Good morning, welcome to PayPal's first virtual Investor Day. My name is Gabrielle Rabinovitch. I'm Vice President of Corporate Finance and Investor Relations at PayPal. We're thrilled you're joining us today here from PayPal's San Jose, California campus. We'd hoped to meet you all face-to-face for this event, given current circumstances, we've re-envisioned 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 Magats about how we're winning and deepening our relationships with merchants through an expanding value proposition. After that, we'll take a short break. I'll speak with Jonathan Auerbach and Darrell Esch for a deep dive on some of our strategies for reaching one billion daily consumers.
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&A session with our equity analyst community. Please note that all sessions, with the exception of our Q&A session, were pre-recorded late last week and 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 a strong sense of mission, vision, and purpose.
We need to make sure that our companies are a force for good, that our brands stand for more than just making money. I think we have a purpose and a profit motive together, and I think they go hand in hand.
We care deeply about people and their ability to participate and thrive in the global economy.
We have a moral obligation to extend the new tools and the new technology to people who are underserved today because it will make a real difference in the world, and we can do it.
Fighting to give capitalism a much-needed upgrade.
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.
What's more, we act on the values that define our mission.
The racial wealth gap is the same today as it was back in the 1960s, the last civil rights movement. It's why PayPal decided to do a $530 million commitment to help Black and minority-owned businesses, not just in the short term, but over the long term as well.
Even if you step away from the money, I think the big thing what that grant did is I felt seen.
To know that a brand and a company like PayPal actually has your back and supports you is an amazing thing.
We all live in the same community. There are a lot of cultural wars. That doesn't absolve us from taking values-based stands and doing our part to try and help.
Creating a ripple effect of positive change in the pursuit of building a better world.
If we can help in some way create financial health around the world 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 world and one in which we maybe understand each other more than less. Hi, everyone, welcome to our 2021 Investor Day. Glad to be here with you. I wish we could all be in person. Obviously, that's not doable. I hope all of you are well and healthy. This format, I think, is going to be quite engaging and informative. The last time we were together was almost three years ago in 2018. At that point in time, we put a three-year vision together for you and we put in place metrics associated with that.
Here we are today, I'm pleased to announce that all those guidance that we gave three years ago, we've exceeded. Whether it be revenues, whether it be earnings, whether it be margin expansion, all of those we've exceeded. Today, we're going to talk about what our journey looks like over the next three to five years. Obviously, the world has changed dramatically. We've leapfrogged into a new digital era, these trends all greatly benefit PayPal. We need to execute to ensure that we take advantage of all of those trends. If we do, we have a very exciting plan in place. John will share with you most of those metrics, we feel very comfortable, 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 five years, and they are led by this management team. 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. 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. 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.
John will spend a lot of time talking about really kind of all of our metrics and what we've accomplished the last five years. 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 five years. The first thing that I would point out is, obviously, we've grown our scale substantially. We've gone from 180 million or so active accounts in 2015 to 377 million exiting 2020. This is the first time we're going to talk about a metric, but I'm very excited that over the next five years, we believe we can grow this 377 million to 750 million active accounts on our platform.
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 five years, we've seen engagement levels grow by one and a half times. Given the success we've seen with the introduction of things like cryptocurrency, our offline or in-store strategies, our buy now, pay later capabilities, we are seeing historic engagement curves start to bend and accelerate. That's especially important because those do two things. One, they obviously increase the average revenue per user, and we expect that to grow substantially over the next five years. At the same time, it also reduces our churn rate. As we get larger and larger, the more our churn rate reduces, the more our net new active cohorts can grow.
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 five years and expect even more going forward is the breadth of our product portfolio. When we were together five 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. Five 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. This is just the beginning. We introduced more product than ever before in 2020. We intend to increase that pace in 2021.
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 hundred people in our risk management and compliance functions. Today, we have almost 4,000 people in our risk management and compliance functions. 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. 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 regulators across the world.
The other thing that we've done is we've put hundreds and hundreds of millions of dollars into our tech platform. We've taken that from being a C++ 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 hundreds a year to now what are tens of thousands of software releases each and every year. We can now scale our platform seamlessly. That's 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. 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. 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 Mercado Libre in South America, Central America, and Mexico, our partnership with Gojek 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. 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. 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 it. This is foundational for us, especially as we start to move into more capabilities like super apps and digital wallets. 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.
Whether it be one study after another or one like the Fortune Change the World, we were ranked number three in the world this past year. Very important that our ESG metrics reflect that. If you look at the S in ESG, we are a leader across the world. Finally, obviously, over the past five years, we've delivered for all of our shareholders. Since our separation from eBay, our market capitalization has grown by at least 7x . All of our metrics, whether it be our revenues or our operating margin or our EPS, our free cash flow, have accelerated dramatically.
The really exciting thing is I think that the past five years, as proud as I am of those, as proud as I am of what every employee in PayPal has accomplished, but the next five years offer us even more opportunity because we are moving into a digital paradigm. 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. It's going to change pretty much every element of our lives. The lines between physical and digital are not just blurring, but they're actually disappearing. This is going to reshape business. It's going to reshape business models to how business is conducted.
What's going to happen is that physical will become digital. 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're now doing digital commerce. I think that digital is going to define a consumer's commerce journey, including their experience and their engagement. 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 talk to right now is 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. 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. There's no going back from that. 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 30, 40, 50 apps on our phones, but we really only use eight to 10 of them every day or every week. Nobody wants to remember 40 or 50 different passwords or 40 or 50 different navigation systems. Nobody wants to put in all their payment details across every single one of those apps.
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. 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 happening 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 into their storefront. In fact, merchants are now trying to figure out how can we be where the buyer is? 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 two or three email messages per day from that retailer.
Add that to all of the other emails, I'm just inundated, it's hard for a merchant to break through and gain my attention. This is where we're so excited about the shopping component of our digital wallet, where we will have hundreds and hundreds 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. Do all that in a way where on our platform, we can provide a universal checkout experience. 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. Basic financial services are just going to be a part of any platform that has hundreds of millions of consumers because it's all tied in to the everyday transactions that we're going to see. I think you're going to see a new system evolve, new 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 disparate capabilities that range from payments to shopping to financial services, and even new forms of digital identification into one super app.
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. It also requires scale both on a consumer side and a merchant side. When I think about those three different elements, payments, shopping, financial services, I think about payments first, because payments is what we're known for. Those payments will obviously all be digital.
They will be both online and offline. They will also encompass not just any financial institution, credit card, debit card, ACH, but will also include things like rewards points redemption, utilizing cryptocurrency as a funding instrument, utilizing central bank-issued digital currencies when that becomes a reality. 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.
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. If somebody's 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. Finally, we'll have a full tab on shopping.
We will have hundreds of millions of consumers building their own wish lists, 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 multi-year 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 two-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. 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. Finally, we are going to provide a robust set of marketing tools that will allow merchants to take full advantage of the fact that we have a two-sided network, that we have a platform with hundreds of millions of consumers that are basically telling the merchant, "Here's what I want," and allow merchants to tap into those demand curves. We clearly believe we can be a differentiated and compelling partner to merchants of all sizes.
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's no question that digital currencies and the underlying technology have the potential to drive the next wave in financial services. 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. 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.
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. Truth of the matter is, several years ago, when we looked at really of that addressable market, where did we compete? It was only in online retail, P2P remittances, and digital. The part of our addressable market that we play in by over 6x in the last three 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 five years will dwarf the opportunities that we saw in the past five 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. I think there are few companies in the world who can even aspire to this vision. Why is that?
It's because it requires capabilities that cross industries from financial services to payments, to shopping, to technology. 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. We are so excited to help consumers and merchants navigate and thrive in the next generation of the digital age. I want to thank all of you for this. We are really looking forward to the rest of the program with you. At the end of the day, John and I will be together to answer any of your questions. Thank you very much.
