Okay, great. So I think we're basically ready to start. Thanks for coming. Thanks for leaving your guests during earnings season. We've never done this before.
I told Don and Dan when I pitched it, it was going to be casual and intimate. I'm not sure either of those things. So we'll see if they let me do it again. After our Investor Day, we got feedback that people really would have preferred an open Q and A session and that, that would have been kind of an effective use of time. So we thought this year, in lieu of doing a full Analyst Day, we would just do a Q and A session.
We think it's particularly timely after earnings last week. Also had a few announcements that are interesting and exciting. So it's a good time to talk to all of you. Just a little bit in terms of logistics, we'll do Q and A for about 45 minutes, and then we'll have a cocktail hour or so. Our innovation showcase, which is over here on your left is open, staffed.
And so if you want to walk around and do some of our experiences, that's available. We'll have mic runners. So Lucinda on our team and Cindy and our team are going to be doing mic running up and down these stairs. So raise your hand, we'll get a mic to you. And I think that's about it.
I'm going to read some forward looking statements, so that's the important part. This presentation contains forward looking statements relating to, among other things, the future results of operations, financial condition, expectations and plans of PayPal Holdings, Inc. And its consolidated subsidiaries that reflect PayPal's current projections and forecasts. Our actual results could differ materially from those predicted or implied by forward looking statements. All information in this presentation is as of today, April 30, 2019.
You should not place undue reliance on the forward looking statements in this presentation. PayPal assumes no obligation to update such forward looking statements. With that, I'm going to turn it over to Dan.
Great. Can everyone hear me okay? Yes. Great. So we just had earnings last week, so we won't go over kind of numbers or anything.
But since our earnings, we actually had 3, I think, meaningful developments that have occurred, 2 of them today. So see if any of those are surprises to anybody and one of them on Friday. Obviously, on Friday, we made the announcement of the investment and commercial partnership with Uber. I'll let you ask questions about that. There's not a lot more we can say than what we did say, because Uber is in its quiet period right now.
But suffice to say, we are really thrilled with the relationship that we have with Uber and with the extent of the commercial partnership that we will have with them. It will be global, it will entail their future endeavors around their thoughts around payments. As you may have seen from Dara, Uber is thinking of themselves as much more than just cars and hailing different transportation, but being much more of a marketplace going forward. The 2 announcements that happened today, one is CMA out of the UK announced the provisional full clearance of our acquisition of Izetto that in the UK was being examined. They came out with a preliminary assessment that is pro competitive.
We're really pleased, quite pleased with that outcome. They've got another month or 2 before they put out their final announcement, but this provisional clearance was obviously a piece of really welcome news for us. And we went into Phase 2 with the CMA knowing that really we just needed more time to explain what point of sale competition looked like there and what omni channel commerce was really evolving towards. So that was a good outcome. And then, just announced later on today, which maybe most of you have seen, but maybe some of you haven't, is that Facebook announced Facebook Marketplaces that is the sort of we had announced a partnership where we were powering Instagram Shopping.
Today, Facebook announced Facebook Marketplaces, which is another huge marketplace out there in which PayPal will be powering the infrastructure of PayPal marketplaces as well as being obviously a branded market there. I'd say significant expansion of our relationship with Facebook. Many of you had predicted some of that, but we are clearly becoming very close infrastructure payments providers to Facebook across all of their various applications. So I think with that, so we have enough time, I'll end there and maybe we can just open let me maybe introduce a couple of people who are here, who are members of the senior leadership team of PayPal. Jonathan Arbuck, right there, he hates me introducing him, but I've been doing anyway.
So I'll probably mangle Jonathan's title, because I don't really pay attention to those. But Jonathan basically runs all of our strategy, works, runs on partnerships, our data elements and all of our sort of M and A and Venture investing. And then Aaron Krezmer over here. Aaron joined us several years ago from American Express. Aaron runs all of our enterprise risk and compliance for the company.
