hand with our product teams, our risk teams, our compliance teams to rapidly deploy products and capabilities, working hand in hand with the regulators across the world.
The other thing that we've done is we've put 100 and 100 of 1,000,000 of dollars Into our tech platform. We've taken that from being a C plus plus monolithic platform to be a service oriented architecture With modern programming language that allows us now to vastly accelerate the amount of software releases we've had From what were 100 a year to now what are tens of thousands of software releases each and every year, we can now Scale our platform seamlessly has been especially important this past year with availability levels At all time records, this past year, our availability was over 99.99%, our highest level ever. And interestingly, this year, as you can see from this chart, in our peak minutes during the holiday period, we were transacting Over 1,000 transactions per second, and that is kind of the scale that we operate at now. We're also clearly expanding internationally, whether it be the 100% acquisition of GoPay in China That allows us to own a domestic payments license in that country, working hand in hand with the PBOC. Our partnerships with MercadoLibre in South America, Central America and Mexico, our partnership with Gojet In Southeast Asia and hundreds of other partnerships around the world, we think that we have a large opportunity to scale our business well beyond the core markets that we serve today.
Importantly, all of this stands On a foundation of brand trust, the most important thing we have is our brand, Is the trust that consumers and merchants have in us. And they believe that not only do we have Privacy capabilities that protect them, security that assures that their transactions And their financial services are safe and secure, but also just trust that our service works For them, if you look at some of these market research quotes that people are 54% More willing to buy when a business accepts PayPal. And almost 60% of PayPal users Will not complete a transaction if the PayPal button isn't available because they are afraid of that transaction. They may not trust And so this is foundational for us, especially as we start to move into more capabilities like super apps and digital wallets. And importantly, we're a company that stands for values, that has a mission That inspires to democratize financial services that has values that we act upon.
We put our employees front and center Because I believe that our employees are our single biggest competitive advantage. We know we operate Within our communities and that the communities are so important, we don't operate isolated as a company. And whether it be one study after another or one, like the Fortune changed the world, we were ranked number 3 in the world This past year, very important that our ESG metrics reflect that. And if you look at the S In ES and G, we are a leader across the world. And finally, and obviously, over the past 5 years, we've delivered for all of our shareholders.
Since our separation from eBay, Our market capitalization has grown by at least 7 times. All of our metrics, whether it be our revenues Our operating margin or our EPS, our free cash flow have accelerated dramatically. But the really exciting thing is I think that the past 5 years, as proud as I am of those, as proud as I of what every employee in PayPal has accomplished. But the next 5 years offer us even more opportunity Because we are moving into a digital paradigm. And this digital paradigm is going to change the way That we live, the way that we work, the way that we play, the way that we pay and the way that we shop, the way that we stay healthy, The way we bank, the way we travel and the way we're entertained is going to change pretty much every element of our lives.
And the lines between physical and digital are not just blurring, But they're actually disappearing. And this is going to reshape business, it's going to reshape business models, how business is conducted. And what's going to happen is that physical will become digital. And previously distinct channels like online versus offline Are collapsing and converging together. You've got stores that are closing physical locations, but are Expanding dramatically because they are now doing digital commerce.
And I think that digital is going to define A consumer's commerce journey, including their experience and their engagement and digital is obviously going to be the front door For a merchant to get and keep a customer relationship, it's clear that retail strategies have changed. Every retailer I've talked to Right now, it's thinking less about how do they attract consumers to their physical storefront and how instead do they optimize For home delivery or in store pickup. And that's because consumers have become habituated To online shopping during the pandemic, it simply affords more benefits to a consumer. There's time savings, convenience, ease, Choice, deals, all of that is what a consumer has, and there's no going back from that. And as you think about that, Consumer, who's now operating in the digital era, things like digital wallets or what's referred to as super apps Are clearly going to emerge and these super apps are going to intermediate dozens of other apps across multiple verticals.
We all have like 30, 40, 50 apps on our phones, but we really only use 8 to 10 of them every day or every week. And nobody wants to remember 40 or 50 different Whereas 40 or 50 different navigation systems, nobody wants to put in all their payment details across every single one of those apps. And really what a digital wallet wants to do, what a super app wants to do is turn all of those separate apps Into a connected ecosystem where you can streamline and control data and information between those apps, Between the act of shopping, the act of paying for that, all of your financial services Can all come together where you create a simple way through this super app to enable, To pay and to track transactions across all touch points. And then you have this common platform and common data That allows machine learning and artificial intelligence to kick in and give personalized recommendations to those consumers. The next interesting thing that's happened clearly right now is as consumers Turn away from going to a physical storefront.
Commerce is going to be done in new spaces and endpoints And merchants now need to figure out how to get the attention of a consumer when they're not coming in to their storefront. In fact, merchants are now trying to figure out how can we be where the buyer is. And that's really what contextual commerce is all about. It's how can you not only be where the buyer is, but provide relevant and tailored offers that need to be personalized to attract the attention of that consumer. I bought an item recently from a retailer and ever since then, I get 2 or 3 email messages per day from that retailer.
Add that to all of the other emails, and I'm just inundated, And it's hard for a merchant to break through and gain my attention. And this is where we're so excited about the shopping component Of our digital wallet, where we will have 100 and 100 of millions of consumers building up their own personalized wish lists, Really, in effect, their own demand curves that retailers will be able to come to our platform and address And do all that in a way where on our platform, we can provide a universal checkout experience. And finally, There's no question in my mind that in this new digital era, we are going to see a new financial system emerge. The technology that is in place right now is antiquated. It takes Days to clear a transaction, it's expensive.
Many elements of our populations are excluded from our financial system. People no longer want to handle cash and financials basic financial services are just going to be a part of any Platform that has 100 of millions of consumers because it's all tied in to the everyday transactions that we're going to see. And so I think You're going to see a new system evolve, new rails, payment rails evolve. And PayPal can be a large part Of helping to shape that future financial system. All those trends naturally lead to Our deployment of our digital wallet, which is such an important element of our strategy looking forward.
And it's just a natural evolution As consumers navigate a new digital landscape, our digital wallet can bring together previously Spirit capabilities that range from payments to shopping to financial services And even new forms of digital identification into one super app. And I think that all of these capabilities need to be linked By a common platform that shares data and machine learning and those together can drive personalized recommendations In order to maximize a consumer's financial health, in order to maximize the transactions they do in the digital era. Obviously, this is a huge step to everyday usage and it leverages the power Of the PayPal brand, that trust, security and privacy is essential if one is going to be trusted When they put out a super app. And it also requires scale, scale both on a consumer side and a merchant side. When I think about those 3 different elements payments, shopping, financial services, I think about payments first, Because payments is what we're known for.
And those payments will obviously all be digital. They will be both online and offline. And they will also encompass not just any financial institution, credit card, debit card, ACH, but will also include things like rewards points redemption, utilizing Currency as a funding instrument, utilizing Central Bank issued digital currencies when that becomes a reality. And all of those transactions need to be instantaneous. They need to be secure and tokenized, and they need to be easy to use across our entire global network of merchants.
When I think about financial services, Here, we are likely going to partner with different financial institutions. There may be some of these financial services We do organically internally, but a lot of these will be done in partnership. But importantly, even when they're done in partnership, it will be a Seamless PayPal experience across all of our financial services, which could include things like high yield savings accounts, Direct deposit and check cashing, investment capabilities, because if somebody is going to be putting their money onto our platform, We want them to be able to grow that money, to invest that money in not just things like crypto, but in individual stocks And other assets that we can digitize and allow people to invest in. We're obviously going to continue to enhance our bill payment Capabilities, our subscription management, so that all those monthly services, those streaming services you sign up Can be managed in one place and all of that together with budgeting tools. And finally, we'll have a full tab On shopping, we will have 100 of millions of consumers building their own wish list, their own Demand curves that merchants can access so that they can give them customized Personalized offers and deals, we will provide the ability for consumers to do price monitoring to get rewards And for our platform to be a universal checkout, so that you don't, as a consumer, need to go from one website to another, Figure out different payment instruments, but do everything from one place.
This is clearly going to be a multiyear journey for us, but it is So exciting to be able to create this super app that is going to enable our consumers to get the most Out of their digital life. At the same time, we have a 2 sided network. We have tens of millions of merchants that are looking to us to help them Not just survive, but thrive in the digital era. And the PayPal Commerce platform is to our merchants What the PayPal digital wallet is to our consumers. It's going to enable a merchant to embrace a digital first Commerce strategy across all of their channels and back office systems, where we are now evolving from being a pure Payments platform, really to a digital commerce enablement engine.
The great thing is we are now Seen as a strategic partner to our merchants and our conversations have moved from how do we improve checkout conversion, which by the way, we'll always do. But Really now, how can we use our platform capabilities across a merchant's full customer experience from engagement to loyalty And help them drive incremental sales in the digital era. We are working hard to integrate All of our solutions into one platform where a business can integrate once and get access to the full suite of our capabilities. We are also creating an open platform where merchants can integrate their back office systems right into their platform, So they don't have to rip and replace if they're going to implement the PayPal Commerce platform. And finally, we're going to provide a robust set Of marketing tools that will allow merchants to take full advantage of the fact that we have a 2 sided network, That we have a platform with 100 of millions of consumers that are basically telling the merchant, here's what I want, And allow merchants to tap in to those demand curves.
And we clearly believe we can be a differentiated and compelling partner to merchants of all sizes. And finally, I want to take a moment to talk about our efforts Related to blockchain, to crypto and to digital currencies. As I mentioned, there is no question That digital currencies and the underlying technology have the potential to drive the next wave in financial services. And I think those technologies can help solve some of the fundamental problems of the system. The fact that there's this huge prevalence and cost of cash, That there's lack of access for so many parts of the population into the system that there's limited liquidity, there's high friction In Commerce and Payments.
And I think that distributed ledgers can form the new foundation Of a new way to manage and move money to really create new rails, a new way of thinking about How we manage, how we move money in the digital era. And I think our platform is uniquely situated To help enable this vision, to provide both broad access, increasing utility and very importantly, to work hand in hand With governments, regulators and central banks. At our last investor Truth of the matter is, several years ago, when we looked at really of that Market, where did we compete? It was only in online retail, P2P remittances and digital. The part of our adjustable market that we play in by over 6 times in the last 3 years, and that gives us a tremendous amount of opportunity.
I believe we are entering into the next chapter of PayPal's growth And that the opportunities over the next 5 years will dwarf the opportunities that we saw in the past 5 years. The new digital paradigm is opening up so many venues of growth for us. And these emerging trends and the capabilities that we now have inherent within PayPal Provide an enormous opportunity for us. The impact we can have for our consumers and for our merchants Can truly be meaningful and allow everyone to have access to the digital economy. It is for all of those reasons that I believe PayPal is entering into this next chapter.
Clearly, our opportunities to grow and increase our relevance to become an essential everyday app for consumers And to provide a comprehensive platform for merchants to move into the digital economy have never been more apparent. And I think there are few companies in the world who can even aspire to this vision. And why is that? It's because it requires capabilities that cross industries from financial services to payments To shopping, to technology, and it requires that you have a tech forward company that basically can do massive numbers of software releases that has platforms that can scale, that has relationships With governments and regulators around the world, it's a brand that consumers can trust. All of those things So excited to help consumers and merchants navigate and thrive in the next generation of the digital age.
So I want to thank all of you for this. We're really looking forward to the rest of the program with you. And at the end of the day, John and I will be together to answer any of your questions. Thank you very much.
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think we just instantly went, what about PayPal? PayPal has helped us to streamline how we run our online business. So it gives us more time to be able to produce more stock. So we're Then able to serve more customers, it definitely helped us in that way.
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sales team sell. Wonderful. Jim?
I started in early 2004, a team of 4 people looking Our payments and our expansion into Europe and Asia and spent time always in the payments realm in some form or fashion. And currently, my scope of responsibilities, I look after our merchant facing product experiences, inclusive of that our Braintree product, iZettle and Hyperwallet as well as the underlying payment systems and payment partnerships that enable our branded and our full stack solutions.
Great. Thank you. Peggy, You're on the front lines with our merchants. Last year, the playing field completely changed for them globally. Can you tell us how you're helping our business customers navigate this evolving environment?
Well, obviously, the theme has been around digitization. There's been a real need to digitize commerce. And so that's been a theme that Sort of spans all segments and all types of customers. But different customers have actually had to adapt in different ways that we've seen. So there's the platform customers that the likes of Uber, where they've been able to really that the likes of Uber, where they've been able to really shift their strategy from one of rides to one of delivery.
And so that Some of those larger platforms have been able to adapt very easily. And then for companies like IKEA, We were able to help them really move online and all of move out of the store environment into really And their digital footprint and so using the PayPal solutions, we're able to help them digitize across the globe and they expanded that I think that there were examples like Spotify, where we were Helping them with our PayPal Me create solutions where they could actually help their Artists be able to help their listeners be able to contribute to artists or to other charities of their choice or just connect Listeners with creators. And so it's really just been about the digital connection and enabling that Digitization of Commerce, but it's been different depending on the segment. There's definitely has also been option of our solutions across the commerce journey. And so everything from contactless payments was a huge focus for us this year And was needed by merchants of all types.
So everything from the farmers markets with the small merchants having to really come online to things where we were actually launching very large merchants like CVS using this contactless payment options was another need of merchants of all types. And so our buy now, pay later could not have come at a better time. And we were able to launch it in the U. S. With Payin4 and Pay and 3 in the U.
K. And so it's really just been about being a consultant to all of these different types of merchants and use all of our solutions together to be able to meet across the commerce journey.
Fascinating. It's amazing how we pivoted so rapidly to help serve their evolving needs last year, given the rapid change we saw. Jim, you're developing products for these business customers. Given what Peggy shared, what are you prioritizing
Now? Well, what's interesting, just the surge of the amount of merchants that are digitizing, Peggy indicated in every segment. And for us, it starts with just getting the basics right. We have, on average, about 15,000 net new merchants coming on to our platform Every day, that's more than many other PSPs have in total. And for us, it's really getting the basics right from onboarding, approval rates, Dispute management, integration, a lot of these merchants don't have a deep sophistication in technology because they're just coming new to the digital space.