My whole life, I heard negative things about my home, my people, my borough, and we said we have to do something to change that narrative, right? There's so much talent, entrepreneurship, ambitiousness, and just raw energy here in the Bronx. We're celebrating our people, we're celebrating our culture, our history, and there's nothing better than that.
Messages within the first hour or two. It was so overwhelming of so much work getting back to each and every person, managing things like payment and details and address. We definitely decided then that we needed to do something with an online system to make that easier for us. I think we just instantly went, "What about PayPal?" PayPal has helped us to streamline how we run our online business. 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.
For us, we had a very challenging time. We had a struggle, and we were really on the edge of closing our commercial space, our flagship store, and overall closing the business. PayPal was always there to help out. Here in the U.S., we have the Paycheck Protection Program loan. We found out that we can access this loan through PayPal. We applied, and we got approved. That capital that came through that loan helped us survive COVID. It helped us store sale customers, and then also all of the sales enablement teams across the world that help the sales teams
Wonderful. Jim?
I started in early 2004, a team of four people looking at our payments and our expansion into Europe and Asia, and spent time always in the payments realm in some form or fashion. Currently, my scope of responsibilities, I look after our merchant-facing product experiences, inclusive of that are 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?
Obviously, the theme has been around digitization. There's been a real need to digitize commerce, that's been a theme that sort of spans all segments and all types of customers. Different customers have actually had to adapt in different ways that we've seen. There's the platform customers that, the likes of Uber, where they've been able to really shift their strategy from one of rides to one of delivery. That has been some of those larger platforms have been able to adapt very easily. Then, for companies like IKEA, we were able to help them really move online and move out of the store environment into really expanding their digital footprint. Using the PayPal solutions, we were able to help them digitize across the globe, and they expanded that digitization footprint into new markets.
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 listeners be able to contribute to artists or to other charities of their choice, or just connect listeners with the creators. 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 the adoption of our solutions across the commerce journey, everything from contactless payments was a huge focus for us this year and was needed by merchants of all types. 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 solution.
Flexible payment options was another need of merchants of all types. Our buy now, pay later could not have come at a better time. We were able to launch it in the U.S. with Pay in 4 and Pay in 3 in the U.K. 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.
It's fascinating. It's amazing how we pivoted so rapidly to help serve their evolving needs.
Absolutely.
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 right now?
Well, what's interesting, just the surge of the amount of merchants that are digitizing. Peggy indicated in every segment. For us, it starts with just getting the basics right. We have, on average, about 15,000 net new merchants coming onto our platform every day. That's more than many other PSPs have in total. 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. We're really just trying to get the basics right for them. Beyond that, really what we're looking at is for all these merchants, they're really time-starved. They want an integrated solution.
We're taking all of our great assets, be it Braintree, Hyperwallet, what we do on credit, and what we do 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 Platform. Really, the Commerce Platform is around connecting customers and connecting these tools together. For us, we've already started with integrating Simility, our risk and fraud management service, into 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 iZettle, 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.
They want to have one set of solutions that can work, whether the customer is in store or online. To that degree, we're focusing with our Braintree customers, having soon rolled out an in-store solution. 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. What we can start to do with that when we bring a lot of our assets together, is really create a connected experience for the customers of these merchants. Imagine you show up in store, they already know what your payment information is. Imagine you're in store and you look at a particular shirt, and you go home, and that shirt is in your shopping vault online as you work through that.
These are all things that we can do together from a large merchant perspective. 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. iZettle is really about an integrated solution for physically first merchants. Why that's important is PayPal has predominantly played with digital first merchants. There's estimates that about 47% of all small businesses don't have an online presence. For us, it's going after a huge segment of those that have need. We're going to be integrating iZettle. What iZettle really does is create interoperability with their tools, like their order management, inventory management, accounting services, and have a great in-store solution.
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.
Fantastic. Jim's talked a little bit about how we're serving small and medium-sized businesses, especially in bringing iZettle to the U.S. These businesses are really foundational for our economy, but they're also foundational for PayPal. Last year, we added more than 5 million SMBs to our platform. This is an increase of more than 100% year-over-year, so we really saw incredible growth. How are we serving this segment from your side, and what do they need?
Yeah, it's interesting because you're right. SMBs have always been the bread and butter of PayPal and tremendously important to our consumer network. In the last year, they have often really suffered because a lot of them had much more of an offline presence than an online presence, and suddenly, COVID required that they completely digitize everything quickly in order to survive. 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, whether it's the actual payment experience required for digitization or even earlier in the journey, how do you attract customers in a way online?
We needed to really serve as consultants and use all of the services and products that we had that could help them really digitize and compete where there was absolutely no choice but to be fully online. 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 attract consumers online. Really creating solutions that they could easily integrate, because they don't have a lot of time and 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.
Really reaching new audiences as well with the likes of Venmo and potentially introducing new consumers that maybe they weren't able to reach before. 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. 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've brought a record number of merchants, we actually brought a record number of consumers as well. I think last year, we brought about 65 million new consumers onto our platform. This presents really unique challenges, and we were able to grow volume at record rates while minimizing our losses. This sort of challenge of maximizing 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 our teams have done is 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. In doing so, what we've been able to do is to remove a barrier or 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 their risk losses and at the same time reducing their auth rate, which hurts their conversion and hurts their relationship with their consumers. We've been able to give them the best of both worlds.
If you look since 2018, in the three-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 one million transactions each day through the work that we've enabled on auth rates. What we've also seen is we've started to benchmark our data versus industry standards and industry standards that we've seen with the payment networks. 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. If you're a merchant and you're taking PayPal wallet, you're going to see six 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. I already thought the teams had done an absolutely fantastic job. 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. 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. The net new users and cross-border transactions very much create a headwind for our risk losses as we work through them, and they've been able to do that with good experience. How we've done it, we've focused, one, on leveraging industry-standard tools and really taking what is today very fragmented tools and scaling them.
One example of that is network tokens. Network tokens are capabilities that help with lifecycle events, like when a card is lost or stolen. We've been able to scale that, and right now, we have over 400 million tokenized cards within our payment vaults. We will, by the end of 2021, have 750 million 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. We have a lot of data.
We estimate that we manage securely about 500 petabytes of risk and transaction data that we have within our ecosystem. In doing so, that 500 petabytes of data basically equates to about 25 Library of Congress. That's the amount of data that we have. 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. 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 it 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 and eradicate bad users from our platform. 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, and 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. 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. Regardless whether it's a PayPal transaction or another type of transaction, they can offer and feel protected against unwanted transactions. 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?
We've had to evolve with it. If you can imagine, if you go five or six years back, the majority of what we were selling was our branded checkout product, right? 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-versed in terms of what was going to resonate with our network, both consumers and merchants. At the same time, we were selling a few products, and so it was more of a product sale.
If you can imagine, when you start to think about all of the digitization of commerce and all of the various 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 credit card processing, whether it's Simility to be able to do risk 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. More importantly, they all need to sort of fit together into more of a solution sell as opposed to a product sell. We're also having to speak to very different people at our customers than we were in the past.
In the past, we were often talking with the payments team or the CFO or the treasurer, and we were talking about how we were going to save them costs and get them more transactions or a better conversion rate. As you start to think about attracting additional customers and competing on the demand side for customers, now we're starting to speak with the chief digital officer or CMOs. 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 salespeople. In addition to that, in the past, we would really look to be aligned with marketing.
We would have marketing was really focused on how to create this network effect that is the magic of PayPal, and we were focused on ensuring that 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 really care about is that next customer, that larger transaction, the bigger basket size. 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. That's been a real change as well.
It's incredibly helpful. I'd like to shift gears a little bit. Jim, we've made a lot of progress in China over the past 18 months. I think it'd be great to hear where we are in that journey and what comes next.