That has been a significant area of investment and a significant area, I think now, competitive advantage for us. Aaron has done an amazing job in really taking that function and turning it really into world class from my perspective or closing in on that. Never done on that front, but a tremendous amount of work there. So those 2 are part of the senior leadership team. We have other members of the PayPal team here, and I may direct questions to you depending on what the questions are.
So be ready, be ready, Franz, be ready. Okay. So anything you have in mind? How do you want to do this? Do you want to get microphones to people because I guess we're
on that?
Let's do mics because this is web test.
Brad Berning from Craig Hallum. Thanks a lot for putting this together today. More broadly, conceptually and strategically in the marketplace space since you announced Uber and you have other relationships and you're now getting into the infrastructure with Facebook. Maybe you can talk a little bit more broadly rather than as a payment brand and a payment settlement mechanism. What is it about what you're offering?
Why are they choosing you? How do you think about post eBay? What does this tell us about the future direction of the company from a marketplace perspective of the different streams or revenues that you want to pursue?
Yes. So I think for the last for quite some time now, we've talked about being a platform as opposed to just a checkout button. I think it's a much more extensive value proposition. And frankly, we thought just checkout alone was interesting, but we had a big share of that. And it was going to commoditize over time.
And really being a platform player that could enable merchants and marketplaces to drive incremental sales, because that's really what they're trying to go do. And for us to be able to provide really the underlying suite of capabilities. And I'll talk about some of those in a second, to basically be an operating system to make their move into digital commerce. And digital commerce could be in context selling on a marketplace, it could be omni channel selling across different physical and online virtual worlds, but that we wanted to provide a suite of those services. And we've put together quite a comprehensive and very powerful set of capabilities right now.
And that's probably a little unappreciated. We don't talk about it a lot, but even just our tokenization capabilities, like Facebook avails themselves of our tokenization capabilities, part of what we're selling with them in this infrastructure, our risk management tools that they have inventory and management type of capabilities, returns functionality, invoicing capabilities. And so it goes well beyond this checkout. And if you think about, we've said this a couple of times, our top 20 marketplace relationships, ex eBay, ex eBay. That's over $90,000,000,000 of TPV growing at 39% right now.
You should expect to see us doing more and more of that. And our capabilities are becoming more and more sophisticated. That difference between 5 years ago and today is night and day difference. We were a monolithic C plus plus platform. We have to do maybe 10, 15, 20 releases a year off of that, Whereas today, we do tens of thousands of releases.
And the power of that platform is evident in the relationship we have with Uber, Airbnb, I mean, it's the major mobile applications and emerging applications and to partner with us. Thanks for hosting this event. David Togut with Evercore ISI. I'd like to ask a question about the B2B market. Are there ways that you can leverage your unique two sided payment network, especially your relationship with 22,000,000 merchants to really go after either the SME B2B market or the enterprise class market?
It seems like a lot of focus is starting to turn to B2B and you have some unique assets. Yes. We think of our addressable market when we talk about this $100,000,000,000,000 market, that of course is not all digital right now is digitizing. It includes B2B for sure in that. We have talked about a couple of different verticals that we're attacking right now.
Bill payment being one vertical that we're attacking B2B will be another vertical that we attack. We do have quite a number of capabilities already in that. We are already serving a lot of B2B and movement of money between businesses, but I feel it's a big opportunity for us. We're developing we've bought some things that help us in that already. We're developing capabilities and we could acquire capabilities there as well.
We've looked at companies on the B2B space.
Yes. The Hyperwallet acquisition gives us payout capabilities, which kind of fit into the area that you're referring to. It's something that's on our roadmap and we're focused
on. Hey, guys. Jason Kupferberg up here.
Hi. Hey, Jason.
Bank of America. Thanks for doing this. So it's been almost a year since the last panel has said. The other
information you want to say.
I'm sorry?
Any other information you want
to call? I like the hats you guys gave in the bag. I was going to put it on, but I figured I'd wait till the reception. Anyway, so it's been almost a year since the Analyst Day. You gave us some new medium term guidance at that point in time, which was obviously well received.