And so we're really just trying to get the basics right for them. And beyond that, really what we're looking at is for all these merchants, they're really time They want an integrated solution. So we're taking all of our great assets, be it Braintree, Hyperwallet, what we do on credit And what we're doing from a risk management perspective, Venmo, all those and trying to integrate them in a very seamless, easy platform for them to utilize, and we call this our commerce And where the commerce platform is around connecting customers and connecting these tools together. And so for us, we've already started with integrating Simility, our risk and fraud management service Braintree, we've already integrated our payout solution Hyperwallet and our Masspay solution together. We've integrated our QR code and a lot of our online Payment acceptance capabilities into Izetta, and we're looking to do more of that as we go throughout the year.
The other piece that a lot of our merchants come to us and tell us about is they want an Integrated omni channel solution. So they want to have one set of solutions that can work whether their customers in store or online. And to that degree, we're focusing with our Braintree customers having soon rolled out an in store solution. So if you're a customer of Braintree, it doesn't matter whether The customer comes online or in store, it's integrated from a complete end to end experience. And what we can start to do with that when we bring a lot of our assets together It's really created a connected experience for the customers of these merchants.
So imagine you show up in store, they already know what your payment information is. Imagine you're in store and you The other thing we're really excited about is what we're going to do with iZettle. IZettle is going to come to the U. S. Later on this summer.
And iZettle is really about an integrated solution for physically first merchants. And why that's important is PayPal is predominantly played with digital first merchants. There's estimates that about 47% of all small businesses don't have an online presence. So for us, it's going after a huge segment of those that have need. And so we're going to be integrating Izetto.
And what Izetto really does is create interoperability with their tools like their order management, inventory management, accounting services And have a great in store solution. And then as they need digitized solutions, we're in a position then to give them all the wonderful things that we do from an online perspective. Beyond that, we're looking from a geographical expansion. We're looking in terms of Brazil and China, Mexico, Japan as a focus area And all the wonderful things that we're doing from our branded products like Pay in 4 and QR code, we're making sure that those can be curated and easily subsumed by our merchants.
Jim has talked a little bit about how we're serving small and medium sized businesses, especially in bringing Izetta to the U. S. These businesses are really foundational for our economy, but they're also foundational for PayPal. And last year, we added more than 5,000,000 SMBs to our platform. This is an increase of more than 100 percent year on year.
So we really saw incredible growth. How are we serving this segment from your side? And what do they need?
Yes. It's interesting because you're right. SMBs have always been the bread and butter of PayPal and tremendously important to our consumer network. And in the last They have often really suffered, because a lot of them had much more of an offline presence Then an online presence and suddenly COVID required that they completely digitize everything quickly in order to survive. And as I mentioned earlier, a lot of times, small businesses don't have the resources or even the expertise to really focus on how they might do that, in a way online.
And so we needed to really serve as consultants and use all of the services and That we had that could help them really digitize and compete where there was absolutely no choice, but to be fully online. And Everything from using our Honey and shopping products and really trying to make sure that we can create the demand gen necessary for them to Consumers online, really creating solutions that they could easily integrate because they don't have a lot of I'm in resources to be able to integrate all of our solutions together. Jim talked about our commerce platform, where we're really able to weave together all of the products and services that we offer for an easy integration that's tremendously important to our small business customers. And then really reaching new audiences as well, with the likes of Venmo and potentially introducing new consumers that maybe they weren't able to reach for. But all of this requires a full integration of how we think about product, how we think about marketing and how we think about sales because The levers for growing the SMB business is really all three of those.
And so our focus has really been able to bring All of those capabilities together to serve small customers.
Fantastic. Thank you. Jim, we've talked about bringing a record number of merchants to our platform. The same time that we brought a record number of merchants, we actually brought a record number of consumers as well. So I think last year, we brought about 65,000,000 new consumers onto our platform.
This presents really unique challenges, and we were able to grow volume at record rates while minimizing our losses. So this sort of challenge Sumizing authorization rates while minimizing the risk on our platform is something we were able to deliver. How does your team do that? And how do you think about that problem?
What Teams have done absolutely fantastic. I would equate it in the payments industry to the trifecta. We've increased our auth rates. We've lowered our loss rates And at the same time, kept our transaction expense at an all time low. And in doing so, what we've been able to do is to remove A barrier or a decision that a lot of our merchants have historically had to make.
They've had to choose between increased auth rates and then basically having to deal with more risk losses Or lowering the risk losses and at the same time reducing their off rate, which hurts their conversion and hurts their relationship with their consumers. And so we've been able to give them the best of both worlds. If you look since 2018 in the 3 year period, 2018 to 2020, We've increased our auth rate on our PayPal Wallet by up to 400 basis points, which in effect has meant that we've been able to Deliver for our consumers and merchants of PayPal Wallet an additional 1,000,000 transactions each day through the work that we've enabled on Authrate. And what we've also seen is we started to benchmark our data versus industry standards and industry standards that we've seen with the payment networks. And we've seen up to 600 basis points better our PayPal wallet in terms of auth rate than they would see and they've measured in terms of the average card transaction.
So if you're a merchant and you're taking PayPal Wallet, you're going to see 6 more transactions out of every 100 than they would if they weren't taking PayPal Wallet. All the while, we've been able to lower our risk loss rate. And I already thought the teams have done an absolutely fantastic job. But if you look at the numbers, Since 2018, we were at 18 basis points of risk losses, and now we're at 12 basis points of risk losses. And they've done that In the situation where we've had a record number of net new users and continuing to have a lot of cross border transaction, and net new users and cross border Transactions are very, very much create a headwind for our risk losses as we work through that.
And they've been able to do that with good experience. And so how we've done it, we focus, 1 on leveraging industry standard tools and really taking what is today very fragmented tools and scaling them. One example of that is And network tokens are our capabilities that help with life cycle events like when a card is lost or stolen. And we've been able to Scale that right now we have over 400,000,000 tokenized cards within our payment vaults. We will by the end of 2021 have 7 150,000,000 tokenized transactions.
We also have developed our own proprietary capabilities, things like smart routing, Which if there's a problem somewhere within the payment ecosystem, we're able to reroute a transaction to maximize the chances that it gets approved. We also have developed different Algorithms and machine learning that help with predicting when a card is about to go stale or lost or stolen, what would the next card information that Can automatically update that within our ecosystem. What we've also done is leverage data and we have a lot of data. We estimate that we manage securely about 5 100 petabytes of risk and transaction data that we have within our ecosystem. And so in doing so, that five 100 petabytes of data basically equates to about 25 Library of Congresses.
That's the amount of data that we have. And what our risk and fraud and decision sciences team do is they curate that data because not only do we have a lot of data, we have a lot of heterogeneity of that data. We estimate that we have about 400 different industry standard types that we support. We support customers from nearly 200 different markets. And so in doing so, we take all this data and we curate it into the most appropriate data for risk management For us to basically score every transaction very seamlessly.
To put in perspective, within 0.3 seconds, We're able to run hundreds of models using thousands of different data variables to score a transaction to maximize the amount of good users that are using Our systems eradicate bad users from our platform. So what we're doing next because we're not satisfied where we're at, we think we have wonderful capabilities and we can do even more. Our first focus area is on our PayPal wallet. We want to move to what we're calling 100% good user approval rate. That means that Any user that is not a fraudster, that has good intent and has money in any one of the particular funding sources that they put within the PayPal wallet, We're going to find a way to approve.
The second thing that we're going to do is focus on our Braintree merchants and take all the wonderful capabilities that we've scaled for our wallet and bring that to Braintree. We've already started that with many of the top merchants that use Braintree, things like network tokens, real time account updater, the smart routing logic I discussed. All those are going to be focused on our Braintree merchants. And last but not least, what we're going to look to do is to bring to our unbranded, our Braintree merchants, Chargeback and fraud protections, something that our merchants love for PayPal volume. We're now going to bring that and scale that for our Braintree merchants.
So regardless whether it's PayPal transaction or another type of transaction, they can offer and feel protected against unwanted transactions. So with that, we're excited where we're going.
Thank you. Peggy, we've talked about our expanding set of capabilities that we're bringing to our business customers. We've also talked about the evolving needs that our customers have. How have these factors changed our sales process?
It's really we've had to evolve with it. If you can imagine, If you go 5 or 6 years back, the majority of what we were selling was our branded checkout Product, right? And so you could almost think of it like our sales folks were selling to different segments, to different markets around the world, needed to be very well 1st in terms of what was going to resonate with our network, both consumers and merchants. But at the same time, we were selling a few products. And so it was more of a If you can imagine, when you start to think about all of the sort of digitization of commerce and all of the various The product development that have enabled us to add capabilities to that journey along with all of the acquisitions that we've done, whether it's Braintree to be able to do card processing, whether it's humility to be able to do rest services, Venmo, enabling you to really reach a new set of consumers.
All of these things require The need that you have expertise in all of those areas, but more importantly, they all need to sort of fit together into more of like a solution cell as opposed to a product cell. We're also having to speak to very different people at our customers than we were in the past. So in the past, we were Talking with the payments team or the CFO or the treasurer, and we were talking about how we were going to save them cost And get them more transactions or better conversion rate. Now as you start to think about the attracting additional customers and Competing on the demand side for customers, now starting to speak with the Chief Digital Officer or CMOs. And so enabling our sales teams to be able To sell all of the solutions in a cohesive way, in a way that enables us to resonate credibly with people across The C suite is something that has required a real change in how we train our sales people.
In addition to that, in the past, We would really look to be aligned with marketing. So we would have marketing was really focused on how to create this network effect that is the magic PayPal. And we were focused on ensuring that we were we had consistent messages with that, but maybe not as integrated. Now It is required that we are fully working marketing and sales are working together because if you think about all business customers Care about is that next customer, that larger transaction, the bigger basket size. And so being able to create these integrated marketing offerings And then offering them in a credible way to our customers when relevant is something that requires a real integration between sales and marketing.
And so that's been a real change as well.
Incredibly helpful. I'd like to shift gears a little bit. Jim, we've made a lot of progress in China over the past in months. I think it'd be great to hear about where we are in that journey and what comes next.
Yes. So I think when you view our One of the things that I think a lot of people should appreciate is the access to customers that we create. And I think China is a great example That sets us apart from others. I think we are uniquely positioned to unlock China for many of our merchants that sit outside of side of China in terms of giving them access to Chinese buyers as well as our consumers around the world to get access to Chinese sellers. And what we have done in the course of the last several months and literally has been several months, we've, 1, gotten a payment service Provider license and we are the 1st non Chinese company to get a payment service provider license in China.
We've stood up A whole instance of PayPal in China to utilize that license. And that was literally done in about 6 months. And so our ability to react to the market conditions, get the license and now be in a position to really thrive and grow in China for us. And let me give a little bit Context as to what we can do now with this license. Historically, because we were unlicensed operator in China, We were unable to support certain service types.
So for example, if a merchant needed to process that needed to process different tax or custom information, We were unable to do that. We were unable to clear and process in local RMB. Now that's something that we're able to do because we'll be able to process And if you're a merchant of PayPal, you don't have to go to a 3rd party to get your money out. We're also able to work now more with different merchant types are also able to work with several of the banks like we've done in the U. S.
To partner with them and to basically Create a situation where they can promote PayPal and promote PayPal out to their customers for cross border buying as they The other piece that we're excited about is we can now utilize this commerce platform approach that we're taking. We're integrating Hyperwallet into our GoPay solution. So if you're a merchant that's operating in China, you can utilize Hyperwallet and the capability associated with that. Or If you want to just use Hyperwallet, we can leverage our GoPay entity there for RMB withdrawal. And what we're also planning to do is Eventually launch Braintree in the market.
So all of our assets start to come together based upon the license and what we've done. And so we're really excited that We're focusing first on standing up and scaling our export selling solution. We estimate that right now PayPal supports about 10% Of export selling. And so we think there's a huge addressable market now that we can go after. We're going to go after our cross border buying and unlock Those Chinese consumers to the rest of the world.
And what we're also doing, which is an interesting play on a lot of things that you heard about in store, is that we're enabling our QR code solution for tourists as they come to China. And if any of you have been to China, it's very challenging sometimes to use your typical cards in terms of them not being supported. So leveraging our partnership with China Union Pay, we'll be able to affect a QR code solution. So Any tourist or anyone visiting China can pay at any location that accepts the China UnionPay QR code, which is most merchant locations.
It's great. Historically, we haven't had as much penetration in some of the Asian markets and some of the South American and Latin So it's great to see us be able to move forward. Peggy, spinning the globe a little bit, which market do you think provides the greatest near term opportunity for Well, an area that is
a high priority for us in the next year is Europe, EMEA. And If you think about EMEA, it has a similar GDP as the U. S, but were less penetrated and Margins of Europe are higher than they are in the U. S. And so that is appealing in itself.
There's also a lot of regulatory complexity in Europe. And so, we have the capabilities to really be able to set apart and really serve our And so we're incredibly excited about Europe, specifically, the UK, Germany, Switzerland, France, Italy, Spain. So the core, what we call our core Pan market is an area that we're really focusing on. Jim also mentioned what we call our growth markets. So Japan is incredibly exciting, the 3rd largest economy in the world and very specific capabilities needed there and we And tend to invest heavily in Japan.
If you think about China, obviously, Jim mentioned why that's so appealing. There's an incredible We could do domestically even just with consumers who are looking to purchase from Chinese sellers or from Chinese sellers that are looking to sell To the 330,000,000 NNAs that were consumers that we have globally that are wanting to Also that they're also wanting to reach. And so, lots of opportunity in the growth markets, but I would say, Lots of near term focus on EMEA. Super exciting.
And
Jim, we've done a lot in Brazil and Mexico, both organically as well as the partnership. Can you talk a little bit about how you're seeing that market and what the potential there might be?
We're really excited about both markets in terms of Having a complete product set is going to allow us to compete and win in those markets. If you look at Brazil, we have Had for several years PayPal Checkout. We now have Braintree live in the market. We have Izetta live in the market. We have working capital through a partnership in the market.
So we're really excited about our position of having all of our products native there. What we're seeing is really good uptake. A lot of Our global accounts are now looking to us in Braintree to support us in Brazil. What we're also seeing is a local A flavor of our capabilities. And it's a really good case study of how we bring our assets together.
There's a particular merchant called Ipiranga, which is, I think we're the 2nd largest gas station provider in Brazil, has about 6,500 locations, and we're powering all their pay at the pump app Solutions. So basically, you show up, you go on to your app, you pay for that particular petro purchase and it's powered by Braintree And really what they wanted through that is chargeback protections. And so what we're doing is taking all that wonderful risk management solutions that we have, Take our Braintree capability and bringing them together because what they wanted to make sure was there wasn't fraud and risk. And we're giving them their protections through those And it's a very powerful example of the commerce platform mindset that we have in bringing our assets together. And so we're also on the consumer side, we've rolled out something called pinless debit.