I think when you view our platforms, one of the things that I think a lot of people should appreciate is the access to customers that we create. 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 China in terms of giving them access to Chinese buyers, as well as our consumers around the world to get access to Chinese sellers. What we have done in the course of the last several months, and literally it has been several months, we've, one, gotten a payment service provider license, and we are the first 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.
That was literally done in about six months. 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. Let me give a little bit of context as to what we can do now with this license. Historically, because we were an unlicensed operator in China, we were unable to support certain service types. For example, if a merchant needed to process VAT, needed to process different tax or custom information, we were unable to do that. We were unable to clear and process in local RMB. That's something that we're able to do because we'll be able to process transactions. If you're a merchant of PayPal, you don't have to go to a third party to get your money out.
We're also able to work now more collectively with different merchant types. We're 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 work through this. 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. If you're a merchant that's operating in China, you can utilize Hyperwallet and the capabilities associated with that. Or if you want to just use Hyperwallet, we can leverage our GoPay entity there for RMB withdrawal. What we're also planning to do is to eventually launch Braintree in the market.
All of our assets start to come together based upon the license and what we've done. 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, 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. 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. 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.
Leveraging our partnership with China UnionPay, we'll be able to effect 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.
That's great. Historically, we haven't had as much penetration in some of the Asian markets and some of the South American and Latin American markets, 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 PayPal?
An area that is a high priority for us in the next year is Europe, EMEA. If you think about EMEA, it has a similar GDP as the U.S., but we're less penetrated, and the margins of Europe are higher than they are in the U.S. That is appealing in itself. There's also a lot of regulatory complexity in Europe, we have the capabilities to really be able to set apart and really serve our customers in those markets. We're incredibly excited about Europe, specifically the U.K., Germany, Switzerland, France, Italy, Spain. The core, what we call our core European market, is an area that we're really focusing on. Jim also mentioned what we call our growth markets.
Japan is incredibly exciting, the third largest economy in the world, and very specific capabilities needed there, and we intend to invest heavily in Japan. If you think about China, obviously, Jim mentioned why that's so appealing. There's an incredible amount of potential, just in the export on the cross-border side with China, even before you start thinking about what 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 million NNAs that are consumers that we have globally that they're also wanting to reach. Lots of opportunity in the growth markets, but I would say lots of near-term focus on EMEA.
Super exciting. Jim, we've done a lot in Brazil and Mexico, both organically as well as through 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 that's 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 iZettle live in the market. We have working capital through a partnership in the market. 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 and Braintree to support us in Brazil. What we're also seeing is a local 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, the second-largest gas station provider in Brazil.
It has about 6,500 locations. We're powering all their Pay-at-the-pump app solutions. Basically, you show up, you go onto your app, you pay for that particular petrol purchase, and it's powered by Braintree and PayPal. Really what they wanted through that is chargeback protections. 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 transactions. It's a very powerful example of the commerce platform mindset that we have of bringing our assets together. We're also, on the consumer side, we've rolled out something called pinless debit. Again, in some of these markets, there's a lot of friction to use your funding instruments.
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. We've created a partnership with Neon Bank for iZettle to be effectively their main distribution partner and their main point-of-sale and integrated mPOS solution for their merchants. We've had a long-standing partnership in Brazil with Itaú, one of the largest banks there on the consumer side, to distribute PayPal. 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.
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 domestic volume, basically consumer and buyer and merchant in Mexico, is bigger than our cross-border business. We probably have over half of the top 50 internet merchants in Mexico on our platform. Between what we're doing in terms of enabling those use cases, we have iZettle 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.
That's great. Both you and Peggy have touched on 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. 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&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.
When we were thinking about what we wanted to be five 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 is a team sport, and we need to get everyone involved to bring that to fruition for us. 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 their funding sources, better access to different platforms, and really create an interoperable set of solutions for those customers wherever they're at.
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. You start to see the stitching come together. In many cases, what we've talked about over the course of the last couple of years is really on the backbone of those partners, that in many ways will be very below the surface in certain cases, and certain cases will be very explicit in terms of what we're doing. Examples, we now are in 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 store within BigCommerce is subsumed within the inventory management solution of iZettle.
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 parts of the life cycle of a customer. I think one of the really good examples of what we're doing now with American Express. 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, $30 back each month based upon a 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 $30 to anyone.
All below the surface, we're using network tokens to make sure that if your card gets lost or stolen, it's automatically updated. At the same time, we're sharing risk data to give you the best approval rates. 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's 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. We're really excited in terms of what we've seen over the course of the last couple of years with these partnerships. One of the more evident areas, things like Pay with Rewards, and that's something that we've launched in the last two years.
We now have about 16.5 million active customers with a Pay with Rewards card, and we will endeavor by the end of this year to have about 30 million in our portfolio here in the U.S. We'll have Pay with Rewards from the top eight 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. 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. A lot of these, and I'd say all of these partners, are absolutely thrilled with the incrementality and the great experience that they've seen.
Thank you.
On the cost side, because that's typically where I think a lot of people want to know, what does this mean? I think 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. I'm very proud that this year, 2020, we had our best year ever on transaction expense. I think 85 basis points as we worked through that. 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. We saw last year a 25% increase in debit cards into our portfolio. 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. I think it is because our product experiences are really going after use cases where low-cost funding sources tend to be prevalently used. Look at our product experiences. Every one of our product experiences, be it crypto, Pay with Rewards, Pay in 4, these are all funding instruments or funding mechanisms that typically are drawing upon low-cost funding instruments. Taken together, we're excited where we're at. We're keen to continue that as we go forward.
That'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. A huge priority for our teams is integrating that into our solution selling and making sure that we help scale it.
Great.
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, and 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 most 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.
Thank you.
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. 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. It may sound very aspirational, 1 billion daily active users, but you ask every one of our employees, they believe that we're actually going to do that. 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 laptops 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. We'll restart 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. 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 C gummies, which I actually forgot to take today. Home. Don't worry, I'll pay for it. Always remember the important things like washing your hands and social distancing, and always wear a mask. Look at my smile. Once you're done shopping, have a CVS employee ring up all your stuff. Thank you, handsome employee man.
When it's time to pay, use your Venmo or PayPal QR code in the app. I have a second phone. Magic. Boom. Paid. Told you I'd pay for it. What time do they open?
I grew up around pies all my life. My grandfather would pop me on the hand because I would go in the mixing bowl 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 an L.A. girl. I went to UCLA and I had the opportunity to run track.
It's Alice Brown now to Jeanette Bolden.
I cannot even put into words what it felt like to be in the Olympic Games here in Los Angeles, where my parents could come, my pastor came, my friends, and 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 works at the bakery. That's Mr. Harry's granddaughter. That's Ms. Carmen's daughter." I mean, on weekends when I wasn't running track, I was delivering pies. One of the things that struck me was that if I want this to continue for the next generation, the third, fourth, and fifth generation, somebody has to maintain it. My mama, my brother have passed on, and now it's my turn. It seemed like in one week everything happened. The shutdown, people were not coming to the business.
All of a sudden, it dried up in one week. At the same time, it's like for the last six months to a year, my pie press machine had been suffering. It wasn't getting hot anymore, and it was difficult for it to make actually the shell. We were kind of MacGyvering it. I had heard from another friend of mine on a certain date, there's going to be a PayPal grant. I started applying and getting all my paperwork together. I actually got it. Oh, my God. If I could tell you the scream that I did. I said, "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 grant, the first thing came to mind is pie press machine.
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." What is your family tradition? Ours is making pies, and I want that tradition to continue. We've been in 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 Bakery.
We started with a foundation of asking ourselves, "How can we do this without the use of chemicals?" That all feeds into a more complex relationship where we're talking about soil health, plant health, animal health, then ultimately human health, and it's all tied together. I'm Casey Wisch. I own Long Stone Farm with my husband, Justin. We have Piper, who's three and a half. We have Boone, who just turned two. We have another boy on the way who's due here very soon. The kids have fresh air and endless activities. There's always purpose out here. Our farming operation has been growing over the last years. We're in year six of 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 community.