And now we're almost a year later. Maybe just to reflect on that, your confidence level now versus then? I mean, I guess if I just think about the EPS, for example, you talked about a 20% CAGR. I think you did 27% in the 1st year of that guide and you're tracking at least 20% this year. So we just love to get your latest thoughts on those dynamics.
Thanks.
Sure. So the guidance that we laid out was over what we would describe as
the medium term, call it
a 3 to 5 year period. And you're right, we said that over that period, we expect to grow earnings 20%. And it's interesting, Jason, because I think there was a lot there were a lot of questions after this last earnings call around our ability to grow earnings at 20% and expand margins. And I think in part because of the composition of our earnings this last quarter with a fairly material amount coming from some below the line items. But our conviction around those numbers that we put out is, I think it's even stronger today as we announce things like the partnership with Facebook.
And remember, we have talked for a long period of time about our ability to go part some of the largest and fastest growing marketplaces. And that was just a statement until you hear of something like today. But there are other conversations going on too with other platforms, other marketplaces. And so our guidance is somewhat dependent upon the achievement of them going out and doing other partnerships. But these are all things that we've got clear line of sight into, whether it's that or things like the monetization of Venmo.
David, we were talking about this at the beginning of the discussion. These there's such good data points out there right now that give us a lot of conviction about our ability to continue to grow earnings. And margin expansion is not something that is it doesn't just happen, but given the scalability of our platform and the low marginal cost at which we're growing. So last year, we grew our other operating expenses, dollars 0.13 for every incremental dollar of bread. That's the right model for us to continue to grow margins over this time period.
The real choice that we have is how much to reinvest back into the business. And we feel like we're threading that needle to continue to invest for growth and Venmo is a great example, while also seeing margin expansion. In the last quarter, if you took out the acquisitions that we acquired last year, we would have grown our margins by over 100 basis points. So we feel really good about the guidance that we've been asking.
I'll just say just philosophically, We think long and hard before we put out any of that guidance. So our conviction should be stronger just by definition a year later on guidance that we put out a year ago. So just philosophically speaking, that should be the case. And obviously, what we've been talking about and the partnerships you're talking about give us stronger conviction. But just from a philosophical perspective, a year later, you should expect that?
Hi, up here. Yes. Way in the back. Yes. Joe Foresi from Cantor.
I had a question about banking opportunities in the sense of how far you might go down that path into providing more banking services and how you think about maybe an Alipay type model where there's a mobile wallet attached to what you're doing on a daily basis. So how far would you go in banking? We see Square sort of flirting with a banking charter and the Ally Pay model versus yours? Thanks.
I'll start and then Jud can come in on that. We have no desire to be a bank. And in fact, we have very close relationships with the financial institutions around the world right now. And my view is we can be much more in the middle of how consumers manage and move their money. How do I say this in a way that doesn't our aspirations for PayPal is for it to be an app that people use on a very regular basis.
I mean, that is our aspirations for it. We've more than doubled the usage in the last 3 or 4 years that people use it, but it's nowhere close to what our aspiration is. If you think about our partnership with Uber, Uber is an everyday type of app. People use it sometimes multiple times a day. Those type of usage patterns and use cases are things that we're very interested in.
It isn't that we don't want to add more and more capabilities and services, but we think there's real powerful ways of doing that within the financial system ecosystem, working with them to take best of breed of their capabilities and putting it onto our platform. I think Rewards Point is a really good example of that. A lot of people ask us, are we going to put out our own rewards capabilities? And we said, look, already you get to use your rewards points if you pay for a purchase with your credit card on the PayPal platform. But we've gone now one step further than that.