So again, in some of these markets, there's a lot of friction to use your funding instruments. And through our risk management capabilities, our partnerships in the market, we're in a position right now to give our Brazilian customers the ability to pay with their debit card without that friction. We also have another set of partnerships with a bank called Neon Bank. Neon Bank is one of the largest neo banks and focuses specifically on micro Merchants. And we've created a partnership with Neon Bank for Izetal to be effectively their main distribution partner and their main Point of sale and integrated mPOS solution for their merchants.
And we've had a long standing partnership in Brazil with Itau, one of the largest banks there on the consumer So a lot going on in Brazil. Mexico is another market that we continue to be doing really well in. Historically, that has been a cross border market just given the proximity to the U. S. And over the course of the last couple of years, the teams have been doing a wonderful job of developing and cultivating a domestic market for us.
We estimate now that our We estimate now that our domestic volume, basically consumer and buyer is Buyer and Merchant in Mexico is bigger than our cross border business, and we probably have over half of the top 50 Internet merchants in Mexico on our platform. And so between what we're doing in terms of enabling those use cases, we have Izetal in the market. We have now a full stack acquiring solution for large merchants. We're really excited about the potential for LATAM for us.
It's great. Both you and Peggy have partnership as part of one of our major strategies. When we think about how we're different from separation and what we've been able to do through partnership, you've been a key architect of that strategy. And it'd be great to hear what it's enabled, the product innovation it's allowed us to bring to our customers. And then from a P and L standpoint, What that means for the resiliency of our income statements?
Maybe you could take us through both the strategic side as well as some of the financial complexities to it.
So When we were thinking about what we wanted to be 5 years ago, we operated with some very fundamental principles. One is we want to give choice, We want to make sure that we operate an open platform and we want to make sure that we're operating interoperably so we can work with others. We firmly believe that digitization It's a team sport, and we need to get everyone involved to bring that to fruition for us. And so we embarked on a strategy that Many questioned at the time, but we embarked on a strategy where we wanted group participation to give our customers better access To the funding sources, better access to different platforms and really creating interoperable set of solutions for those And so we embarked basically on a strategy to work with tech platforms like Google and Facebook as well as banks as well as other channel partners for us. And you start to see the stitching come together.
And in many cases, what we've talked about over the course of the last couple of years is really on the back One of those partners that in many ways will be very below the surface in certain cases. In certain cases, it will be very explicit in terms of what we're doing. So examples, we now are a position where if you're a small business, you have a very easy integration into Google for selling, very similar on Facebook. If you're an Izettle merchant, we have A partnership with BigCommerce. So any of your inventory that you stored within BigCommerce is subsumed within the inventory management solution of Izettle.
So there's a lot of interoperability that we've created. On the bank side, what we've been able to do is really look at all the different I think one of the really good examples of what we're doing now with American Express. So if you're an American Express customer, you have the American Express app, You can basically go to your app. You can push your American Express card into PayPal. If it's a platinum card, you're going to get right now For the next several months, dollars 30 back each month based upon different spending threshold.
You can pay with rewards. You can then take that $30 that goes back into your Amex app. And from the app, Venmo, dollars 30 to anyone. And all below the surface, we're using network tokens to make sure that if your card gets So it's automatically updated. And at the same time, we're sharing risk data to give you the best approval rates.
So there's just a litany of different things that we're doing with all of our different partners to bring that to fruition. Visa and Mastercard is another example. We've launched instant transfers and we see about 35% of our consumers and small businesses all the time utilizing that service as how they get money out. And so we're really excited in terms of what we've Over the course of the last couple of years of these partnerships, one of the more evident areas, things like Pay with Rewards, and that's something that we've Launched in the last 2 years. We now have about 16,500,000 active customers with a Pay With Rewards card.
And we will endeavor by the end of this year to have about $30,000,000 in our portfolio here in the U. S. And we'll have pay with rewards from the top 8 issuers by the end of the year And through our partnerships with FIS and a partnership that we'll be launching with Fiserv, we have over 2,000 different banks with Pay with Rewards that We'll be able to utilize within our platform. So all of it's come together very nicely in terms of creating that wonderful End to end experience that we're really proud of for our customers. And a lot of these and I'd say all of these partners are absolutely thrilled with the incrementality and the great experience On the cost side, because that's typically where I think a lot of people want to know what does this mean, because I thought a lot of people again thought we were crazy To do a partnership with banks and basically thought that that would screw up our operating income as we went through this.
And I'm very proud that this year, 2020, we had our best year ever on transaction expense, I think 85 basis points as we work through that. And a lot of that is through the function of these partnerships because what these Partnerships do is they enable better capabilities in terms of adding your funding instrument. And we saw last year a 25% increase in debit cards into our portfolio. And so we're just seeing a lot of better use cases that we're creating around P2P. We're seeing use cases in terms of The ability for our customers to pay at lower ASP merchants, which drives down typically a lower funding cost that the consumer is using, all these taken together, we're really thrilled where we're at with transaction expense.
Is it sustainable is an obvious question that we get a lot. And I think it is because our product experiences are really going after use cases where low cost funding sources tend to be prevalently used. And look at our product experiences, every one of our product experience via crypto, pay with rewards, pay in for, these are all Funding instruments are funding mechanisms that typically are drawing upon low cost funding instruments. So taken together, we're excited where we're And we're keen to continue that as we go forward.
It's great. Peggy, Jim, our session is rapidly coming to a close. Before we finish up, In a few words, can you share first what your most important priority is for 2021?
Well, we talked about solution selling and all of the capabilities and wanting to sell those together. We have Some really exciting new products that we launched this year, buy now, pay later and QR. And so a huge priority for our teams is integrating that into our solution selling and making sure that we help scale it.
Number one priority is execution. We Are really thrilled with the momentum that we have from a product side. We're really thrilled with the innovation that we've seen, But we've got to execute. Our customers are going through a very challenging and exciting time, and we've got to be there for our customers. We've got to execute on our product delivery.
Understood. Both of you spend a fair amount of time speaking with external stakeholders as well as your work within PayPal. What do you think is the Underappreciated attribute about PayPal when you speak externally.
I think it's the scale of our merchant side And the scale of our consumer side and that network that, that creates so that all the solutions that we're building actually are able to resonate with scale.
To me, what's underappreciated is how much people care. And I mean how much the average employee within PayPal cares about our customer and cares about our mission. And it's very interesting, we're in Our building here where no one is here, but we're everywhere. Our employees bleed PayPal blue. They bleed the cause and they really believe in the mission.
And it may sound very aspirational, 1,000,000,000 daily active users, but you ask every one of our employees, they believe that we're And what I've seen in this past year has been remarkable in terms of everyone working from home, the capacity for our organization to do things like distribute around the world within days. Just the willingness to succeed, the willingness to be there for our customer, I think, is underappreciated.
Well, thank you so much. Really appreciate the time you spoke with me today. We're ready for our first break, where we start the program in approximately 15 minutes. If you haven't had the opportunity already, please explore the Merchant Showcase tab of the event website to meet more of our incredible PayPal businesses. Enjoy the break.
Hi, Neil Patrick Harris here. I'm alone in a CVS after hours because PayPal and Venmo asked me to do a video about how using QR Codes is a safe, touch free, super fast way to shop. Normally, I would have a whole crew with me, right? We live in weird times. And so I said, no, I can film this thing myself, right?
Piece of cake. Still working. Let's get started. Okay. Hi.
Here's how it works. Shop as you normally do. Hey, vitamin See gummies,
which I actually forgot to take today.
Okay. Don't worry, I'll
Thank you, handsome employee man. Then when it's time Paid. Told you I'd pay for it.
What time do they open?
I grew up around Pies all my life. My grandfather Pop me on the hand because I would go in the mixing room when he wasn't looking and take a little bit of the sweet potato pies. I'm from Compton, California. I'm bright. I'm a L.
A. Girl. I went to UCLA and I had the opportunity to run track. Where my parents could come, my pastor came, my friends came to actually watch me at the Olympic Games. Growing up right here and working here at the bakery, everyone knew that I was, oh, yeah, that's the lady who worked at the bakery.
That's Mr. Harry's granddaughter. That's Ms. Craven's daughter. I mean, on weekends, when I wasn't running track, I was delivering pie.
One of the things that struck me was that if I want this to continue for the next In the 3rd, 4th and 5th generation, somebody has to maintain it. My mom and my brother have passed on and now it's It seemed like in 1 week, everything happened. The shutdown, people were I come into the business. All of a sudden, it dried up in 1 week. At the same time, it's like for the last 6 months to a year, my pie crust machine have been suffering.
You know, it wasn't getting hot anymore, and it was difficult to make Actually the shale and we were kind of MacGyver in it. I had heard from another friend of mine on a certain date, there's going to be a PayPal grant. So I started Client and getting all my paperwork together. And I actually got it. Oh, my God.
If I could tell you the screen that I did. Oh, my God. Because this is the first time something actually went through. I was so happy to get that grant. As soon as I heard about the The first thing came to mind is high press machine that we had to just make sure we kept that going, and it was like a godsend.
It was like, here, Here's the money now. This is how you spend it. When people see our bakery, they're like, Wow, I remember that. My parents have Always come here to the bakery. And what is your family tradition?
Ours is making pies, and I want that tradition to continue. We've been in
the business over 60 years and we want to continue another 60.
My name is Jeanette Bolden Pickens and I'm the owner of 27th Street
We started with a foundation of asking ourselves how can we do this The use of chemicals and that all feeds into a more complex relationship where we're talking about cell health, plant health, animal health and then ultimately human And it's all tied together. I'm Casey Wish, and I own Longson Farm with my husband, Justin. We have Piper, who's 3.5, and then we have Boone, who just There's always purpose out here. Our farming operation has been growing over the last few years. We're in production, we produce pastured pork, beef, chicken and chicken and duck eggs.
One of the things that we pride ourselves in is in the fact that we produce food for our Once COVID hit, all of a sudden people had more time and we saw a huge amount of increased traffic that would come out and Shop at our Farm store. The store is traditionally a cash or check based store and we needed to explore ways that we could take payment that were contactless. So the PayPal QR code is used in our Farm Store as a way to take Touch free payments from our customers, folks were able to use their own digital devices, use that secure Option to pay us directly for the products that they were buying.
In development, especially safe, quick TV.
We are seeing about 70% to 80% of our Farm Store transactions are going through the PayPal QR code at this point in time, which is a very dramatic shift for There's a lot of people that have been coming to our store for many, many years that have always paid these checks and are now paying us PayPal. We're lucky We get to raise our 3 kids on the farm. We're very hopeful that it instills a great sense of responsibility in
Here's to the people, pioneers searching for better, ambitious fortune seekers in strange new places. They know the world won't move forward on its own. It needs a push, a shove and a lot of drive to get all done. They work hard But the currency of life isn't dollars, pounds or euros. It's love.
Here And they keep plugging along even when life is tough. This is who we serve. They are the inspiration behind Zoom, whether they
Being creative takes work. And people that know how to create know that it takes a good team to put a solid project together. To make good Tim, you need people like Sade, who runs audio. You need people like Sean B, the musician. You need people like A photographer.
And that's what we do at Cam Kirk Studios. We create. I started Cam Kirk In 2017, I just felt like the city of Atlanta needed more creative resources. The creative community here was so But I never felt like we had a home.
This space is very important. It brings a lot of different people together.
Any given day, you'll see your favorite artist. You'll see an aspiring music artist. You'll see your favorite photographer. You'll see a beginner We see people create all types of things here from music videos to photo shoots to album covers. 2020, the start of the new decade, I mean, we had Some really strong goals that we wanted to achieve.
You know, COVID struck us. It struck us We had to make that tough decision to shut the studio down. If the studio was shut down permanently, I feel like it would take the heart And so a lot of the creative scene in Atlanta. We not only were stopping our business income, but we know we will be also So stopping the income of other creatives that still needed to create to continue to put food on their tables. In turmoil and in Our time is really when the creative scene comes to life.
So the PayPal installment grant was just a blessing. It allowed us to get caught up on some rent. It allows us to keep our payroll going. I mean, it just gave also just that peace of mind of knowing that the work that we're doing here It's not going unnoticed.
You can't think Atlanta without Camp Kirk Studios, truthfully.
We sell a lot of the hot dogs because we're in Chicago. We sell a lot of the pizza because Chicago, but the biggest toy of the year has been the dumpster fire figure because It's the perfect toy for 2020. Roto Fuji is a designer toy store and art Gallery in Chicago, been open for about 16 years now. We have a pretty large location. It's sort of cut into We have a gallery space on one side, then we have the toy area on the other.
RotoFruji is pretty unique in a lot of ways There aren't that many designer toy stores left, to be honest. A lot of them have shut down. We have a lot of stuff that you're really not going to find anywhere else. We get new stuff in every week. And this stock is always changing, especially with the toys because they'll release them in limited quantities.
And once they sell out, You can't get them anymore. So the store is different literally like every week. It keeps us on our toes. There has been a real Big shift with the pandemic. It's just been more of a shift to mail order.
So we still have the customers. They're just not coming in as much or as Often, so that's been a little bit of a struggle, but we're hanging in there. So we just added PayPal as a payment option, but as an in store We just added it mostly because it's touch free. You can just sort of scan the code, show us your phone, now it's been paid and you're good to go. So you don't have to touch Anything, honestly, I've been a little surprised at how many people get so excited about it.
They're like, oh, you take PayPal, great. Anything that's going to help a small business stay in business is going to help them and the community that they're And their customer base, just seeing the joy on people's faces when they come in and they find something that is just
That video is really illustrative of how consumer behavior around shopping has changed amid the pandemic. Jonathan and Daryl, thank you for joining me today. I want to talk about how we're focused on increasing our consumer value proposition to make both PayPal and Venmo, even more relevant on an everyday basis. I've had the privilege of knowing both of you for a few years. But for context, let's start with some background on each of you.
Tell us about your role at PayPal and how it's evolved over time. Jonathan, let's start with you.
Thanks, Gabb. Hi, everybody. I'm Jonathan Auerbach. I lead Strategy, Growth and Data at PayPal. And this includes the development of PayPal strategy, Our mergers and acquisition and our venture investing, it also includes marketing and data sciences as well as 2 fast growing business units, our China business where we have 100% owned subsidiary with a domestic payments license and our recently created crypto blockchain And Digital Currencies Business Unit.