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 options that were contactless. 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 product that they were buying.
It felt especially safe, quick, easy.
We are seeing about 70%-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 us. There is a lot of people that have been coming to our store for many, many years that have always paid with checks and are now paying with PayPal. We are lucky that we get to raise our three kids on the farm. We are very hopeful that it instills a great sense of responsibility in our kids. We are not just sustaining, but we are growing.
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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 for their money, but the currency of life isn't dollars, pounds, or euros, it's love. Here's to the people whose goals rise above their fears, whose sleeves are always rolled up as they pound out their dreams, and they keep plugging along even when life is tough. This is who we serve. They're the inspiration behind Xoom, whether they send money to help put food on the table or to fulfill bigger dreams. We are here for them. Just as they are never done, neither are we. We are Xoom, the fast and secure money transfer app from PayPal.
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 content, you need people like Sade, who runs audio. You need people like Sean B., the musician. You need people like Nis, a photographer. That's what we do at Cam Kirk Studios. We create. I started Cam Kirk Studios in 2017. I just felt like the city of Atlanta needed more creative resources. The creative community here was so strong, 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 photographer. We see people create all types of things here, from music videos, to photo shoots, to album covers. 2020, the start of a new decade. COVID struck us crazy. We had to make that tough decision to shut the studio down. If the studio was to shut down permanently, I feel like it would take the heart and soul out of the creative scene in Atlanta. We not only were stopping our business income, but we know we would be also stopping the income of other creatives that still needed to create to continue to put food on their tables. In turmoil and in dark times is really when the creative scene comes to life.
The PayPal Empowerment Grant was just a blessing. It allowed us to get caught up on some rent. It allowed us to keep our payroll going. It just gave, also, just that peace of mind of knowing that the work that we're doing here is not going unnoticed.
You can't think Atlanta without Cam Kirk Studios, truthfully.
We sell a lot of the hot dogs because we're in Chicago. We sell a lot of the pizza because we're in Chicago. The biggest toy of the year has been the dumpster fire figure because it's the perfect toy for 2020. Rotofugi is a designer toy store and art gallery in Chicago. It's been open for about 16 years now. We have a pretty large location. It's sort of cut into two areas. We have a gallery space on one side, then we have the toy area on the other. Rotofugi is pretty unique in a lot of ways because 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 the 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. The store is different literally 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. We still have the customers, they're just not coming in as much or as often. That's been a little bit of a struggle, but we're hanging in there. We just added PayPal as a payment option. As an in-store option, we just added it mostly because it's touch-free. You can just sort of scan the code, show us your phone that it's been paid, and you're good to go. You don't have to touch anything.
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 serving, and their customer base. Seeing the joy on people's faces when they come in, and they find something that is just perfect for them, or perfect for their loved one, or perfect for their kid. It's one of the best things about working at Rotofugi.
That video is really illustrative of how consumer behavior around shopping has changed amid the pandemic. Jonathan and Darrell, 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, Gabrielle. Hi everybody, I'm Jonathan Auerbach. I lead strategy, growth, and data at PayPal. This includes the development of PayPal's strategy, our mergers and acquisition, and our venture investing. It also includes marketing and data sciences, as well as two fast-growing business units, our China business, where we have a 100% owned subsidiary with a domestic payments license, and a recently created crypto blockchain and digital currencies business unit. I should also say, Gabs, that today I'm sitting in for Mark Britto, our excellent Chief Product Officer, who is unable to make it today. 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. I'm very happy to sit in for Mark today.
Thanks so much, Jonathan. Darrell?
Hey, Gabs. I'm Darrell Esch. 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, Gabrielle. Look, the pandemic has accelerated everything as we know. In particular, it's accelerated the migration of commerce and financial services to digital. 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 and our platforms to scale globally, and these efforts have really paid off. Our software releases last year 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. We really are benefiting from our global scale. Our business has already achieved a scale of 377 million accounts, including close to 30 million merchant accounts. The global reach of our two-sided network is such that when the pandemic caused people to engage more in digital channels globally, for many, we were their best choice. For many, we were actually their most trusted choice. When we introduced more great products in 2020 than we ever have, products like buy now, pay later, or cryptocurrencies, or QR codes, they all achieved scale amazingly fast.
Third, we added roughly 73 million Net New Actives to PayPal in 12 months. We start 2021 with essentially 25% more customers than we started last year. 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 Actives. 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 onto 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 fun to watch, but it's also been an incredible journey for us. Darrell, similarly, 2020 involved pivoting in 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 was 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's 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. A couple of big things that happened, then I'll touch on the pandemic response to the customers as well. A couple of big things that happened in 2021 is we really started a migration from making Venmo a business of scale to making Venmo a business of scale with breadth. We have, for the history of Venmo, really been focused on P2P. 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.
We're giving a lot more opportunities to our customers to engage with Venmo on a day in and day out basis. That's the first thing is moving from business to 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 eight years ago now, Venmo still continued to pride itself on operating like a startup, and that was great in terms of innovating quickly. 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.
Using the common platforms and services that'll allow us to have greater stability, it'll 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, Gabrielle. Our in-person payment strategy is really simply a critical component of our overall strategy to be relevant to our customers every day. COVID-19 accelerated our in-store efforts given the enormous merchant and consumer demand for safe, contactless, in-person payment solutions. 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. Six months following the launch of the SMB solution, we launched our first national retailer, CVS, and we've signed and we're bringing QR codes to many, many more large retailers this year.
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. Choice is really at the center of our proposition. I'm not talking simply about choice of financial instrument, but it's choice of device, choice of platform.
We really believe that this value proposition of choice really positions us well in the market, certainly vis-a-vis competitors whose primary value proposition stops at the choice of how to pay. 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 to find new ways to serve their customers during this period of time. We're incredibly impressed with the traction that we've gotten over the past year in store. We're going to continue to invest heavily and continue to build out our safe, contactless in-store acceptance 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's been synonymous with shared experiences, splitting fares, reimbursing friends for dinner, being in the same place with the same people and sharing that experience. 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 stopped connecting with each other. Darrell, 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.
Yeah. I think in particular, the pandemic taught us and really confirmed the power of the brand for Venmo. We've got three primary brand tenets that have really defined Venmo from the beginning, and which we'll carry forward even in the new products we're developing now. Those real tenets are, one is around community. Venmo is a community nearly 70 million strong, and it's a community of smaller communities of people who know each other well because as you called out, Gabrielle, these are people who are generally doing social experiences with each other. They're using Venmo to pay each other back for a show or for a ride or something. It's community, it's app-powered money. Venmo has always been about pay people from the app. It's social in nature, the feed where we're sharing our experiences, and it's a fun social piece.
Those are the attributes of Venmo. One of the things that really popped in the pandemic is we saw the power of community really shine. We did see actually an initial pullback in March when shelter in place became a norm, and those things like sharing a ride and sharing a pizza and going to a show all ceased to exist. It was very, very quickly replaced with the trend of people helping people inside of the community. You saw customers helping caretakers who were working around the clock and Venmo-ing for groceries and the like. You saw people doing online yoga classes and tipping instructors where studios had been closed down. Then one of my favorites, which goes back to the beginning of Venmo. Venmo initially, the earliest use case was around tipping musicians.
We got to see during the pandemic all of these musicians who frankly are making their money playing gigs on Friday and Saturday nights, and now all of a sudden those venues are closed. They had to innovate, and they started doing streaming shows on Facebook or other social channels. They ultimately used Venmo. Venmo became that pickle jar with the tip board out in front of it. This is how the community came together. We really saw community rise up and be a big proof point during the pandemic. Everything now that we're working on, I think as you look at how it's going to lead our and form our strategy, we are staying true to those tenets of community, app-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 talk about in a little bit.
We definitely will. Speaking of app-powered experiences, Jonathan, let's move to our digital wallet strategy. How are you envisioning the user experience?