We've basically enabled our platform to be the repository of all rewards points and somebody can take those rewards points and pay with those rewards points at 22,000,000 merchants. And the FIs are providing those rewards points on our platform. And I think the best sort of maybe savings type of thing or retirement or investment vehicles, we can do the same sort of things with the FI community as opposed to developing it ourselves. And so we think we can be a great platform in the user interface that enables people to manage and move their money. We have a very trusted brand in that space.
We want to see that interface, but the underlying capabilities, some will develop, some will acquire and some will partner.
Just to add that as much as we believe and hear from our merchant base that there's a lot of utility in having a platform. We provide things like risk as a service, payouts and things like that. Consumers, generally speaking, have shown to opt for point solutions. You may have an iPhone, but you use Google Maps. And the approach that we're taking by being an open platform is just that to allow consumers to use us however they want and allows them to put whatever bank or whatever partners that they have into our wallet, which provides a lot more utility to them as well.
So we don't need to force our consumer base into a user experience or a funding mechanism like we have done in the past. The best approach for us and candidly the larger addressable market for us is by partnering with the rest of the ecosystem.
I'll just add one other thing. It'd be a mistake to kind of think about consumer as one segment. We think of it as many different segments. You have an affluent segment. You have a millennial segment.
You have an underserved segment, you have an un banked segment. In each of those segments, we'll put together different value propositions and different ways of bundling things together to adjust those pain points of those segments. Some of them may be more of our own capabilities, some may be more in partnership depending on what segment we're trying to target.
Hey guys, it's Darren Peller from Wolfe. Just look, there's 2 parts to this question that relate to the net new active numbers, which have been very strong. One of them is on the under bank side and one of them is on the international side. It seems the Uber deal as an example is one where I know you could potentially help them get to some of those under bank drivers with a payment system. That's I think they've been talking a bit about that.
That's probably one example. I'd be curious to hear how else you could really reach into the under bank that you've talked a lot about penetrating as a bigger addressable market. And then on the international side, we've talked about MELI. India had some traction. I mean, can you just give us other examples of how we're going to see other big international market opportunities to expand?
Yes. Let me start. First of all, we really haven't had our full product set out in the vast majority of the world, really because everything we did was bespoke 5 years ago. So you'd start out in the U. S.
And then maybe you'd that would be the full suite of services and then you would export maybe to the UK a couple of years later and then to Canada and then maybe Australia and then eventually we get to maybe some other countries. When we redid the platform, we did it on a global basis, so that we can really start to pull out or put out into multiple countries at one time, our full suite of services. So P2P, we're just doing a major rollout into every European market on that. That is going to open up those markets. P2P is a huge driver of net new actives for us.
Capabilities, just like e KYC, which is so important in Japan, we hadn't had e KYC capability that unlocks the Japanese market for us. Basically assuring that we could tape our network and distribute it more efficiently worldwide, so that you wouldn't have latency types of things in India, where everything used to have to bounce back to the U. S. Now we've got nodes across the world. And so the platform extendibility that we've had right now, again, we talk a lot about how we've got bigger on platform, but we don't necessarily always talk about how that extends into just how much more of the market we can address as a result of it and how that opens that up.
And so I think we've got between partnerships that we have and between capabilities that we're rolling out around the world. I think international is a quite a large opportunity for us. On the under bank, I think our just structure of our wallet is going to be very appealing to the underbanked. We can manage and move money at a much lower cost structure than traditional players. If you just think about remittances, remittances today versus the traditional remittance players, If you use our Zoom functionality and Zoom is going to be expanding quite significantly on a send basis than just U.
S. And Canada. We can we are basically at least 50% less than traditional methods of sending international remittances. That enables you to penetrate a large part of the underbanked market in countries overseas. We've got partnerships with Walmart right now.
We're thinking about a lot of partnerships with retailers where you can start to put cash into a cashier and have that cash go automatically onto our platform. And so we're really starting to try to figure out how do we take cash out of the system and put it into electronic platform so that the unbanked can be part of the digital economy. There are a lot of ways to go and do this. And really, I would say probably in the second ending of that right now. Anything you'd add on that?