But I should also say, Gav, that today I'm sitting in for Mark Breedeau, our excellent Chief Product Officer, who Is unable to make it today, but I'm really comfortable doing that as Mark, Peggy and I work incredibly closely across product, Sales and Marketing. In fact, I've never worked on a team that works together as seamlessly as this one. So I'm very happy to sit in for Mark today.
Thanks so much, Jonathan. Daryl?
Hey, Gabs. I'm Darryl Esh. I am the GM of Venmo and I also lead the checkout product and engineering team. I'm a 10 year veteran at PayPal and most recently coming off of leading the global credit business.
Amazing. Thanks. Jonathan, 2020 was a record year for us as the pandemic sped up the move to digital. At the same time, as we were managing the transition to working from home and new ways of collaborating as a team, We launched more products than we ever have in our history. Tell us how PayPal was able to pivot so rapidly.
Thanks, Gav. So look, the pandemic has accelerated everything As we know, in particular, it's accelerated the migration of commerce and financial services to digital. And PayPal has benefited from these Tailwinds, there's really no doubt about that. That said, I think the reasons why we've been able to benefit so much From this global movement to digital is that we've spent the last several years actually Building out so many elements of our business that have allowed us to actually benefit from this. First, we've been adapting our technical infrastructure were up 26% over 2019 with 25% fewer bugs.
We've also been working incredibly hard to build our risk and compliance capabilities, our Sales and our marketing capabilities and the alignment across all of them, which has allowed us to innovate faster and to really benefit from the tailwinds created last year. 2nd, we really are benefiting from our global scale. Our business has already achieved a scale of 377,000,000 accounts, Close to 30,000,000 merchant accounts. And the global reach of our 2 sided network is such that when the pandemic Cause people to engage more in digital channels globally. For many, we were their best choice.
For many, we were actually their most trusted choice. So when we introduced more great products in 2020 than we ever have, products like Buy now, pay later or crypto currencies or QR codes, they all achieve scale amazingly fast. And third, We added roughly 73,000,000 net new actives to PayPal in 12 months. So we start 2021 With essentially 25% more customers than we started last year and these new cohorts are using PayPal More than the old cohorts did, which is a remarkable accomplishment. It's not simply due to the pandemic.
We've gotten much better as a company in generating And engaging high quality net new active. So yes, 2020 was a phenomenal year for us. Some of it was due to the great tailwinds we saw. But if we weren't Really ready to capitalize on the massive shift. To digital globally, you wouldn't be seeing the record number of product introductions, NNAs, Customer engagement and volume coming on to our platform.
Thank you. The engagement has been incredible. And that alongside watching how we've been able to innovate at scale has really been it's been fun to watch, but it's also been it's been an incredible journey for us. Daryl, similarly, 2020 involved pivoting and Venmo to address the evolving needs of your growing customer base. In April, you increased weekly sending limits in response to cash displacement And you also ramped direct deposit to help distribution to stimulus payments.
This is really a jumping off point for a very active cadence of product introductions throughout the year. Can you tell us about how Venmo evolved last year and how Venmo is positioned for the coming years?
2020 was a great year for setting up Venmo, I'm really enthusiastic about how we're sitting coming into 2021. Couple of big things that happened, and then I'll touch on the Pandemic response to the customers as well. But a couple of big things that happened in 2020. 1 is we really started a migration from Making Venmo a business of scale to making Venmo a business of scale with breadth. And We have for the history of EnMode really been focused on P2P.
And what you're seeing now in 2020 late in the year, we started getting new products Out the door in terms of pilot mode at least, a lot of those things we're going to be starting to scale and ramp up in the first half of this year. But we're giving a lot more opportunities to our customers to engage with Venmo on a day in and day out basis. So that's the first thing, is moving from business Scale to scale plus breadth. The second big change evolution in Venmo in this past year was we've moved towards Really leveraging the collective power of the PayPal enterprise. I think after the acquisition, which was roughly 8 years ago now, Venmo still continued to pride itself on operating like a start up, and that was great in terms of innovating Quickly, but now that we're really ready to turn the corner and drive up the scale of Venmo more broadly even, Leveraging the enterprise capabilities is going to be so much more important.
So using the common platforms and services that will allow us to have Greater stability, it will allow innovation faster out the door and ultimately, it's going to lead to Venmo being able to expand around the globe more rapidly.
Back to Jonathan. 2020 was notable in part because of the extraordinary shift in consumer behavior. In picking up on this innovation thread and our ability to rapidly develop and scale new products, developing more comprehensive in store payments experiences has been on our roadmap for quite some time. Last year, we were able to meaningfully accelerate these initiatives. Can you give us an update on our current in person payment strategies?
Yes. Thanks, Gab. Look, our in person payment strategy is really simply a critical component of our overall strategy to be relevant to our customers Every day, COVID-nineteen accelerated our in store efforts given the enormous merchant and consumer demand for safe, contactless, In person payment solutions. And we responded incredibly quickly to the demand for in person payments. In a matter of months, we launched QR code payments for micro and small businesses in 28 countries followed by an expansion of our QR Functionality for Large Enterprises, which was also powered by a really strong network of channel partners that we feel very lucky to work with.
We've already passed 600,000 small and medium sized businesses using our QR codes. 6 months following the launch of the SMB solution, We launched our 1st national retailer, CVS, and we've signed and we're bringing QR codes to many, many more Large retailers this year. But I think what's most exciting to me about this is that our work in building out our QR code, Value proposition functionality has really unlocked many new and expanded use cases, both for our merchants and for our consumers. Let me give you a few examples. We've built the ability for merchants to create on ramps for consumers to enroll in their loyalty programs.
We've developed prompts for consumers to rate their experiences with reputable third parties. We've created tipping and donating use cases, order ahead, Pay at table, order ahead, pick up in store, order ahead and pick up curbside. We've Developed installments at the point of sale and choice is really at the center of our proposition. And I'm not talking simply about choice of financial instrument, but it's Choice of device, choice of platform. And we really believe that this value proposition of choice really It positions us well in the market, certainly vis a vis competitors whose primary value proposition stops at the choice of how to pay.
And we see this as a unique opportunity for PayPal to both serve the needs of consumers and merchants. And merchants who are increasingly trying to innovate Find new ways to serve their customers during this period of time. So we're incredibly impressed with the traction that we've gotten over the past year In store, and we're going to continue to invest heavily and continue to build out our safe, contactless, in store This happens to be more and more relevant to our customers' daily lives.
Thanks. It's very exciting. In addition to the consumer shifts we've seen In store and online, we also just saw a major consumer shift in behavior on Venmo. Historically, Venmo has been synonymous With shared experiences, splitting fares, reimbursing friends for dinner, being in the same place with the same people and sharing that experience. But what's truly remarkable is that as our customers' lives began to drastically change last year, they didn't stop using Venmo.
Actually, their usage accelerated. Our customers really never connecting with each other. So, Jal, it'd be great to hear from your perspective what that tells you about the power of Venmo and how it informs the way you're thinking about your strategy.
Yes, I think in particular, the pandemic taught us and really confirmed the power of the brand For Venmo. And we've got 3 primary brand tenants that have really defined Venmo from the beginning and which will carry forward even in the new products $70,000,000 strong and it's a community of smaller communities of people who know each other well because as you called out, Gabs, these are people who are generally doing social experiences with each They're using Venmo to pay each other back for a show or for a ride or something. So it's community, it's App powered money. Venmo has always been about pay people from the app. And then it's social in nature, the feed where we're sharing our experiences and it's It's a fund social piece.
So those are the attributes of Venmo. And one of the things that really popped in the pandemic is we saw The power of community really shines. So we did see actually an initial pullback in March when shelter in place became a norm and those things like sharing the ride and sharing a pizza and going to a show all ceased to exist. But it was very, very quickly replaced with the trend of people helping people inside of the community. So You saw customers helping caretakers who were working around the clock and then going for groceries and the like.
You saw people doing online yoga classes and tipping instructions where studios had been closed down. And then one of my favorites, which goes back to the beginning of Venmo. So Venmo initially, the earliest use case was around tipping musicians. And we got to see during the pandemic all of these musicians who, frankly, are making their money playing games on Friday Saturday nights, and now all of a Those venues are closed. And so they had to innovate, and they started doing streaming shows on Facebook Or other social channels.
And they ultimately used Venmo. Venmo became that Pickle jar with the tip word on front of it. And so this is how the community came together. So we really saw community rise up And be a big proof point during the pandemic. So everything now that we're working on, I think as you look at how it's going to lead our inform our strategy, we are staying true to those tenants of community, at Powered money and social fun in nature with all the things we're doing, even with something like a credit card, which I know we'll have a chance to
How are you envisioning the user experience?
So Cabs, we're in the process of building super app functionality to allow Begin and end their commerce and financial services journeys in our digital wallet. For example, we're strengthening our digital wallet Dramatically or wallets dramatically because obviously Venmo, as Daryl has been talking about, is one of our digital wallets. But we're strengthening our digital wallets In a number of different ways. Let me start with our enhanced payments hub. Leveraging our partnership with Paymentus, people can now increasingly Be able to pay their bills and manage all their subscriptions in their digital wallet, paying for TV gas, electricity bills or Any subscription in the wallet itself.
2nd, we're building a richer rewards hub into PayPal, expanding the ability of our Customers to leverage their issuer and their merchant rewards points. And talking of expanding, we're expanding PayPal Shopping. We're building Honey Shopping and coupon engine into our wallet. So consumers will be able to set their product preference And complete product purchases at some of the best prices available all within their wallet. And 4th, we are now developing additional financial services to help consumers move and manage their money much more cost effectively.
We're working with Partners on some of these experiences, but we're always going to ensure a seamless PayPal experience. And these new services are broad and they include, just as a few examples, Saving vehicles like term deposits or savings account, investment tools such as brokerage tools to invest in stocks or fractional shares, Enabling crypto and digital currencies initially with the buy, hold and sell use case and the wallet, but increasingly as a funding instrument to fund Commerce. And as I mentioned, we're working with different partners to power a number of these services, but they're always going to Have a PayPal user experience like we've done with crypto in the wallet, in the PayPal wallet or is Daryl is going to explain later with the Venmo credit card, and I'm not going to steal his thunder, but the Venmo credit card experience is absolutely fabulous.
Daryl, the Venmo wallet is also diversifying and moving beyond its core P2P value proposition. The monetizable experiences are ramping, We've indicated that we believe revenue for Venmo will approach $900,000,000 this year. How are you thinking about the evolution of these experiences over time? And what will Venmo look like in 5
years. Yes, 5 years is a really long time for sure, but I'll take it in blocks. So in the immediate term, that path the $900,000,000 of revenue that Dan has talked about on earnings calls, it really is driven by a few Key strategies this year. So and these are all in process at this point. Some are already ramping to consumers And businesses in the first case.
So the first of the strategies is around commerce and moving from Venmo has historically been P2P. The thing that our customers say they would like most to do with Venmo in addition is to pay businesses and to buy things with Venmo. So on a commerce track, we have 3 things that are happening. 1 is we are on the journey with PayPal On QR codes, so just as PayPal is out there with some of the large named partners like CVS, Venmo is there as well. That's thing number 1.
Thing number 2 is we have now business profiles that we're ramping now. So these are Already out into the market and this is going to allow small businesses to have a Venmo profile and it's going to we think it's going to be really powerful Because it's going to give them the chance to interact with and have a digital experience of getting to new customers Through friends of their customers. So the social nature of Venmo and having the feed available, we are going to be able to Do things like if I go out and make a purchase, I'll have the ability to have that show up in my feed and my friends will go there, I received that I went there and we think that's going to be really powerful for the small business community. When you think about it from an endorsement perspective, I would as a business owner, I want to take part in this because I would much rather reach new customers Through endorsements where their friends have voted with their wallet to buy something as opposed to maybe seeing a review from a stranger that you Wonder whether the owner wrote the review in the 1st place or not.
So I think that's going to be powerful for Commerce. We have some really elegant online pay with Venmo experiences that are starting to ramp now as well. We'll see those in greater scale near midpoint of the year later in Q2. And then the other areas that we're dependent upon right now Our crypto, we've had great success on the PayPal front based on who the Venmo customer is. We think they're going to really love and take hold of the So capabilities when those come to market here in this first half of the year.
And then again, the credit card, which is now I'm happy to say it's actually right now available to 100% of our customers and imminently. So in the days weeks We'll start the more broad rollout of that program. What's beautiful about it is, this is an 11 year old business now, Venmo, nearly 70,000,000 active And at this stage in our life cycle, we're going to be accelerating revenue quarter by quarter as we go through 2021. The other thing as we look out longer term relative to the 5 years, I think after this first period, we will start To go deeper into providing financial solutions that our customers can use day in and day out, and then we will eventually find our way around the globe. That's one of those things that I mentioned early on that the power of leveraging the enterprise capabilities and Forms and best in class practices and compliance expertise and so forth is going to help us Ultimately, take Venmo, this great capability, instead of capabilities that expands, we're going to take it outside of the U.
S. Eventually in that 5 year timeline for sure. And I think the thing here is leveraging those PayPal capabilities and platforms Doesn't necessarily mean we'll go to every PayPal market, but I think it means we'll have the ability to go to any PayPal market.
It's incredibly exciting. Daryl touched on crypto as it relates to the Venmo Wallet. Jonathan, I'd love to talk a little bit crypto and the PayPal wallet. We launched our buy, hold, sell experience in October. We've seen a tremendous response from our customers in the U.
S. Can you share a little bit more about this initial experience and how it's performing? And then what the longer term vision is around digital currencies more broadly?
We're really excited about enabling PayPal Customers buy, hold and sell cryptocurrencies in their digital wallets. This, as you mentioned, is only the first use case for crypto and digital currencies for PayPal. That said, even as a first use case, our early results are incredibly strong and frankly have exceeded All of the expectations that we had for this use case. The number of daily users of crypto services continues to grow rapidly. Every day, we're seeing An incredibly healthy influx of first time users and increased engagement once they've made their first crypto purchases.
Customers who have purchased crypto have been logging into PayPal at roughly twice their login frequency prior to actually having purchased crypto, which is amazing. This year, though, we're going to be, as you mentioned, increasing access to crypto and digital currencies to more customers around the world. And we will be enabling crypto as a funding instrument for transactions at millions of businesses around the world. So if you even just think about the roadmap For the first half of twenty twenty, building on what Darryl was talking about, we're going to see crypto and Venmo I'm on track to go live in the first half of the year. We've got crypto as a funding instrument for commerce going live in several months.