Gabs, we're in the process of building super app functionality to allow our customers to both 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 Darrell's been talking about, is one of our digital wallets. 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. Second, we're building a richer rewards hub into PayPal, expanding the ability of our customers to leverage their issuer and their merchant rewards points. Talking of expanding, we're expanding PayPal shopping.
We're building a Honey shopping and coupon engine into our wallet, so consumers will be able to set their product preferences and complete product purchases at some of the best prices available, all within their wallet. Fourth, 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. 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 a buy, hold, and sell use case in the wallet, but increasingly as a funding instrument to fund commerce.
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 PayPal wallet, or as Darrell is going to explain later with the Venmo Credit Card. I'm not going to steal his thunder, but the Venmo Credit Card experience is absolutely fabulous.
Darrell, the Venmo wallet is also diversifying and moving beyond its core P2P value proposition. The monetizable experiences are ramping, and we've indicated that we believe revenue for Venmo will approach $900 million this year. How are you thinking about the evolution of these experiences over time? What will Venmo look like in five years?
Five years is a really long time, for sure, but I'll take it in blocks. In the immediate term, that path to the $900 million of revenue that Dan's talked about on earnings calls, it really is driven by a few key strategies this year. These are all in process at this point. Some are already ramping to consumers and businesses in the first case. 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. On a commerce track, we have three things that are happening. One is we are on the journey with PayPal on QR codes.
Just as PayPal's out there with some of the large named partners like a CVS, Venmo is there as well. That's thing number one. Thing number two is we have now business profiles that we're ramping now. These are already out into the market, and this is going to allow small businesses to have a Venmo profile. 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. 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 or see that I went there.
We think that's going to be really powerful for the small business community. When you think about it from an endorsement perspective, 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 first place or not. 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 the second quarter. The other areas that we're dependent upon right now are 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 crypto capabilities when those come to market here in this first half of the year. Again, the credit card, which is now out, and I'm happy to say is actually right now available to 100% of our customers and imminently. In the days and weeks ahead, 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 million active customers. 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 platforms, and best-in-class practices and compliance expertise and so forth, is going to help us ultimately take Venmo, this great capability, a set of capabilities that expands. We're going to take it outside of the U.S. eventually in that five-year timeline for sure. 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. Darrell touched on crypto as it relates to the Venmo wallet. Jonathan, I'd love to talk a little bit about 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 to 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. If you even just think about the roadmap for the first half of 2020, building on what Darrell was talking about, we're going to see crypto and Venmo 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 U.K. in a number of months as well.
We're still at the early days of our development of our crypto aspirations, but we really do believe that digital currencies, CBDCs, and the collaboration with central banks and regulators will open new ways to exchange value and power global commerce and financial services for entirely new segments of the population. 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. 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 were able to essentially create an experience for 100 million U.S. consumers being able to buy crypto pretty instantaneously in October, and we've seen great demand. Darrell, Venmo's user growth continues to be astounding. Last year, we reached nearly 70 million customers, with growth being more than 30%. Who are Venmo customers today, and how has the demographic shifted over time? Can you tell us just a little bit more about what that means for the lifetime value of these customers?
Yeah, it really has been amazing. It's hard to argue with the success if you look back over the now 11 to 12-year history of Venmo, and you see how this base has just continued to grow, and 30-ish% to a number of 70 million is just amazing still. It's amazing that it keeps growing. The journey of the customer. Venmo originally started with college students as the original adopters and enthusiasts back those 11 or 12 years ago. At 70 million 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 into houses. They're forming families, and they brought a lot of us along with them along the way. That's how 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 to now, and we expect that to keep rolling. Who the customer 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, and they skew female. 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. That's where we think in the immediate term. Again, we're at the beginning of a streak 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 first 11 years collectively.
It's incredibly exciting. 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 another incredibly successful launch in 2020, and I think it really illustrates the power of our two-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.
Well, thanks, Gabrielle. 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. What we think distinguishes PayPal is that we offer our buy now, pay later solution in-wallet for any merchant that already accepts PayPal. 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, we've already seen literally astonishing results.
Nearly 5 million loans have been completed, which represents over $600 million in volume in Q4 alone. 2.5 million unique customers transacted at more than 230,000 merchants. Our reuse rate is already over 40% for U.S. users, that's only in the first three months of operation. Our customers tend to spend more with buy now, pay later. Increasingly, merchants are allowing PayPal to present buy now, pay later offers upstream in the shopping journey. We know that upstream presentment increases conversion, and we have upstream presentment in over 100 large enterprises and well more than 10,000 SMBs. 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 in-store contexts. We're going to expand our product suite to include shorter and longer-term installment products.
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. Darrell, 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?
Yeah, thanks, Gabrielle. We are so proud of this product. It really is a differentiated, one-of-a-kind solution. I think it starts with a simple but powerful thought, and that is, this is a paradigm shift on a credit card. The shift is a lot of credit cards that are out there have an app that comes with them, and you can enroll in the app, and you can use that to do things and power the card. This is a totally different animal where Venmo is an app that has a card. It sounds little maybe, but it's a big, big difference. When Venmo, the core experience of Venmo as 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 differentiating 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 your spend is going by category, and where you are with your balance. 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 have the surprise of where they are. I 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? 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 that's really customized to the customer's spending. 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, but we actually work it towards the customer's 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. It's working in their interest. 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.
When I get to the end of the cycle, I get to see it pop and show up in my Venmo balance. That's one of those reasons what it means to have an app with a card. 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. Split transactions with each other. 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, splitting and sharing is one of the core features of Venmo today. We've taken that, what that happens, that experience 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. When you pay me back, I can even direct it to go straight to the credit card balance to pay down the balance. 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. 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.
What's cool there is there's a great use case probably most of you can relate to. You go out to dinner and you've got maybe four of you at dinner. That dreaded moment comes when the bill shows up at the table. You all look at each other and decide who's going to pay it. You decide, are we going to make the poor waiter or waitress split this thing four ways? Are we going to do it relative to what we ordered or divide by four? You get the story and 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 comes back. You all point your phone at my card, and it takes you right to where you can pay me back and settle up. That is a very unique feature, and it's also very Venmo appropriate. I'm just going to finish with, I said from our strategies, we would honor those core tenets of community, app-powered money, and social. 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 a billion daily users. What are the most meaningful levers to get us there?
Well, 1 billion daily active users is inspiring to all of us at PayPal. 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. 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. Second, we're continuing to globalize and strengthen our global platforms. Our product productivity, our global risk compliance, sales, marketing functionality, the alignment, more importantly, across all of these, is really accelerating our speed of innovation as a company. We're offering more products and better products at scale than we ever have. Third, 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. Fourth, 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.
Fifth, we are much more programmatically driving net new actives. This is not simply a factor of COVID-19. 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 NNAs on a sustainable basis. 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 is going to bring us to 1 billion consumers on the network and 100 million merchants.
Thanks, Jonathan and Darrell. I'll now turn it over to John Rainey for perspective on our financial outlook. First, we want to share a short video with you about our journey to improve the financial wellbeing 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 a mission that is bigger than ourselves if we're not first practicing it inside our company?
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.
One out of every six 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 in the day-to-day zone. That's kind of where you have to be to survive.
You would hear stories about individuals sleeping in their cars that were recently evicted.
Team members 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 earnings just operating on the fringes of financial security.
We should not be hearing those stories. How did we get to this place?
Here's the thing. We pay at market or above market across all of our locations and job descriptions. That's an interesting thing to me because what it's basically saying is for this population, the market is not working. We are 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.
Man, I'm just blown away right now based off what I just heard.
Is this a joke? Who's punking us right now?
Okay, what exactly is going on here? Did you just see that?
I was just in shock, in a good way.
It's going to be a difference of not being able to go to the doctor or being able to go to the doctor.
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.