Craig? Craig Moore with Autonomous. Thanks. Hello, Craig. Good to see you guys.
Good to see you too. Wanted to ask about, I said, I know that the deal is still in regulatory review, so I'm not going to ask you for specifics on the company, but you're buying a platform driven toward entrepreneurs, small merchants. What does how do you position that or how would you position a platform on PayPal like that globally when you have some stiff competition in the likes of say Square and PagSeguro in certain markets. So how do you use the PayPal ecom presence and growing omni channel presence to appeal to the micro merchant and small merchant community?
Yes. Thanks. So first of all, we looked really carefully, obviously, around everything every company that was looking at omni channel solutions. From Square to IZON, there are a number of others out there as well. And several was the only platform that we saw that was truly international.
And what I mean by international is multiple markets. So 12 different markets, no concentration in a particular market, really other competitors or players in that space really are in one market per se, that's really where they are. And we can't wait to bring Izetto into more markets as well. But really, omni channel is a requirement now for small merchants. We have 22,000,000 of them.
If you look at the number of people that are using any of the competitors to IZettle, even IZettle's actual customer numbers that they talked about before they were going to IPO. Our ability to cross sell into that is enormous. And really we had to put most of those activities on hold until we went through the CMA review. And so the CMA provisional clearance is a big step to enabling us to be able to really provide 2 small and micro merchants a full omnichannel solution through our sales force and through our 22,000,000 merchants and all the go to market channels we have. And then to be able to invest more in that and put it into more markets as well.
So I think, you'd say if you haven't used it before, it's a beautiful experience. It's a fantastic product. The onboarding is perhaps the best onboarding experience I've seen for them. They offer multiple capabilities as well, inventory management, a number of things that you might not think about for a point of sale solution. It's a full platform and suite of services.
Putting that onto our platform, I think will significantly accelerate our ability to offer a full service solution to small businesses.
I would add, Craig. Dan mentioned this, but it's a point worth emphasizing. We often talk about the sort of the ever changing regulatory environment that we face as a company and how if you're good at that, it can be a competitive advantage. And I think we've demonstrated that we've used it as such. Well, the iZettle acquisition really fits into that as well.
The fact that this is a scalable platform across multiple markets, they're not insignificant asset that they have and something that's very important to us as we want to be a global player omni channel eventually. So this is the asset that we wanted.
Hey guys, it's George Mihalos from Cowen. Sorry, thanks for doing this. Two strategic questions, if I may. Just a follow-up on the last one. When you think of Omnichannel and the iZettle acquisition, do you think you'll have to make more of a push to either build or acquire more vertical specific point of sale or vertical specific solutions?
And then secondly, as it relates to Uber, to the extent you have an entity like that where they have a wallet and they may want to use that as 3rd party wallet, is that more of an opportunity or a threat to PayPal?
We think the relationship with Uber is clearly a positive for us, clearly a positive. Remember, we want to be the underlying platform for digital payments. That's what we want to be. And just like we accept Apple Pay and Android Pay and any other pay that you might have to do Braintree, we want to I mean, if we want to be the solutions provider to marketplaces and to merchants, they're not just going to accept PayPal, right? No merchant is going to 100% just accept us.
So we want to be the overall solutions provider. And the relationship that we have with Uber, both the extension of that extension we have a very close relationship today with them. But the extension of that globally and the extension of their future payments initiatives, which we're quite familiar with and we have very close relationship there all the way up and down that company is a real excitement for us. So we think that it's a great opportunity. There will be some verticals where we'll do some specific capabilities, but we may do a lot of partnering on that front.
I think what we're doing with Paymentus is a good example of that. We've done a couple of things internally to make sure that they could connect into all of our underlying platform capabilities. But we're going to use their capabilities to go into Bill Pay And others again, neither Uber nor Paymentus, nor MELI, none of those are exclusive in any way whatsoever. We want to partner with everybody out there, just maybe some players that we'll have a more extensive partnership with.