And we plan to expand our crypto Offering geographically to the UK in a number of months as well. So look, we're still at the early days of development of our crypto aspirations, but we really do believe that digital currencies, CBDCs and the collaboration with central banks and regulators We'll open new ways to exchange value and power global commerce and financial services for entirely new Segments of the population. And as I talked about before, crypto services will broaden the range of financial services offered through the PayPal and Venmo apps. And that's going to support the transformation of those apps into being destination apps, not only for financial services but for commerce. In addition, we're actually looking at our crypto services to help position PayPal to help shape the role of cryptocurrencies and CBDCs in consumer payments, Commerce and Financial Services safely and securely.
So look, early days for us here, but we're moving rapidly. We're moving with discipline and we continue to build on our crypto capabilities. And this is going to be an area of growing focus for us going forward.
It's incredibly exciting. I think about our ability as PayPal to bring a solution to mainstream consumers. We're able to essentially create an experience for 100,000,000 U. S. Consumers being able to buy crypto pretty instantaneously in October, and we've seen great demand.
Daryl, Venmo's user growth continues to be astounding. Last year, we reached nearly 70,000,000 customers with growth being more than 30%. Who are Venmo customers today? And how has the demographic shifted over time? And can you tell us just a little bit more about what that means for the lifetime value of these customers?
Yes, it really has been amazing. It's hard to argue with the success if you look back over the now 11 to 12 year And you see how this space has just continued to grow and 30 ish percent to a number of $70,000,000 is just amazing still. It's amazing that it keeps growing. So the So the journey of the customer, Venmo originally started with college students as the original adopters and enthusiasts Back to those 11 or 12 years ago. And at 70,000,000 users in the U.
S, The reality is Venmo serves customers from every walk of life. Those original enthusiasts who took the program are now in their 30s. They're in the houses, they're forming families and they brought a lot of us along with them along the way. And that's Venmo has continued to multiply along its journey. Customers are enthusiasts.
They love it. This community and social nature, It just has largely spread naturally up till now. And we expect that to keep growing. But who has become from an over indexing perspective is Venmo over indexes towards millennials. They are digital natives.
They're highly educated. They are solidly middle income and rising. They tend to be fairly well banked. They're just starting to invest in the SKU female. And so with this profile, along with The stated needs and desires of what the customers are looking, Venmo, to deliver to them.
We really think the commerce agenda is a powerful way to start. And again, playing off of what Jonathan just said, the crypto Phenomenon that has really come out strong with PayPal. We think given the audience, this millennial base digitally oriented and Rising income just starting to invest. We think crypto, of course, is going to play really well with this group as well. So That's kind of where we think in the immediate term.
Again, we're at the beginning Of a street here, we're going to be bringing more and more feature function. This year, we're going to ramp more feature function into the Venmo Community than literally in the 1st 11 years collectively.
It's incredibly exciting. Just Jonathan, in talking a little bit more about launching new commerce initiatives, last year was really exciting for us from an installment pay launch standpoint. Our buy now, pay later solutions were incredibly successful launch in 2020. And I think it really illustrates the power of our 2 sided platform and our ability to bring solutions both to our merchants as well as our consumers at the same time, which creates Very strong network effects. Love to hear your perspective on how we're positioned relative to the competition as it relates to installment pay.
Thanks, Gabs. Look, consumers around the world have turned to buy now, pay later, also known as short term installments to provide Payment flexibility that complements their monthly or their biweekly pay periods. We really believe that PayPal met this buyer demand by designing Literally a best in class solution. Our product allows buyers to split purchases into equal interest free payments, Approval is within seconds. Plans are easily tracked and managed in the PayPal app.
But what we think distinguishes PayPal is that we Offer our buy now, pay later solution in wallet for any merchant that already accepts PayPal. So no new merchant integration is needed, No premium over our existing take rate. We launched buy now pay later in France in Q2, In the U. S. In Q3, in the U.
K. In Q4, and we've already seen literally astonishing results. Nearly 5,000,000 loans Have been completed, which represents over $600,000,000 in volume in Q4 alone, 2,500,000 Unique customers transacted at more than 230,000 merchants. Our reuse rate is already over 40% For U. S.
Users, and that's only in the 1st 3 months of operation. And our customers tend to spend more with buy now, pay later. So Increasingly, merchants are allowing PayPal to present buy now, pay later offers upstream in the shopping journey. And we know that upstream presentment increases conversion. And we have upstream presentment In over 100 large enterprises and well more than 10,000 SMBs.
So we're going to be building on that success in 2021. We're going to launch new markets. We're going to expand Buy Now Pay Later into all flows, including in store contexts. And we're going to expand our product to include shorter and longer term installment products. So buy now, pay later has been a home run Launch for us.
And we're going to continue to innovate here. And this will be an area of rapid and disciplined growth for PayPal.
Fantastic. Darryl, in talking about the growth of Venmo and some of the new products that we launched last year, in September, we launched the Venmo credit card. It's incredibly powerful. It's built into the app. It's got a QR code on the surface of it.
Can you just tell us a little bit more about the Venmo credit card, What you're seeing in initial use and sort of why you think it's so powerful?
Yes. Thanks, Gads. We are so proud of this product. It really is a differentiated, One of a kind solution. And I think it starts with a simple but powerful thought.
And that is, this is a Paradigm shift on a credit card and the shift is a lot of credit cards that are out there have an app that comes with them and you can enroll And you can use that to do things and power the card. This is a totally different animal where the Venmo is an app that has a card. And it sounds little maybe, but it's a big, big difference. So When Venmo, the core experience of Venmo is one of those core tenants being app powered money. As customers are coming in and using the app, what it means To have an app with a card is a few big differentiated things.
One is, I as a customer have much greater awareness of my day to day Spending. We see categories. We have a great, highly engaging account overview inside of the app where You can see day to day where you spend is going by category and how much where you are with your balance. And I think customers historically, Frankly, don't necessarily pay attention day to day what's on their credit card and then the bill comes at the end of the month and they kind of have the surprise of where they are. Think the fact that we're an app that customers are engaging with, customers are going into Venmo and they're seeing again day to day, where am I spending?
Do I need to slow down on one category or the other? So that Financial discipline is important. The next reason it's important to have an app with a card is we have a great Reward program is really customized to the customer spending. And so there are a lot of cards out there that have different reward values for Certain categories, gas, dining, grocery and so forth. And they might have bonuses on them.
With our card, we have a system like that as well. We actually work it towards the customers advantage that on any given day or their spend in any given cycle, I should say, They get 3% for the top qualifying category, 2% for the second and then 1% for everything else. So it's working in their interest. But what makes it unique that we have an app with a card is that on any given transaction by transaction, I'm watching how my Cashback reward balance is growing. And then when I get to the end of the cycle, I get to see it pop and show up in my Venmo balance.
So that's one of those reasons of what it means to have an app with a card. And then finally, one of the features that is really, really distinctive, Venmo has always been known within the community for a way to split and share expenses, so to split transactions With each other, so back to that social orientation of Venmo in the first place. We go to a show together, we go to a meal together, we take a car. And so splitting and sharing is one of the core features of Venmo today. We've taken that, What that happens, that experiences it is in the app and now applied it to this credit card.
And it shows up in a couple of ways. One is, I may buy a gift that's from all of us and I can use that splitting feature on Venmo and send you the request To pay me back. And when you pay me back, I can even direct it to go straight to the credit card balance to pay down the balance. So I could take it as balance in my Venmo account or I can have you split and actually make a payment directly into my card account. And then the other thing that is really, really unique and what I like about this is it's synergistic to The overall enterprise QR strategy is as you called out, we put the QR code on the card itself.
I'm going to hold mine up for a second. You actually can probably scan it. And when you do that, it will take you straight to my Venmo profile. So and what's cool there is, there's a great use case, probably most of you can relate to. You can go out to dinner and you've got Maybe 4 of you at dinner.
And then that dreaded moment comes when the bill shows up at the table and you all look at each other and decide who's going to pay it and you decide, Are we going to make the poor waiter or waitress slip this thing 4 ways? And are we going to do it relative to what we ordered or divide by 4? You get the The experience we probably all lived it. The beautiful thing here is, we don't have to put anybody through that trouble. I just take the card out.
I pay for it. It comes back And you all point your phone at my card and it takes you right to where you can pay me back and settle up. So that is a very unique Feature and it's also very Venmo appropriate. So I'm just going to finish with, I said from our strategies, we would honor those core tenants of Community, app powered money and social. And that's what we've done with this card, which makes it truly one of a kind.
Thank you so much. Jonathan, I want to close it out with you with a final question to just wrap it up. As an organization, we've talked about our long term goal to reach 1,000,000,000 daily users. What are the most meaningful levers to get us there?
Well, 1,000,000,000 daily active users is inspiring to all of And in terms of levers, we've got a number of them. First, we've got the momentum of the overall movement to digital commerce And digital engagement across all elements of people's lives. And PayPal, with the trust that we have with our customers, we believe is uniquely positioned To not only ride this wave, but more importantly, to help accelerate it. 2nd, we're continuing to globalize and strengthen our global platforms, our Product productivity, our global risk compliance, sales, marketing functionality and the alignment, more importantly, across all of these It is really accelerating our speed of innovation as a company and we're offering more products and better products at scale than we ever have. 3rd, we're investing heavily to be at the center of our customers' commercial and financial lives.
We're in the process of building super apps where customers can begin and conclude their commerce and financial journeys, Working with PayPal and also working with our partners, but always ensuring a seamless end to end PayPal experience. 4th, we're innovating and we're putting ourselves at the forefront of our industry in areas such as the blockchain, crypto, Digital currencies to be a partner to governments and regulators as they move to digital currencies and to strengthen at the same time our own digital wallets as a destination app for our consumers. 5th, we are much more programmatically driving net new actives. And this is not Simply a factor of COVID-nineteen. It's not simply a factor of marketing.
We're getting much Better at a company across PayPal through better user experiences, risk management, stronger ecosystem partnerships to drive NNA is on a sustainable basis. And we're expanding our global reach. In China, as we've talked about, Merchant proposition Enables us to actually approach merchants and help them increase their sales just by working with PayPal. What we're doing on the consumer side together with what we're doing on the merchant side, we think it's going to bring us to 1,000,000,000 consumers on the network and 100,000,000 merchants.
Thanks, Jonathan and Daryl. I'll now turn it over to John Rainey for perspective on our financial outlook. But first, we want to share a short video with you about our journey to improve the well-being of our employee population.
We have a mission as a company to democratize financial access, to help Small businesses to drive financial wellness and financial health throughout the world. How can we talk about
Wellness is not just one thing. Wellness is feeling great about yourself physically And emotionally feeling great about the work that you do every day and having financial stability.
1 out of every 6 employees told us that They don't have enough money in their bank account for an unexpected life event. 70% of our employees told us that they're living paycheck to paycheck.
I'm a single mom. For a while, I wasn't able to do insurance for my kids.
When you're living paycheck to paycheck, you're just like the day to day zone, that's kind of where you have to be to survive. You will hear stories about individuals sleeping in
their Ours that were recently a big team member is having to go to the food pantry.
A gentleman who had to make decisions around whether or not he's going to be able to afford the medical for his daughter.
His Operating on the fringes of financial security.
We should not be hearing those stories. How do we get to this place?
Here's the thing, we pay at market or above market across all Our locations and job descriptions. And that's an interesting thing to me because what it's basically saying For this population, the market is not working. So we're going to invest a significant amount in just increasing base Wages, we are going to lower the cost of benefits on average by about 58%. Every single person Inside PayPal will be a shareholder and an owner of PayPal, every single one.
And I'm
just blown away right now based on what I just
heard. Is
Okay. What exactly is going on here? Did he just say that? I was just in shock
It's going to be a difference of not being able to go to the doctor or being
It's college education for my kids.
I'm able to get both my children insurance.
It just allows us to save and something That I've never been able to really do before.
It's amazing. It's amazing.
When you're sitting in a room with employees and then and half the room Starts crying tears of joy. That feeling that you get is being part of a company that's doing that for people. Like you can't like I'll never forget that feeling.
I think This is a great first step, but we're on a journey together, and we need to keep looking at this and working on it.
Take care of the employee, they'll take care of the Customer will take
care of the shareholder.
But it had to come from the top. It had to come from leaders who have decided that Shareholders are important, but employees are important as well.
If more companies do that, I think we'll see a lot of benefits to our society. I think businesses will continue to be stronger. I think our communities will
be stronger. I think people will feel connected with
a greater sense of purpose to what they're trying to
do in their career and in their lives.
It has to happen All parts of the company, leaders
have to care about the people that work
for them and employees have
to care about each other and care about their company.
There are Priorities in the organization, but putting the people priorities first, I think we're learning over and over again that it gives you the most return
Welcome and thank you for joining us virtually today. I've been looking forward to this event for some time And I hope that you've enjoyed hearing from my colleagues today. I'm going to discuss how a lot of what you've heard from them already Translates into our financial performance over the next 5 years. But first, I want to talk about where we've come from And the last 5 years, when we separated from eBay as a small independent company in 2015, We had by some measures impressive financial performance. We had 181,000,000 customers on our platform.
That year, we generated a little over $9,000,000,000 in revenue and we had just shy of $2,000,000,000 in free cash flow. There were a lot of questions about PayPal at that point in time. Could we coexist in the financial ecosystem? Could we partner with the companies that we needed to? What would competition do to us?
Could we thrive or frankly even survive in the midst of the competitive landscape that Seemingly was coming from every different angle. Would we have the ability to grow our platform off of eBay, Which we were so heavily reliant on at that point in time. What about our capital structure? Where are we too reliant on credit As a business, were we too capital intensive? What the durability of our earnings would be over that period of time?
And lastly, How all of this would impact our margins and our free cash flow generation. What did we do? I think this slide speaks volumes. We expanded partnerships with the largest, fastest growing, most prominent companies in their various industries. And we did this while having excellent financial performance.
The graph in front of you shows various metrics, but we tripled Our payment volume, we more than doubled our revenue and we did that. We more than doubled our revenue while expanding our margins 400 basis points. And over that period of time, we almost tripled the free cash flow generation of our business. Importantly, From a capital allocation perspective, we returned $8,500,000,000 to shareholders and spent a similar amount of money On going out and acquiring other companies through acquisitions. The last 5 years has been, I think, good by almost any measure.