When you're sitting in a room with employees and then half the room starts crying tears of joy, that feeling that you get as being part of a company that's doing that for people, I'll never forget that feeling.
I think that 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, we'll take care of the shareholder.
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 at 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 lots of 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 and reward.
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 five years. First, I want to talk about where we've come from in the last five years. When we separated from eBay as a small independent company in 2015, we had, by some measures, impressive financial performance. We had 181 million customers on our platform. That year, we generated a little over $9 billion in revenue, and we had just shy of $2 billion 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? Were 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? 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. Over that period of time, we almost tripled the free cash flow generation of our business. Importantly, from a capital allocation perspective, we returned $8.5 billion to shareholders and spent a similar amount of money on going out and acquiring other companies through acquisitions. The last five years has been, I think, good by almost any measure. It's reflected the hard work that we've done as a company. As I sit here today, I'm more excited about the opportunity in front of us and what the next five years bodes for us, and I hope that you'll strap in and be with us for this ride.
Let's talk about our opportunity, the opportunity that we have in front of us. 2020 changed everything. Black swan events tend to result in 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. 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 three to five years. Look at the graph in front of you. It took almost two decades to get to 12% U.S. digital market penetration.
Estimates today are that we will get the next 12% in just the next five 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. Five 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, Xoom, other platforms that have provided more experiences, more capabilities in the wallet for our customers.
When we look at the next five 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 hundreds of millions of customers around the world. 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. We've talked about how excited we are about this product. I'm going to show you a couple pieces why. We launched this in the fourth quarter of last year in just three markets, three markets in the world. When we look at our 2020 results, in those three months, the first three months of the launch of that product, we generated $750 million in payment volume. Do the simple math, $3 billion in annualized payment volume.
We had 3 million unique customers that used this and shopped at 250,000 merchants around the world. With 14,000 of those merchants, they've elected to provide this in 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 in 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 in transactions.
If you look at the U.S., 40%, 40% of customers that have used buy now, pay later, have come back subsequently for two more transactions during that period of time. It's a relatively low-risk experience that we provide, as 80% of 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. 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 for 350 million customers around the world to shop at those merchants. 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 free. We charge the standard take rate that we already charge that merchant. There's no incremental cost, no incremental cost for the ability to have a customer buy now, pay later. At the same time, there's no risk for the merchant. They bear no risk to have that transaction. When you combine those three aspects with the fact that we cast our net over 350 million 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. 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-19 changed that. Customers don't want to handle cash. They don't want to touch a keypad on a point-of-sale device. We provide a value proposition that will enable us to play in this space and compete with anyone. We will increase our ubiquity. 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 into the experience that we want. We want to provide them the experience that they want. 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 seven markets in 2025.
In just those seven markets, if we look at the online space, we have a $2 trillion addressable market, yet that's dwarfed by the offline opportunity. There's a tremendous ability for us to grow and keep our customers engaged through this offline channel. When we look at the experience there, customers that use QR codes have a 19% increase in engagement over our entire platform. Just last year, we had $20 billion of payment volume through the various form factors that we offer to our customers, card, contactless pay, QR code. 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. We've talked 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. 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 is 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.
Just take this graph at the very bottom, and I'll give you an illustrative example. Assume that a customer deposits a $100 paycheck. What we see today is they'll spend about $30-$40 of that through online and offline. They'll spend another $30-$40 through things like bill payments. Then they'll invest $5-$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 are a greater share of wallet that we will get over time. As a company, we've got robust analytics to segment and understand our customers. We bucket them in low, medium, and high engagement. You can see the five metrics here that we look at, recency, frequency, and others, to make that assessment.
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 three 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 PayPal. When we look at Venmo, the difference is even more stark. It's 10x the difference.
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. Let's talk about how all this translates into our medium-term outlook over the next five years. 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 million that we ended 2020 with to 750 million customers, three-quarters of a billion 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 five years, our compounded annual growth in revenue was 18%.
When we look at the next five 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 billion company. 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 billion of incremental revenue. To really compare that, we talked about at our last Investor Day that we expected our revenue growth to average 17%-18% annually.
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. 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 five years, and we'll do it over the next five years. We have demonstrated that we can scale our platform at a low marginal cost, and we can do it while still appropriately investing for growth in our business.
We expect that our earnings per share, as a result of this, will grow 22% over the next five years while still heavily investing in our business. 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. Over the next five years, we expect to generate $40 billion in free cash flow. 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, in 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% - 40% of our free cash flow will be returned to investors through our share buyback program. 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 arrow in our quiver to go out and compete in this space. In closing, if we look at 2025, we expect to have 750 million customers on our platform. We expect to be a company that's generating over $50 billion in revenue. We expect to have free cash flow margins that will allow us to generate $10 billion in free cash flow. It sounds cliché, but I believe that we have a once in a lifetime opportunity in front of us today.
I'm excited about the last five years and what we've done. I'm even more excited about the next five 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&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.
Mommy has something for you. I was working in property management, and a member from my corporate office left town. 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?" That started me going down that road of exploring, is home dog boarding an option? Do people do that? It fueled itself right to where I am now. I run dogs full time out of my home. I offer boarding and daycare services full time from my home for clients who are traveling, have tough work schedules, things of that nature. COVID-19, as a small business owner, was cataclysmic. Very easily said. It's like turn the lights off and you sit in the darkness and panic. I shut the business down completely on March 15th.
I didn't open up again until May 4th. That's a long time. I need help. Applying for a grant, that was the first grant I've ever applied for in the history of me being self-employed, and it was because I was scared. My name is Bridgett Jeffries. I am a recent recipient of the PayPal Empowerment Grant. Someone somewhere said, "There is a Black businesswoman that is doing her best, that is trying, and that is struggling, and we see her, and we see enough value in her product or her service," 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 got a $10,000 hug that said, "It's going to be okay." That's huge. That's just huge. Come on, babies. Let's go outside.
PayPal and I have teamed up to give an essential worker and her son an amazing holiday surprise. I'm going to call her now. Hello.
Hi.
Hey, Kimberly.
Hi, Paul.
How are you?
Good. How are you?
Take that big, deep breath in. Good. I heard you do that big, deep breath. Don't be nervous. You look great. You sound great. I was so excited to meet you. I've heard your story. I've watched your videos of you and Ethan. It's fallen in love. 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. 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 seven, in for close to eight weeks. 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.
I wanted to get you some things to help make your place more recharging and more spa-like so you and Ethan can relax. I got you a new media center to go underneath the TV. I got you guys two new chairs, so that way you guys can sit next to each other in matching chairs and have space.
Amazing.
A new desk for Ethan.
Oh, my God.
With some storage in it as well. I wanted to partner with PayPal to get Ethan something even more special. If Ethan can come out so we all can meet him.
Hey, Ethan. Can you come here?
Ethan, if you look under that pillow 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.
Yeah. We try.
All right, guys. Thank you so much for doing this. Kimberly, thank you for everything that you do for your community. Bye. Bye, Ethan. Bye.
Bye.
Hi, I'm Iman. 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 right now because of coronavirus. Welcome to my workspace. In school, a lot of times we create small algorithms or personal projects, 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 able to use what I create is just so rewarding. The internship is completely virtual this summer. Although I'm working on my own individual projects, I'm also connected with 100 other interns all over the world. I have a mentor who is a recent college graduate. She always assigns me tasks.
She ensures that I have all the help that I need. I'm never bored. I'm never running out of things to do. They always try to challenge me. Not only will I be able to have strengthened technical skills by the end of the summer, I'll also have a network of people that will help me with my career in the future.