Hi. Harshita with Bernstein. Can you talk about your M and A strategy in emerging markets? So it's encouraging to see partnerships like the MELI partnership, Uber partnership. And in many emerging countries such as India, you appear to have a very good business in cross border, but domestic payments appear to be in early innings.
So can you talk about your strategy to gain domestic traction in these countries? And is that something you can do organically?
I think we've talked about from an acquisition perspective that one of the areas that we would look at tuck in acquisitions, where it would either take us too long a time to develop internally or we've got other things on the roadmap that we want to develop internally, but we still need that capability. There we would acquire. The other one is geographic areas. We would look at Nelly as a good example of that where we decided to do an investment as opposed to a full acquisition and a commercial partnership. But we're not against acquisitions in developing markets, if we think it would help jumpstart us.
India, we're getting great traction right away and that's all organic. And as I mentioned before, part of the problem that we had in developing margins is we did not have a full product suite. And if you're just doing like on checkout and that's it, it's difficult to get full traction. India, we've got a pretty full product suite right now. We're getting great traction on it.
But like Brazil, our partnership with Itau right now is really taking off as well. So like there are different models in different places. And as you well know, the interesting thing about payments is that each market is different. Brazil is very different in that it's got 3 or 4 banks that really that are the majority of that market. Germany is different in that it's not really it's more of a banking than a credit type of market.
U. S. Is very different, China is very different, India is very different. And so we look at each of those markets, make decisions, we want to go organic, do we want to do a partnership strategy or should we acquire to get scale?
I think that's one of the unique differentiators of PayPal and that we have over 20,000 people that wake up each day and they're just focused on payments. So there's a lot that we can do organically. For some, maybe a newer startup company, that's the only thing perhaps that they can do. Also because we've got 22,000,000 merchants across the world and several 100,000,000 consumers, we have people want to partner with us. We bring up scale to bear.
And then lastly, there are very few companies that have our growth profile that also have our free cash flow generation. So that gives us the ability to go out and acquire growth inorganically if that's the faster path to getting a foothold in some area where we have white spaces across the globe. And so all of those things point towards growth, but we have a lot of leverage, whether it's organic development, partnering with others, we're going out and acquiring other companies. Just to point out, some of
the capabilities we're developing is going to be incredibly important for that international development, like smart buttons. This smart buttons, for instance, we're doing this partnership with Nelly right now. So Nelly, they use Cardapago to power their payments. But you don't want to have to necessarily educate all of their users that now when you see a PayPal button, you can click on PayPal and you can use your Certafago wallet to make that transaction. What we want to do is when somebody comes to that purchase site, render ink the CardoFago there so that they can automatically purchase and then we get the same big rates, all that kind of thing that we're talking about before.
But we don't have to educate or reeducate consumers who are using different wallets to be able to shop at our 22,000,000 merchants that we have and growing. So this dynamic button capability, which is now being deployed across all of our base, enables us to render a Venmo dynamic Venmo buttons, alternative payment methodologies allows us to partner with players around the world to tie into our $22,000,000 merchant base, huge advantage that we have having that 2 sided platform and now much more dynamic capabilities as opposed to static capabilities.
Steve, do you have a question? Sure.
As you do more of these marketplace type deals, bring more marketplace volume onto the system, expand peer to peer in Europe where you have more two way flows of funds within the ecosystem. What kind of impact do you think it has or how are you able to leverage that when it comes to your transactional costs and cost of funding? Does it start to look more organic or more within the platform similar to the benefits you got from the eBay relationship?
Yes. Our transaction costs are specifically transaction expense. Over the medium term, we don't expect to change a lot from where it is today. So we've hovered in that 95 to 100 basis points for the last several quarters, in fact, 96 basis points specifically for the last several quarters. And there's a mix of things happening there.