It's reflected the hard work that we've done as a company. But as I sit here today, I'm more excited about the opportunity in front of us And what the next 5 years bodes for us. And I hope that you'll strap in and be with us for this ride. So let's talk about Our opportunity, the opportunity that we have in front of us, 2020 changed everything. Black Swan events tend to result And permanent changes in consumer behavior, and this one is no different.
The changes in consumer behavior that we're seeing now, though, create an opportunity for PayPal That is unlike anything that we've seen before. Merchants are adopting digital first strategies. It's no longer a nice to have. It's become a necessity. And consumers are habituating to e commerce and digital first experiences because they're simpler.
There's less friction, there's more convenience and they're doing so without sacrificing quality or choice or in some cases even speed of delivery. Most estimate that e commerce has been pulled forward 3 to 5 years. Look at the graph in front of you. It took almost 2 decades to get to 12% U. S.
Digital market penetration. Estimates today Or that we will get the next 12% in just the next 5 years. Imagine that we are building a city. And in that city, the products and experiences that we have and we offer our customers are represented by the buildings. 5 years ago, we had a limited number of buildings.
We had a limited number of products. We've added to that city though over that period of time. And some of those tenants have taken less space in our city. But we've added things like Simility and Hyperwallet and Izettle and Honey, Zoom, other platforms that have provided more experiences, more capabilities in the wallet for our customers. And when we look at the next 5 years, We're going to add on to that city even more.
And we're going to make that city a destination, a destination app for 100 of millions of customers around the world. Now there are many examples that I can point to and discuss, but I want to talk about a couple today. The first is buy now, pay later. And we've talked about how excited we are about this product. I'm going to show you a couple of pieces why.
So we launched this In the Q4 of last year, in just three markets, three markets in the world. When you look at our 2020 results, In those 3 months, the 1st 3 months of the launch of that product, we generated $750,000,000 in payment volume. Do the simple math, $3,000,000,000 in annualized payment volume. We had 3,000,000 unique customers that use this and shopped at 250,000 merchants around the world. And with 14,000 of those merchants, they've elected to provide this And upstream presentment in the checkout, where we see much better experiences for our customers and much better results for us.
Our sales team has done a tremendous job launching this at a number of large enterprise merchants and we're Excited about the pipeline that we have for 2021 as well. Where we see upstream presentment though, very importantly, we see a 10% lift And our branded share of checkout. It's very important for us, very important for our merchants as well. When we look at Customers that have adopted buy now pay later. There's a 12% increase in the weekly TPV and transactions.
If you look at the U. S, 40% of customers that have used buy now pay later Have come back subsequently for 2 more transactions during that period of time. And it's a relatively low risk experience that we provide as 80% The funding of this is done around debit. I'm excited about this. This is one of the best product launches that we've ever had, but also I'm going to tell you why we're going to win in this space.
We have a better value proposition than anyone. If you look at what we offer, it's a seamless integration without any effort on the part of the merchant. We provide access to 3 for 350,000,000 customers around the world to shop at those merchants. And if they want to have upstream presentment, It's a relatively seamless integration as well. At the same time, there's no better price for a product than 3.
We charge the standard take rate that we already charged that merchant. There's no incremental costs, no incremental costs for the ability to have a customer buy now and pay later. At the same time, there's no risk for the merchant. They bear no risk to have that transaction. And when you combine those three aspects With the fact that we cast our net over 350,000,000 customers that have access to that merchant With the ability to buy now pay later, that's a value proposition that is second to none.
I want to shift to our in person strategy. And we've long talked about in person or in store sales has been sort of A solution in search of a problem. It's not been that difficult to candidly carry around a credit or debit card and pay through that way. COVID-nineteen changed that. Customers don't want to handle cash.
They don't want to touch a keypad on a point of sale device. And we provide a value proposition that will enable us to play in this space and compete with anyone. We will increase our ubiquity so customers don't just use PayPal online. They have the ability to tap and pay or to use a card or to scan a QR code and pay offline. These are multiple form factors.
We don't want to force customers And to the experience that we want, we want to provide them the experience that they want. And what this will eventually do, and I'll show you metrics here in a second, Is drive incremental increased customer engagement. Look at this slide in front of you. The bar here on the left depicts The addressable market that we have in our top 7 markets in 2025. In just those 7 markets, If we look at the online space, we have a $2,000,000,000,000 addressable market, yet that's dwarfed by the offline opportunity.
So there's a tremendous ability for us to grow and keep our customers engaged through this offline channel. And when we look at the experience there, Customers that use QR codes have a 19% increase in engagement over our entire platform. And just last year, Just last year, we had $20,000,000,000 of payment volume through the various form factors that we offer to our customers card, Contactless Pay QR code. But I think very importantly, I want to point you to the last number on this slide in front of you. When consumers adopt NFC payments, They have an incremental 50 transactions over and above what they were already doing.
This is not us Forecasting this, this is actual experience that we've seen in our markets where our customers have done this. I want to shift to financial services now. And we've talked about a lot about wanting to be a destination app, that destination city. Consumer Financial Services is one of the ways that we will help enable that. And I think that we have a value proposition here That allows us to win as well.
When you look at our scale, the fact that we are an open digital payments platform, We're not beholden to one technology, not beholden to one type of mobile device or even the financial instrument. We can partner with anyone in the ecosystem. We provide broad functionality and we'll have leading technology experiences that engage our customers. This will allow us to win in the space And increase that average revenue per user, increase the average level of engagement of those customers. One example This cryptocurrency, again, last year we launched crypto and provided it in the PayPal wallet.
What did we see? Well, of those users That bought or held cryptocurrency, that 50% of them would go to the PayPal app each day to log in. This is precisely the type of engagement that we want to see as we add these additional financial services to our wallet, Like buy now pay later, like QR codes, like consumer financial services. How this translates into Revenue for us or income for us? Well, look at this slide.
Of those customers that elect to use direct deposit, We generate 56% more incremental value, customer value than one that doesn't. And so just take This graph at the very bottom, and I'll give you an illustrative example. Assume that a customer deposits $100 paycheck. What we see today is they'll spend about $30 to $40 of that through online and offline. They'll spend another $30 to $40 Through things like bill payments.
And then they'll invest $5 to $10 of that and withdraw the balance. The more financial services that we can add And provide for our customers the more experiences that we can give them our greater share of wallet that we will get over time. We do as a company, we've got robust analytics to segment and understand our customers. And We bucket them in low, medium and high engagement. And you can see the 5 metrics here that we look at, recency, frequency and others, to make that assessment.
And what we saw last year was some of the increased experiences that we provided. The number of customers that migrated from a medium engaged segment to a high engaged segment Was 3 times what it was over the prior year. This is precisely the type of outcome that we want By adding these additional experiences that you've heard about today, and we're so excited and looking forward to over the next several years. What will that do for us? Well, when you take that average revenue per user of a medium engaged customer and they move to the high engaged segment, We get twice the amount of average revenue per user.
That's on a PayPal. That's on PayPal. When we look at Venmo, the difference is even more stark. It's 10x the difference. And we will do this.
We will achieve this by adding these additional experiences, by doing things that keep people engaged, coming to the wallet Each and every day. So let's talk about how all this translates into our medium term outlook Over the next 5 years, and I'm excited to share this. When we look at the payment volume on our platform and the customers on our platform, we expect our customers To double over the next year from the 377,000,000 that we ended 2020 with to 750,000,000 customers, Three quarters of a 1000000000 customers on our platform. We expect our payment volume to increase even more to triple over that period of time. We look at revenue.
This is exciting to me. Over the last 5 years, our compounded annual growth in revenue was 18%. When we look at the next 5 years, we believe that we will achieve 20% compounded annual revenue growth. You go to the right side of that graph, That makes us a $50,000,000,000 company, a $50,000,000,000 company. And you contrast that to 2015 when we came out of eBay As a small independent company, and you think about what we've done, that's tremendous.
This level of revenue would easily put us Today in the top Fortune 100 Companies. When we look at that and we compare that to what we told you at Investor Day a couple of years ago, that's $14,000,000,000 Of incremental revenue. And to really kind of compare that, we talked about at our last Investor Day that we expected our revenue growth to average 17% to 18% annually. Now importantly, when we gave that number, we said that about 150 basis points of that was going to come inorganically by acquiring other companies. The 20% revenue growth that we're talking about today is entirely organic.
So the important distinction there, If you take an apples to apples comparison to what we're saying today versus what we said at our last Investor Day, That's a 400 basis point improvement in our average annual revenue growth. We'll do this While expanding our margins, we've done it over the last 5 years and we'll do it over the next 5 years. We have demonstrated That we can scale our platform at a low marginal cost, that we can do it while still appropriately investing for growth in our business. And we expect that our earnings per share as a result of this will grow 22% over the next 5 years, while still heavily investing in our business. So I want to wrap up and I want to talk about capital allocation.
One of the unique things about our company is that we enjoy the growth profile that we have, But we do it while having large free cash flow margins, high free cash flow margins. And over the next 5 years, we expect to generate $40,000,000,000 in free cash flow. When we look at what we will do with that, It will be balanced as it was before. We'll continue to invest organically, invest in our business and the types of products And experiences that you've already heard about today. We'll continue to return cash to shareholders.
Our target Is at least 30% to 40% of our free cash flow will be returned to investors through our share buyback program. And lastly, We'll be disciplined in our acquisition strategy. We have the luxury of having a strong balance sheet, of having strong free cash flow generation, and we'll use that as an asset, as another Aero in our quiver to go out and compete in this space. So in closing, if we look at 2025, We expect to have 750,000,000 customers on our platform. We expect to be a company that's generating over $50,000,000,000 and Revenue.
And we expect to have free cash flow margins that will allow us to generate $10,000,000,000 in free cash flow. It sounds cliche, but I believe that we have a once in a lifetime opportunity in front of us today. I'm excited about the last 5 years and what we've done. I'm even more excited about the next 5 years. And I hope that you'll strap in and stay with us for that ride.
Thank you.
Thanks, John. We're going to take a short break before our live Q and A session. Analysts, as a reminder, Instructions were emailed to you before the event. We'll return to the program in approximately 10 minutes. Enjoy the break.
I was working in property management and a member for my corporate Office left town and she said, Hey, I know you love dogs. You're always talking about your dogs. I had dog photos all over my office. She said, Would you mind watching my dog? So that Starting me going down that road of exploring, is home dog boarding an option?
Do people do that? And then it fueled itself I run dogs full time out of my home. So I offer boarding and daycare services full time for My home for clients who are traveling, have tough work schedules, things of that nature. COVID-nineteen as a small business owner was I shut the business out completely on March 15th. I didn't open up again until May 4th.
That's a long time. I need help. I need help. Applying for Jefferies, I am a recent recipient of the PayPal Empowerment Grant. Someone somewhere said, there is a Black businesswoman that is doing her That is trying and that is struggling and we see her and we see enough value in her product or her Even though they've never stepped foot in this house, they've never met me, they've never seen a single dog and they say, we are going to help her.
This grant gave me hope.
I had
a $10,000 hug that said it's going to be okay.
PayPal and I have teamed up to give an essential worker and her son an amazing holiday surprise. You're going to call her now. Hello. Chris, you look great. You sound great.
So I was so excited to meet you. I've heard your story. I've watched your videos of you and Ethan and it's fallen in love. So I wanted To be a little fairy godmother, I guess you could say. And help you out a little bit during all this.
Tell me a little bit about your story.
Yes. So I'm a nurse on Long Island And where I work was the epicenter of the COVID outbreak here. It was traumatic. We worked So hard to keep so many people alive. My mom and my dad took my son, Ethan, who's 7, in for Close to 8 weeks, so I didn't spread it to Ethan and then him bring it back home to my parents.
I'm a single mom And we're very tight. It was just really rough.
So I wanted to get you some things to help make your place more recharging and more So, like, so you and Ethan can relax. I got you a new media center to go underneath the TV. I got you guys 2 new chairs, so that way you guys can sit next to each other at matching chairs and have space. Amazing. And a desk for Ethan.
Oh my gosh. And storage
in as well. I wanted to partner PayPal to get Ethan something even more special. So if Ethan can come out, we all can meet him.
Hey, Ethan, can you come here?
Ethan, if you look under that Hello on the chair. PayPal and I got you a new laptop.
Wow. Thank you.
You're welcome. I bet you
that's going to help with school, yeah, and with games when you're done with school. Kimberly, she looks like a mom that's going to make you do your homework first. All right, guys. Thank you so much for doing this. And Kimberly, thank you for everything that you do for your community.
Bye. Bye, Ethan. Bye. Bye.
Hi, I'm Yman. I'm an intern at PayPal. I work under the Business Finance Solutions team. Essentially, what we do is give loans to small businesses, which is really prevalent Now because of coronavirus, in school,
a lot
of times we create like small algorithms or personal projects, so we don't really get to work In a professional development team, now I know that all the changes that I'm making are actually going out and being put into production. The fact that so many other people are going to be To use what I create is just so rewarding. The internship is completely virtual this summer. So although I'm working on my own individual projects, I'm also connected with like 100 I have a mentor who was a recent college graduate. She always assigns me tasks.
She ensures that I have all the help that I need. I'm never running out of things to do. They always try to challenge me. So not only will I be able to like have strengthened technical skills by the end of the summer, I'll also have like a network of people that
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Good afternoon. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone. Welcome back. Thanks again for being here today.
I'd like to turn the call over to Dan Shulman and John Rainey.
Welcome back and thank you for joining us here today virtually. Dan and I are here together socially distanced, which is a sign of the times. We are entering the Q and A portion of our show today, And Denise is going to lead us through that. So Denise, I'll turn it back over to you for the first questions.
Your first question comes from Colin Sebastian from Baird. Your line is open.
Great. Good morning and thanks for taking my question. Exciting presentation, guys. I was hoping to drill down a little bit more into Venmo, Including the key priorities for this year. And then how much of the medium term NNA guide is dependent on Venmo?
And likewise, how much of a contributor should we Expect that to be to the 2025 revenue outlook. Thank you.
Hey, Galen, it's Dan. I think I'll start off and maybe John, you can come in. I think Daryl did a good job in terms of explaining what our roadmap is for this year. I think we're excited about the business profiles that's coming out. We're excited about the credit card, Very excited about pay with Venmo.
That will start to come out in Q2 and that will obviously ramp quite substantially Over time and then obviously crypto comes on to Venmo. And as Jonathan and Daryl were talking about, The Venmo product roadmap going forward will also include a lot of the functionality that we talked about in the PayPal app Around our super app, financial services, payments and shopping as well. And so they're both going to move along a similar path in their unique ways, but on a similar path. And then obviously, as we look forward, we'll see Venmo move into international markets. As Daryl mentioned, because Venmo is now riding on a lot of the back office platforms of PayPal, They can expand wherever PayPal is.