At PayPal, we believe that financial health is critical to the resilience of individuals, organizations, and communities impacted by environmental issues such as climate change. We know that environmental degradation disproportionately impacts financially underserved communities. This is why, as a company, we have a responsibility to manage our environmental impact and an opportunity to help advance global sustainability. We take a holistic approach to environmental sustainability by managing our impact on the planet, mobilizing our people to act, and driving environmental innovation in our products and services. Part of living our values is managing our environmental impacts with a focus on mitigating greenhouse gas emissions, managing water consumption and resilience, enhancing waste management practices, and engaging partners across our value chain. Addressing global climate change is our highest environmental priority at PayPal. We're exploring ways to decarbonize our business operations and support an equitable transition to a climate-neutral economy.
Our employees care deeply about the environment. From volunteering on Earth Day, to enhancing waste recycling practices at our offices around the world, to bringing new ideas forward that improve the environmental performance of our business, we mobilize the skills, creativity, and passion of our people to advance our environmental sustainability objectives. We're continually identifying ways to incorporate environmental innovation across our operations and products. We're pursuing ways to enable PayPal's consumers and merchants to better manage their own environmental footprint while improving the economic health and resilience of underserved communities around the world. To learn more about our global environmental sustainability efforts, please see PayPal's latest Global Impact Report.
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Good afternoon. My name is Denise. 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 Schulman and John Rainey.
Welcome back. 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&A portion of our show today. Denise is going to lead us through that. Denise, I'll turn it back over to you for the first questions.
All lines have been placed on mute to prevent any background noise. If you'd like to ask a question, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. We ask that analysts limit themselves to one question and then return to the queue for any additional questions. If you're also tuned into our webcast, please mute the webcast before you ask your question. Thank you. Your first question comes from Colin Sebastian from Baird. Your line is open.
Great. Good morning. 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. Likewise, how much of a contributor should we expect that to be to the 2025 revenue outlook? Thank you.
Hey, Colin. It's Dan. I think I'll start off and maybe John, you can come in. I think Darrell 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. Obviously, crypto comes onto Venmo. As Jonathan and Darrell 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. They're both going to move along a similar path, in their unique ways, but on a similar path.
Obviously, as we look forward, we'll see Venmo move into international markets. As Darrell mentioned, because Venmo is now riding on a lot of the back-office platforms of PayPal, they can expand wherever PayPal is. It's just a matter of market fit, and then making sure we're in language and expanding those capabilities. John, do you want to take the second part?
As Dan said, Venmo is certainly one of the more exciting things that we're talking about in terms of the next five years. We've long been asked questions about when are you going to expand that internationally, and that's in our plans for the next five years. 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. Certainly, there's a large assumption around Net New Actives that come with that. 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. There's a combination of two factors.
One 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, five years ago, to now being this 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 timeline 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. Just want to get a better understanding on the timeline experience so we can track this.
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? 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.
Yeah, I think I'll take the first crack at that.
Sure.
Turn it over to John for anything else. I think we've laid out pretty clearly what the vision is for this super app, and it crosses payments, which we're obviously deep in now, but we're going to expand dramatically. It goes into financial services and then importantly into shopping tool sets and wish lists as well. The reason I think those are all important is because they're all interrelated. They're all features that are necessary if somebody's going to live their digital transactional life on our platform, on our super app, and one feeds into another. 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 Magats was talking about, like this trust and always make sure that your transactions go through can happen. 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. To your point, you don't want to have a cluttered app. You want to have a very clean app.
We've been spending the last year in market research, working with consumers, 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. What we've been talking about, we intend to roll out fully over the next 18 to 24 months. You'll see a large chunk of that happen this year alone. The way that I think about financial services, the way that I think about all of our partnerships that 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. We think that we will with this super app, as you can see from John's presentation at the end, we are looking at basically tripling our TPV over the next five 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. 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 million active accounts on your platform, that's a ton of demand that can be generated for our merchants to tap into.
All this kind of feeds into each other. It's a cumulative effect that builds. 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 that accrues for both us, our customers, and our partners.
I'll just add to that, Dan, that if you think about the last five years, I would characterize the growth that we've had is really increasing our distribution. That's in part because of the partnerships that we had. We've done this in a way that's good for our customers, good for our partners, and good for us. As Dan said, we are a digital distribution channel for those partners. The next five years will be more characterized by increasing the experiences that we provide to our customers. At the same time, we'll do that by partnering, by continuing with the partnerships that we have to enable those experiences. 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.
Hey, 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 or will be driven by organic investment versus partnerships versus acquisitions. I was also curious why, unless I missed it, I don't think India was mentioned, just given the low e-com penetration there. Thank you.
I'm sorry?
Go ahead. Yeah.
Thanks for that question, Jason. We've talked about this quite a number of times. We are really in seven to 10 core markets today. In many parts of the world, our market share is 1%-5%. These geographies of the world offer tremendous opportunity for us. 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 three e-commerce market in the world, holds opportunity for us. Brazil, Mexico, certain countries in Southeast Asia are all target markets for us.
As we think about the net new actives that we're going to be bringing on over the next five years, there are a couple things that give us great confidence in that number. First of all the engagement that we're seeing right now with the new products that we've launched is 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 two times as much. When we look at engagement, we've typically measured that by TPA, transactions per 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?
The more engagement that there is, two things happen from that. First of all, the average revenue per user goes up quite dramatically over the next five 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. You think about that when you're as big as we are, churn matters a ton. You reduce churn by 10, 20 basis points, you could reduce the number of people coming out of the bottom of the funnel by five, 10, 15, 20 million. As our churn starts to reduce and our engagement goes up, our cohorts start to go up as well, our Net New Actives cohorts. 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 million number that we put out there.
Yeah. Jason, perhaps I'll address the other part of your question. First with India. India is still a very important market to us, but our focus going forward is cross-border. 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. India is a big market for us in 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. The 20% revenue growth, the 22% earnings growth, the free cash flow generation, that's all organic.
To the extent that we go out with the maybe $40 billion of free cash flow that we'll have over the next five 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. That's the fortunate thing for a company like ourselves, in that we not only enjoy a very high growth rate, but we also generate a ton of cash. 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 Togut 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 five years, looking at the $40 billion 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? The follow-up question is, if I take your math on capital return, John, 30%-40% through share buyback, you still have $24 billion-$28 billion 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 future.
David, you jammed in a lot in that question. I took some notes. I'll try to address all of it. Generally, we expect our free cash flow margins to remain in the same area that they have been. Again, 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. We've now introduced yet another credit line with buy now, pay later, albeit much less capital intensive than some of the other aspects of our business. 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 billion U.S. consumer credit receivable portfolio and partner with them and do it in a very asset-like way. 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%-40% can be returned to investors. That's a minimum.
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 three years ago and what we just said. Three years ago, we gave revenue guidance of 17%-18%, and about one and a half points of that was due to acquisition. Normalized from an organic perspective, our guidance last time was 16% revenue growth with one and a half 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. We are clearly going to be a consolidator in the industry. We are clearly going to use the strength of our balance sheet to continue to grow.
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. 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. Some will be for us to enter into a geography in a more robust way than building up over time.
Those will all be additive to what we put in front of you. 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. 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. You can expect us to look at that capital that we have, that free cash flow, and deploy it wisely.
Understood.
Sure.
Thanks so much.
Thanks, David.
Your next question comes from Lisa Ellis with MoffettNathanson. Your line is open.
Hi, Dan and John. Thanks for putting this event together. I like the $50 billion. Good stuff. Of course, I can't resist a question on crypto. Would it be possible, I guess, first 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.? Second, articulate a little more specifics on your longer-term aspirations for digital currencies and broader investment services. Are you expanding buy, sell, hold offerings into other asset classes? How are you tracking on launching the commerce offering? I know you're pretty heavily involved also with government-backed digital currencies. Thank you.