And so it's just a matter of market fit and then making sure we're in language and
So, as Dan said, Venmo is certainly one of the more exciting things that we're talking about In terms of the next 5 years. And we've long been asked questions about when are you going to expand that internationally, and that's in our plans for the next 5 years. And we're Really excited to take some of the experiences that so many enjoy with the social features of that app and bring them into new markets. So certainly, there's a large assumption around net new actives that come with that. But I think very key, if you focus on the last part of my presentation, We have the opportunity to appreciably increase the average revenue per user of Venmo today, much more so even than what we do on PayPal.
So there's sort of a combination of 2 factors. 1 is net new active growth, but also almost exponentially increasing The amount of revenue that we get from each new Venmo user as we roll out some of these experiences to the Venmo platform that we've talked about today.
Thank you.
Your next question comes from Tien Tsin Huang from JPMorgan, your line is open.
Thank you so much. Good show today. I was just thinking you guys have really come a long way From wanting to be more than a buy button, I guess, what, 5 years ago to now being the super app covering shopping and Financial Services. I wanted to ask on the digital wallet, really a lot of ways to ask it, but I'll ask it this way. Just the time line On when we'll see these products introduced?
And of course, what is the consumer experience going to be like? I know it's not Easy because you need to minimize clutter and make sure consumers can find and use what's relevant for them. So just want to get a better understanding of the time line experience so we can track this. And then I have to ask guys on financial services. How do you manage The conflict of which financial services partners to feature and do you become more bank like?
What's and where's the line maybe that you won't cross in terms of products like mortgage, Auto loans, what's on and what's off the table? Thanks.
Yes, I think I'll take a first crack at that and then So look, I think we've laid out Pretty clearly what the vision is for this super app. And it crosses Payments, which were obviously deepened now, but we're going to expand dramatically, goes into financial services And then importantly into shopping tool sets and wish lists as well. And the reason I think those are all important is because they're all interrelated. They're all features that are necessary if somebody is going to live their digital transactional life On our platform, on our Seapr app, and one feeds into another. For instance, if you are doing bill pay with us and we can See, just how well you're keeping up with those bills, then our ability to lend credit, and to do other things plays off from that.
If we see savings accounts in place and our ability to do other things like Jim Begass was talking about like this trust and always make sure that your transactions go through can happen. So All of these feature functionality need to ride on a common platform. They need to share data. We need to Look across them, look at that data, use all of our machine learning capabilities and our AI capabilities, which have been growing tremendously Over the past several years to take that and to do personalized recommendations, because to your point, You don't want to have a cluttered app. You want to have a very clean app.
And we've been spending the last year in market research working with that when we unveil the next iteration of our digital wallet, which will be in the next several months, It's going to be a really different clean look and feel. And so what we've been talking about, We intend to roll out fully over the next 18 to 24 months. And you'll see a large chunk of that Happened this year alone. And the way that I think about financial services, the way that I think about all of our partnerships We've had is those partnerships will continue to flourish. I think they will continue to maybe even get closer than ever before.
We are already one of the largest digital distribution channels for all of our partners, Whether they be FIs across the world, financial institutions across the world or the networks, we're increasingly a large part Of their volumes, we add substantially to their growth rates going forward. And we think that we will With this Seapr app, and as you can see from John's presentation at the end, we are looking at Basically tripling our TPV over the next 5 years, we're going to generate a ton of volume and a ton of that volume Is going to accrue to our partners as well. And so we're really excited about the possibility of deepening our partnerships, Creating this super app and enabling not just our financial institution partners and our Network partners, but our merchant partners to tap into those demand curves. I mean, the other really important thing is when you have 750,000,000 active accounts on your platform. That's a ton of demand that can be generated for our merchants To tap into and so all this kind of feeds into each other.
It's a cumulative effect that builds And I don't think we could be any more excited about the potential of building our digital wallet into a super app And all the partnerships and benefits that accrues for both us, our customers and our partners.
I'll just add to that Tien Tsin that If you think about the last 5 years, I would characterize the growth that we've had is really increasing our distribution. And that's in part because of the partnerships that we've had. And we've done this in a way that's good for our customers, good for our partners and good for us. As Dan said, And we are a digital distribution channel for those partners. The next 5 years will be more characterized by increasing the experiences that we provide to our customers.
But at the same time, we'll do that by partnering, by continuing with the partnerships that we have to enable those experiences. So this is something that I think Accrues to our benefit as well as the rest of the ecosystem because there's such a large addressable market here.
Your next question comes from Jason Kupferberg with Bank of America. Your line is open.
Thanks, guys, for all the detail today. I wanted to talk a little bit about the geographic expansion strategy here. You highlighted a number of regions and countries. I wanted to get a better sense of how much of the penetration strategy will be given It will be driven by organic investment versus partnerships versus acquisitions. And I was also curious why
Thanks for that question, Jason. So we've talked about this quite a number of times. We are Really in 7 to 10 core markets today and in many parts of the world, our market share is 1% to 5%. And so these geographies of the world Offer tremendous opportunity for us. And as the panels before, both on the consumer And the merchant side talked about, we are increasing our product capabilities and our platform capabilities into many parts of the world.
We think countries like China have tremendous opportunity for us. Japan, Which may be surprising for some people, but is the number 3 e commerce market in the world, holds opportunity for us. Brazil, Mexico, certain countries in Southeast Asia are all target markets for us. And as we think about the net new actives that we're going to be bringing on over the next 5 years, There are a couple of things that give us great confidence in that number. First of all, all the engagement That we're seeing right now with the new products that we've launched is very, very encouraging.
We're seeing our Bending of historic engagement curves, and that's accelerating. John mentioned in his presentation things like Crypto, people are opening up the app 2 times as much. And when we look at engagement, we've typically measured that by TPA, Transactions for Active. But there are so many ways to look at engagement, like how many times is somebody Checking their wallet, opening their wallet. How many times will they look at their balance?
How many times will they look at deals And offers that we can do in the shopping tab. And so the more engagement that there is, 2 things happen from that. First of all, the average revenue per user goes up quite dramatically over the next 5 years And our churn rate comes down. We are already seeing our churn rate come down quite meaningfully, for instance, in Q4 of last year. And you think about that, when you're as big as we are, churn matters a ton.
I mean, you reduce churn by 10, 20 basis points, you could reduce the number of people coming out of the bottom of the funnel About $5,000,000 $10,000,000 $15,000,000 $20,000,000 And so as our churn starts to reduce and our engagement goes up, Our cohorts start to go up as well, our net new active cohorts. And so that's one place we'll get it. And the other place is obviously from geographic expansion as well. We have a ton of room there. And between those three things, we feel very comfortable with that $750,000,000 number that we put out there.
Yes. And Jason, perhaps I'll address the other part of your question. So first with India. India is still a very important market to us, but our focus going forward is cross border. And it's really a matter of prioritization.
When we look at All of the opportunities that we have around the world and where we can invest for the best return, we simply see that there are other markets that Create a higher return for us, but India is a big market for us and cross border and will remain so going forward. In terms of the part of your question, Referring to organic versus inorganic. The plan that we put in front of you today is entirely organic. So the 20% revenue growth, The 22% earnings growth, the free cash flow generation, that's all organic. And so to the extent that we go out with the Maybe $40,000,000,000 of free cash flow that we'll have over the next 5 years and use that to acquire other capabilities, Other companies and geographies maybe where there's some white space for us.
That's simply additive to that. And that's the fortunate thing for a company like ourselves And that we not only enjoy a very high growth rate, but we also generate a ton of cash. And as I said in my presentation, that's an arrow in our quiver. As we look across the competitive landscape and compete with others, it gives us another asset to go out and compete in that field.
Your next question comes from David Crockett with Evercore ISI. Your line is open.
Thank you very much. Appreciate the great content today. As your business grows and diversifies over the next 5 years, Looking at the $40,000,000,000 free cash flow you expect to generate over that time, is there anything You can tell us about assumptions around free cash flow margin, how capital intensity might be changing with the diversification of your business. And then the follow-up question is, if I take your math on capital return, John, 30% to 40% through share buyback, you still have $24,000,000,000 to $28,000,000,000 left over for other uses. And I'm curious how you rank Other uses for allocating that capital and potentially as a dividend at some point in PayPal's
David, you jammed in a lot in that question. So I'll I took some notes. I'll try to address all of it. So generally, expect our free cash flow margins to remain in the same area that they have been. And again, that's, as I just said in my answer to Jason, I think that's one of the great things about our business.
In terms of capital intensity, certainly credit remains one of the parts of our business that is more capital intensive. And we've now introduced yet another credit line with buy now pay later, albeit much less capital intensive And some of the other aspects of our business. But as we've demonstrated in the past, if we get to a point where we think that We are too capital intensive on credit. We can externalize that. We can go out and do something very similar to what we did with Synchrony, where we sold our $6,000,000,000 U.
S. Consumer credit receivable portfolio and partner with them and do it in a very asset light like way. And so we can certainly avail ourselves of those options in the future because we want to remain nimble and we want to continue to not be a capital intensive business. In terms of the free cash flow generation and what we do from a capital allocation perspective, we earmarked that 30% to 40% It can be returned to investors, that's a minimum. And certainly, as we look at the various options that we have to return that capital Or spend it acquiring companies or investing in ourselves, we always view it from the standpoint that every dollar of capital Has to compete against all those various alternatives and we seek to invest where we have the highest return.
In terms of dividend, It's something that we look at a lot in terms of our capital allocation and how best to use that. It's not something that's currently in our plans, but we've discussed it and it might be in the future.
If I can add on to that. I think it's important to kind of contextualize a little bit about what we said 3 years ago and what we just said. 3 years ago, we gave revenue guidance of 17% to 18% and about 1.5 points Of that was due to acquisition. So normalized from an organic perspective, our guidance last time was 16% revenue growth With 1.5 points of growth from acquisitions. This time, as we were thinking about what we were going to do from guidance, there are So many different potential acquisition targets for us, both tuck ins, small and some larger, Looking at different geographies, and we are clearly going to be a consolidator in the industry.
We're clearly going to use the Strength of our balance sheet to continue to grow, but it was difficult for us to put it into that forecast And we thought it'd be more conservative and maybe just to look at what we could generate organically because the difference In terms of what we're now seeing in the market with these digital trends and the opportunities that have opened to us Enabled us to put in front of you a revenue growth target that's fully organic. But clearly, We are looking across the ecosystem at potential targets and we will clearly do acquisitions every single year. Some will be tuck in, some will be to acquire talent, some will be to get capabilities that we just don't have the room In our roadmap to go and do, and some will be for us to enter into geography in a more robust We've been building up over time. And those will all be additive to what we put in front of you. And so I think Our balance sheet is a weapon.
We're very disciplined in the way that we think about capital allocation. I think John pushes us in all the right ways to think about each dollar of capital and how valuable that is in the different use cases we have. But we clearly know that this is an industry that is growing Tremendously, we are in a unique position right now, both the capabilities we have internally And with the firepower we have from our cash generation. And so you can expect us to look at that Capital that we have, that free cash flow and deploy it wisely.
Understood. Thanks so much.
Thanks, David.
Your next question comes from Lisa Ellis with MoffettNathanson. Your line is open.
Dan and John, thanks
for putting this event together.
I like the $50,000,000,000 Good stuff. Of course, I can't resist a question on crypto. So Would it be possible, I guess, 1st, to provide any additional metrics on some of the success you're seeing with the initial crypto buy, sell, hold launch in the U. S. And then second, articulate a little bit more specifics On your longer term aspirations for digital currencies and broader investment services like so are you expanding buy sellhold offerings into other Asset classes, how are you tracking on launching the commerce offering?
And then I know you're pretty heavily involved also with government backed digital Thank
you. Okay.
I mean, I think I'll try to answer some of those questions, Lisa. That was a multipart question, but All of them really, really good. I think and I tried to say this in my remarks that Buy, sell, hold is like step number 1 moving into Sort of this whole digital currencies arena, obviously, we're tapping into a tremendous market SMRS to have the ability to simply and easily buy cryptocurrencies, hold it or sell it. And As I think Jonathan mentioned, we are seeing just first time users flock every single day To that, so the results that we saw that kind of surprised us to the upside continue to do the same thing to this day. But that's just the beginning of what we're really thinking about.
If I take a step back, I really do think that over the next 5 to 10 years That the architecture of the financial system is going to have to change. First of all, it's pretty antiquated. It can take days to complete a transaction to have your money actually get to you. It's very expensive. And by the way, It's very expensive from a take rate overall.
But if you have lower income levels, that take rate Can be 6%, 8%, 10% versus the most affluent who can have take rates of like 0.5% to 1%. So it's skewed in terms and it basically is very exclusionary. It's not inclusive. It doesn't bring in all The world's population still have 2,000,000,000 people outside the financial system. And so I think as we move to a much more modern Infrastructure, modern technology, it could be distributed ledgers, it could be other technologies that you're going to see a shift In the way that digital forms of value are moved throughout the world.
And we think as Central banks start to seriously consider the direct issuance of digital currencies. And Most of them are thinking about it right now and many of them are moving forward and are talking about launching that Over the next several years, that that is a natural complement to digital wallets. And if you think about How many digital wallets we're going to have over the next 2, 3, 5 years, going up to 750,000,000 We're a perfect complement to central banks, to governments, to distribute Those digitized fiat forms of currency in a very modern way so that transactions can be instantaneous So that more and more of the population can access the digital economy. And we think that really is kind of the Focus area of this new business unit that we've put into. What's that architecture going to look like?
How can we shape it? But in the interim, you've got all the things that are happening with digital forms of currency right now, which are called crypto. And they run on distributed ledger technology, and we think we can add more and more utility to those cryptocurrencies. Step number 1 Is allowing cryptocurrencies to be used as a funding instrument so that somebody can invest in crypto, If that runs up or runs down, whichever way it goes, but they can instantaneously access that amount of money they've invested and use it to make a purchase at any of our merchants. So that's step 1 and that's going to happen in the next couple of months.