Okay. I think I'll try to answer some of those questions, Lisa. That was a multi-part question. All of them really, really good. I think, and I tried to say this in my remarks, that buy, sell, hold is step number one moving into sort of this whole digital currencies arena. Obviously, we're tapping into a tremendous market in which we're seeing demand and growing demand from our customers to have the ability to simply and easily buy cryptocurrencies, hold it, or sell it. As I think Jonathan mentioned, we are seeing just first-time users flock every single day to that. The results that we saw that kind of surprised us to the upside continue to do the same thing to this day. 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 five 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. By the way, it's very expensive from a take rate overall. If you have lower income levels, that take rate can be 6%, 8%, 10%, versus the most affluent who can have take rates of half a percent to 1%. It's skewed in terms, and it basically is very exclusionary. It's not inclusive. It doesn't bring in all of the world's population. You still have 2 billion people outside the financial system.
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. 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 is a natural complement to digital wallets. If you think about how many digital wallets we're going to have over the next two, three, five years, going up to 750 million.
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. 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? In the interim, you've got all the things that are happening with digital forms of currency right now, which are called crypto. They run on distributed ledger technology. We think we can add more and more utility to those cryptocurrencies. Step number one 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.
They can instantaneously access that amount of money they've invested and use it to make a purchase at any of our merchants. That's step one, 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. Our roadmap around cryptocurrency, enhancing the utility of that, not just the buy, sell, hold, but the fundamental utility of cryptocurrencies.
Really thinking about the long term, like what does the new financial system look like and 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? It's quite expansive. We're investing heavily here. This is a once in a multi-decade opportunity where the fundamental rails of the system are going to be redefined, and we have a chance to help shape that.
Very exciting. Thank you.
Our next question comes from Dan with Your line is open.
Hi. Good afternoon. Thank you for taking my questions. Dan, you historically shied away from doing large transformational acquisitions. I know the target of $50 billion is all organic, seems to be some significant upside to that from an M&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, $10 billion? Thank you very much.
Yeah. It's a good question. Why don't we take the first crack at it, Jonathan, 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&A. We clearly see a lot of winds at our back right now and a lot of trends that frankly are falling our way and we need to execute extremely well internally to take advantage of those. We are doing better than we've ever done before on that. 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 three years ago or five years ago. We are a $300 billion+ market cap company.
Acquisitions that might have seemed bigger three years ago. Honestly, our 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? We are very disciplined in that. We always want to have a break even that is no longer than three years. We aspire for two years on that. We put strict filters on all of our acquisitions. 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.
I wouldn't really posit it 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 particular, 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. 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 Sakhrani with KBW. Your line is open.
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 specifically giving you the confidence to provide a five-year outlook? There's a lot there inside of that, I assume. Maybe you could just talk about how even you expect that growth to be over the next five years. Thanks.
Sure. You want me to take that?
Yeah, go ahead.
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 five 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 five years. 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. 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.
We believe that the trends that we're seeing are going to continue into the future. Look, with any outlook, there's some degree of risk, whether it's one quarter out or five years out. Myself and this management team have never had more conviction and more confidence in the plan that we've put out in front of you, and we're looking forward to executing on it.
Yeah, 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 had before. There are more opportunities available to us than we've ever had before. 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 foot forward. 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 6x with the new products and services we're putting out and intend to put out.
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 five years, and they've totaled not just hundreds and hundreds of millions of dollars, but billions plus dollars of investment while expanding our margins, by the way, have been in the foundational capabilities of the company. Having a tech stack that was antiquated to now is a modern tech stack. The difference is night and day when you do that. Having actually now risk function, risk management compliance we've put in multiple hundreds of millions of dollars. That is a huge competitive differentiation for us now. It allows us to deploy product faster than ever before.
When I look at 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, a larger addressable TAM, and frankly, some of the great results we're seeing from just some of the early products we're putting out. We've put out, it's like the tip of the iceberg right now of what we've put out. The vast majority of what we plan to do is ahead of us. I think we have a strong degree of conviction in what we've put out. That doesn't mean that things can't go wrong one way or another. 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. Certainly, we operate in a dynamic marketplace, and we're subject to the trends and the vagaries of that marketplace. 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 toes investing into this and taking this by the horns to help shape this outcome over the next five years.
I'd say the whole team feels that way, not just our senior team, but throughout the company.
Yeah.
Thanks, guys.
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. Just trying to think about the pieces there, John, maybe the eBay headwind obviously is going to be going away. Thinking about new products, increase in 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. 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. Bryan, certainly, there are headwinds and tailwinds in our guidance. You noted eBay. I think it's important to understand that we are so much more diversified as a platform than we were five years ago, and that inures to our benefit as we look forward. If you decompose the growth over the next couple of years or next five years, what 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. 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. Those actives will contribute less relative to the existing PayPal base five years from now.
I would, to use rough math, say a third of that growth comes from the customer acquisition. 2/3 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 five years, that'll contribute about two-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 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 five years, the scalability of our business, the ability to grow at a low marginal cost, that enables our margins to go up. They will go up over time. How much happens one year versus the next will be heavily dependent upon the level of investment in that particular year. We think that this is a plan that balances good margin expansion while investing into this opportunity to be ready for the five years that follow this plan.
Got it. Thank you much.
Maybe if I can just add on to that. I think one great point is what's happening with eBay. Like eBay, for the last four 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. 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. That large part of our base that is much slower growing, we now have other marketplaces that are replacing that are growing anywhere from seven to 15 x 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. I think eBay is a depressant to our growth this year. As we start to lap over that, it's an accelerant going forward. All that's built into our plans, and it's why we feel so comfortable about the revenue growth targets. 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 two more questions. Operator?
Your next question comes from George Mihalos with Cowen. The line is open.
Hey, thanks. Thanks for squeezing me in, guys, and congrats on putting this all together. Just had a partnership or maybe more aptly a frenemy question. Five 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 three to five 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 encroach 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 three to five years. Why is that? One, we're going to be generating a ton of value and volume for our partners. When I look at the amount of volume that we drive, being probably the largest digital distribution channel for many of our partners, that's just going to accelerate going forward. On top of that, we're going to be partnering with some or several of them as we go more deeply into financial services. Not only are we going to continue to drive the growth that we have for our partners, but with many of them, we'll go deeper into partnerships. I think American Express is a good example of that.
We started off with one or two things. 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. 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 three to five years. We're excited about the next three to five years. I know they're excited about the potential that we can do together. I think clearly there are always some places where you bump into each other. 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.
Your last question comes from Darrin Peller with Wolfe Research. Your line is open.
Hey, thanks, guys. Nice job. When you're calling for doubling of users, clearly a big number, 15% CAGR versus the last five 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 five years clearly just underscores expectations for material increases in engagement per user from, let's call it roughly 40x-50 x per year today. 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, can you give us a sense of what you see the PayPal customer doing? What's the attach rate? How many products and offerings do you actually see these customers using down the road? Thanks again, guys. Nice job today.
I'll start. As I noted earlier, Darrin, and thank you for your question, a big part of the growth comes from increases in engagement from the experiences that we're offering. I think fundamental to our outlook over the next five 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. 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 will continue to add into the future are going to make that digital wallet as good as anyone that's out there.
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. That's what underpins the assumptions that we have in this plan.
Yeah, 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 of people who come in later take some time for their usage to come up. When we look at the base of our customers, we're so excited about the amount of usage that they could do. John mentioned, when somebody uses us in store, they have 50 more incremental transactions on top of their online transactions. 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 roadmap behind that in terms of things that we want to go do.
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 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. We try to be realistic about what we want to put out in front of you. Certainly, you know what our aspirations are.
Our aspirations are 1 billion users on the platform using it every single day. We don't get there in these next five years, but that is our aspiration, and that is what we're going to be building towards.
Thanks, guys.
Thanks, Darrin.
One more.
No, let's wrap it up.
Okay.
Your next.
Do we have one more question in line? No? Okay. 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 this. 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. I really want to, again, thank you for joining us in our Investor Day. I hope that all of you stay well, stay safe. I hope that everybody gets vaccinated shortly. Until then, we look forward to staying in touch. Again, thank you for your time. Bye-bye.
Thank you.
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 and 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.