After that, if you think about some of the utility inherent within blockchain, things like smart contracts, you talked about Digitizing other assets and maybe having people be able to invest in those digitized assets that can be broken down Into smaller piece parts. That's clearly things that we are looking at and have on our roadmap. We'll expand internationally as well, as Jonathan mentioned in his presentation. And so Our roadmap around cryptocurrency, enhancing the utility of that, not just buy, sell, hold, but the Fundamental utility of cryptocurrencies and then really thinking about the long term, like what does the new financial What's our role in helping to shape that and how do we work hand in hand with central banks, with governments and with regulators to go and do that. So it's quite expansive.
We're investing heavily here. But this is a once in a Multi, multi decade opportunity where the fundamental rails of the system are going to be redefined, and we have a chance to help shape
that. Your next question comes from Dan Dolev with Mizuho. Your line is open.
Hi, Good afternoon. Thank you for taking my questions. Dan, you historically shied away from doing large Transformational acquisition. And I know the target of $50,000,000,000 is all organic, seems to be some significant Upside to that from an M and A perspective, can you tell us a little bit what is on your wish list? Do you see yourself doing some transformational acquisitions?
And do you see yourself doing something that's more than, say, dollars 10,000,000,000 Thank you very much.
It's a good question. Let me take a first look at John and then turn it over to you. Look, we look at Potential acquisition targets that are small and some that are more transformative. The numbers that we put out in front of you today involve no transformative M and A. We clearly see a lot of wins at our back right now and a lot of trends Frankly, are falling our way and we need to execute extremely well internally to take advantage of those, but We are doing better than we've ever done before on that.
And as I mentioned in a previous question, We're going to be acquisitive. There's no question about it. We've got a lot of firepower and we're a very different company than we were 3 years ago Or 5 years ago. We are $300,000,000,000 plus market cap company Acquisitions that might have seemed bigger 3 years ago, honestly, are tuck ins right now. Might we look At larger acquisitions, of course, we're going to look at larger acquisitions.
But what we really try To do, when we look at those larger acquisitions is, what is the degree of difficulty in terms of integrating that into our platforms? What exactly does that get us? And we are very disciplined in that. We always want to have A breakeven that is no longer than 3 years, we aspire for 2 years on that. And We put strict filters on all of our acquisitions, but I will say, when we do our reviews, We do it at my senior team level every single month, looking at the landscape.
We are looking at targets that are tuck ins to more substantial acquisitions. But I wouldn't really Positive on my wish list around that right now or the likelihood Or unlikelihood of us doing a transformative transaction, we'll look at these things the same way we always have with a ton of discipline And a ton of understanding on how it fits in strategically with the vision and with our roadmap.
The only thing I'd add is that the last 12 months have really emboldened our thinking around how we bring things to market And in particularly, organically, the team has done a better job than we've ever seen in terms of bringing new products, new experiences to market And doing it in a way that's fast and really meets the consumer needs. And so as we think about the future, We're not in a position where we need to react defensively and go acquire some other company to provide these capabilities. We're really on our front foot here. And it allows us to be very selective and disciplined as we look at the landscape out there of opportunities.
Thank you, Dan, and thank you, John, for great performance.
Thank you, Dan.
Your next question comes from Sanjay
Thank you. First off, congratulations on everything you guys have accomplished, very impressive. I guess On the outlook, you guys have obviously a number of different irons on the fire in terms of product pipeline. But what's Giving you the confidence to provide a 5 year outlook. I mean, there's a lot there inside of that, I assume.
And maybe you could just talk about How
even do
you expect that growth to be over the next 5 years? Thanks.
Sure. Let me take that.
Yes, go ahead.
So Sanjay, I'll take the last part of your question first. It's a fairly Linear trajectory in terms of the outlook over the next 5 years. In terms of what provides our confidence, The acceleration that we saw in 2020 around e commerce and digital payments Are really the undercurrents of what our plan is over the next 5 years. We certainly like once We get past coronavirus and people regain mobility and can go back to restaurants and stores in a more normal fashion. We'll likely see some drop Down from the elevated levels of e commerce activity that we see right now.
But I think very importantly, we don't expect a reversal in trends. We don't expect what's happening with cash displacement to turn the other direction. Look, among the many things that I look forward to doing after the pandemic, Going to an ATM machine is not one of them. And so we believe that the trends that we're seeing are going to continue into the future. And look, with any outlook, there's some degree of risk, whether it's 1 quarter out or 5 years out.
But Myself and this management team have never had more conviction and more confidence in the plan that we put out in front of you, and we're looking forward to executing on it.
Yes, I'm just going to build on that, John. I completely agree with you. I think we have more conviction in our business than we've ever I had before. There are more opportunities available to us than we've ever had before. And honestly, we put forth a plan in front of you that is not like an optimistic plan for us, it's not like putting our best This is a realistic plan.
We think we are going to deliver against and we have a track record against doing that. I would say, to John's point, trends have accelerated. There's no turning back from this new digital era That we're going into for so many reasons, both from a merchant perspective and a consumer perspective. Our real addressable TAM has grown 6 times with the new products and services we're putting out and intend to put out. So we have a lot more room to grow and we're executing better than we ever had before.
Look, all of the investments we've put into our business over the last 5 years And they've totaled not just 100 and 100 of 1,000,000 of dollars, but 1,000,000,000 plus dollars of investment, Well, expanding our margins, by the way, have been in the foundational capabilities of the company, having a tech stack That was antiquated to now as a modern tech stack. I mean, the difference is night and day when you do that. Having actually now risk Function, risk management, compliance, we've put in multiple, multiple, 100 of 1,000,000 of dollars. That is a huge competitive differentiation for us now. It allows us to deploy product faster than ever before.
And so when I look at sort of the sum cumulative effect of where we are today, the scale we have today, The platform capabilities, our ability to put out more product, more software, the trends behind us, Larger addressable TAM and frankly, some of the great results we're seeing from just some of the early products we're putting out And we've put out it's like the tip of the iceberg right now of what we put out. The vast majority of what we plan to do is ahead of us. And so I think we have a strong degree of conviction in what we put out. That doesn't mean that things can't go wrong one way or another. But we've been very thoughtful and very disciplined about the numbers that we put out in front of you.
I'd add one more thing, if
I can, Dan, Sanjay. And certainly, we operate in a dynamic marketplace and we're subject to the trends and the vagaries of that marketplace. But here's the important thing to understand is we're not just sitting back on our heels being a recipient of this trend. We are on our Toews investing into this and taking this by the horns to help shape this outcome over the next 5 years.
I'd say the whole team Feels that way. Not just our senior team, but throughout the company.
Your next question comes from Bryan Keane with Deutsche Bank. Your line is open.
Hi, guys. Thanks for the day. I also wanted to follow-up on the guidance. On the revenue, it is 400 basis points stronger in organic from the last outlook. And so just trying to think about the pieces there, John, maybe the eBay headwind, obviously, is going to
be going away, Thinking about new products, increased engagement, which has been a highlight today, and then obviously, that acceleration of new user growth, I wonder how much of a component is that to the increase in the organic growth? And then secondly, just on operating margin expansion to get to that 22% EPS growth. Should we expect a steady increase? I don't know if 50 basis points is the right metric? Or what should we think about Annual margin expansion.
Thanks so much.
Sure. I'll take that. So Brian, certainly, there are Headwinds and tailwinds in our guidance. You noted, you know, eBay. I think it's important to understand that we are so much more diversified as a platform Than we were 5 years ago.
And that inures to our benefit as we look forward. If you decompose the growth over the next couple of years, 5 years. Well, you can see from the numbers we put in front of you, we're expecting our net new actives or our total actives to double. So if you think about that, there's a maturity curve that comes in terms of the engagement level and the revenue and income contribution from those new actives. And so Those actives will be, contribute less relative to the existing PayPal base 5 years from now.
So I would, To use rough math, say a third of that growth comes from the customer acquisition. 2 thirds comes from the cohort of customers that we have today By increasing their engagement, all of the things that we talked about and you heard from everybody today. If we can double that cohort, Double the revenue per user of that cohort over the next 5 years, that will contribute about 2 thirds to that growth. In terms of operating margin expansion, look, here's the thing to understand. As I said in my answer to Sanjay, we really think this is sort of a once in a lifetime opportunity.
And we want to invest into this and we're investing heavily in this plan that we put in front of you today. It just so happens that as you've seen over the last 5 years, The scalability of our business, the ability to grow at a low marginal cost, that enables our margins to go up. And so they will go up over time. But how much happens 1 year versus the next will be heavily dependent upon the level of investment in that particular year. And so we think that this is a Plan that balances good margin expansion while investing into this opportunity to be ready for the 5 years that follow this plan.
Got it.
Thanks so much.
Thank you
so much, Ken. Just to add on to that. I think one great point is What's happening with eBay? Like eBay for the last 4 quarters or so, I'll probably get these numbers slightly wrong, but it's been about 1% TPV growth for us. The rest of our business is growing at about 30% or so.
And as you think about eBay becoming a much smaller percentage of our business, and we anticipate most of that will happen through this year, Maybe a little into next year. Then that large part of our base that is much Slower growth. We now have other marketplaces that are replacing that that are growing anywhere from 7 times to Team times that of eBay. In fact, we're working with a number of new marketplaces right now that we hope to be able to announce over the next several months That we're really excited about, that we believe can add incremental growth on top of that. And so I think eBay It's a depressant to our growth this year.
And then as we start to lap over that, it's an accelerant going forward. And all that's built into our plans and it's why we feel so comfortable about the revenue growth targets. So I think that's it. Do we have time for one more question? Two more questions?
Okay. I think that's not it. And we have time for 2 more questions. Operator?
Your next question comes from George St. Helos with Cowen. Your line is open.
Hey, thanks for squeezing me in guys and congrats on putting this all together. Just had a partnership or maybe more aptly a frenemy question. 5 years ago, you partnered with the networks, you became sort of a collaborator as part of the traditional financial payments ecosystem. I'm just curious now as you sort of fast forward the next 3 to 5 years, do you see more opportunities On the partnership side with those constituents, those peers of yours? Or do you think you start to maybe bump heads a little bit more As maybe you encroached in some of the areas that you're both playing in and frankly, you've outgrown A lot of these collaborators.
Just curious how you're thinking about that in your market positioning going forward?
I'll take a first crack at that, and then John can come in. I think our partnerships are going to strengthen over the course of the next 3 to 5 years. Why is that? 1, we're going to be generating a ton of value and volume for our partners. When I look at the amount A volume that we drive, being probably the largest digital distribution channel for many, many of our partners, That's just going to accelerate going forward.
And then on top of that, we're going to be partnering with Some or several of them as we go more deeply into financial services. And so not only are we going to continue to drive The growth that we have for our partners, both many of them will go deeper into partnerships. I think American Express is a good example of that. We started off with 1 or 2 things, and then we are now moving into Using our peer to peer platform to help enable peer to peer movement for American Express customers, They're obviously doing some of their rewards capabilities to encourage people to use PayPal. And that relationship is just deepening Over time, I could go through one partner after another.
As I look to our partnership with the networks, they've been fantastic over the last 3 to 5 years. And we're excited about the next 3 to 5 years. And I know they're excited about The potential that we can do together. And so I think clearly, there are always some places where you bump into each other. But when I look at the totality Of what we plan to do and the potential of our partnerships around the world, I think they grow in numerous ways.
And your last question Comes from Darrin Peller with Wolfe Research.
Nice job. When you're Calling for doubling users, clearly a big number of 15% CAGR versus the last 5 years of also 15% or 15%, 16% despite obviously a much higher base. I think even more important is the tripling the TPV the next 5 years clearly just underscores expectations for increases Material increases in engagement per user from, let's call it, roughly 40 to 50 times per year today. So John, if you can just first touch on that. And then on a related basis, Dan, when we look at 2024, 2025, maybe just more holistically, if you can give us a sense of what you see the PayPal customer doing, like how many attach What's the attach rate?
How many products and offerings you actually see these customers using down the road? Thanks again, guys.
So I'll start. As I noted earlier, Darren, and thank you for your question, a big part of the growth comes from increases in engagement from the experiences that we're offering. And I think fundamental to our outlook over the next 5 years is a belief in the ascendancy of digital wallets, The primacy of digital wallets. We don't believe that there's going to be a winner take all and certainly don't think that everyone is only going to use PayPal. But we do believe that consumers are going to continue to move towards digital wallets.
And we think that the Experiences that we're adding now and we'll continue to add into the future, we're going to make that digital wallet as good as anyone that's out there. And as you have those experiences to go out and use crypto, to use buy now pay later, to use a QR code offline, to shop online, to complement that with things like Shopping and offers and rewards. Those are the very kinds of things that are going to drive that engagement that doubles that Average revenue per user over the next several years. And so that's what underpins the assumptions that we have in this plan.
Yes, I'll just add on top of that. Obviously, you can do the math and divide at the end of the time, but that actually doesn't really even give you a full Picture because people who come in later take some time for their usage to come up. And so when we look at the base of our customers, we're so excited about the amount of usage That they can do. John mentioned, like when somebody uses us in store, they have 50 More incremental transactions on top of their online transactions. And what excites me about becoming a super app Going forward.
And again, we've outlined the next 12 to 24 months for you in terms of our product Aspirations. But there's a whole another road map behind that in terms of things that we want to go do. And what I love about it is these build on each other. When somebody uses us offline, they tend to use us more online. When somebody uses us more and more, they tend to put more money onto the platform.
When people put more money on the platform, they tend to want to do other things on the platform like bill pay. When they do more bill pay, then we can look at maybe how much more credit can we give them because we see whether they're Whether we can responsibly lend to them. When we started thinking about shopping on top of that, And the rewards that people can have, the demand curves that can build up, this could be a massive ecosystem That builds upon itself. And we try to be realistic about What we want to put out in front of you, but certainly, you know what our aspirations are. Our aspirations are 1,000,000,000 users on the platform using it every single day.
And we don't get there in these next 5 years, but that is our aspiration And that is what we're going to be building towards. Do we have one more question in line? No? Okay. So let me do this then.
Let me thank all of you for your time Over the last couple of hours, I hope it was informative for you. We spent a lot of time planning and thinking about We're very excited to lay out our overall vision for you and to put that out there and then for you to see us execute Against that. Hopefully, the next time we do this, we'll all be able to see each other in person. And I really want to again thank you for joining us in our Investor Day. Hope that all of you stay well, Stay safe.
Hope that everybody gets vaccinated shortly. And until then, we look forward to staying in touch.
Thank you so much for joining us today. We appreciate your continued support. I'm sure we'll see many of you virtually in the coming weeks months at conferences, and we look forward to the next time we can be together in person. On behalf of all of us at PayPal, stay safe and stay healthy.