So you see with new customers, we make it very easy for them to bolt whatever is the most convenient instrument, the credit or debit card. But over time, as they're moving cash in and out of the wallet, maybe they augment that with ACH or if they start with the credit card, maybe they use a debit card. But that initial customer that comes to us often comes with a higher average transaction expense. I think what kind of you got areas of growth like Venmo and that demographic, which is sort of predisposed towards using debit or bank. And as that's growing in the last quarter 73% year on year, those have been sort of naturally offsetting.
So there may be some inflation in the wallet over time, but certainly not far from what we've seen historically. And so we expect that to stay pretty constant. On the transaction loss side, that's one where I think we could see inflation, but there's also opportunity as well. The inflation would come through offering taking the value proposition around the protections that we provide and expanding that beyond what we do today. But that could be offset by the very ways that we manage risk.
So today, when we manage risk, it's very transactional, right. We look at View Heath has completed or went through a purchase with a certain purchase and we look at everything sort of in isolation right there, taking into account a lot of the things, but we know your history. We can take perspective that can actually help bring this cost down over time as well.
I think just on take rate in general, if I go to a different way, I think as Venmo continues to accelerate its monetization, P2P has been the biggest driver of take rate decline for us. And a
lot of
that has been Venmo. Now as Venmo starts to scale and that loss rate starts to taper and move towards profitability, that's going to clearly help on piece of it. Hi. Over here on the West side. Ramsey El Assal from Barclays.
I wanted to ask about Venmo monetization and if you could give us any incremental color on the mix of contributing pieces there, Instant Card and Pay with Venmo. I think Pay with Venmo, we all feel is kind of the big one that should, at the end of the day, power the most sustainable kind of growth. And I was just curious year to date what can you share with us about that mix? Well, in the last 3 days, not that much has changed since we talked about that. But let me just say this and then I'll let John talk about them.
I think obviously Venmo monetization is a big focus that we have. And when we talk about Venmo monetization, it's really about adding incremental services to the Venmo user to give them more functionality. Again, that's really important for me to say all the time because there isn't a single Venmo monetization event that occurs when a customer says themselves, I'm monetizing on Venmo right now. What they say is, I'm buying something, I'm taking money off faster, I'm doing whatever it is, more capabilities to them. And we are not only seeing the existing capabilities and the shift isn't all that much different than what we talked about originally, where half of it is instant transfer and the rest are the other things that are happening.
But those are accelerating and we're adding more services on top of that. So I feel really good and we have for quite some time, but it's nice to see the extent of the acceleration, which is why we gave the 2 data points in a row in terms of $200,000,000 annualized run rate coming out of last year, dollars 300,000,000 coming out of Q1 just to give a sense of the acceleration of that. But the only thing that I would take issue with on your point is, I think that monetization is going to be a great time to grow, but I actually think other things that we're doing will be as large, not even larger than Venmo monetization. These things that we're doing with marketplaces right now, these things we're doing in other verticals, incremental services we're putting out, international expansion, These are a number of growth drivers that may not be as evident as a Bebo monetization is and obviously that's an important thing for us and but they're all clearly growth drivers in my mind, not just Venmo monetization.
I would just add, Ramzi, that as you're aware, there's actually 4 ways that we monetize Venmo. So we can we've got the Venmo card, we've got pay with Venmo and then the instant transfer. And the instant transfer has been the bulk of the opportunity thus far simply because the use case thus far is Venmo P2P, right. That will change over time as we expand pay with Bimbo and use more of a merchant take rate model. We do as we announced sort of the number of customers and the amount of volume around Venmo, we do have a 4th way, which we do earn a slight amount of interest on the balances that are held.
It was less material previously, while it was smaller, but it's worth mentioning. But our focus very clearly is on growth. Just that is what we want to do. This is a great opportunity for us and we feel like we've got the luxury because of some of the other parts of the business that are performing very well profitably to invest in this business to make sure that we maximize the opportunity that it can be. The reason that we put out some
of the metrics that we
have is because I think there was some skepticism maybe about the ability to monetize this. And we feel like with data points like 40,000,000 customers that are on the Midland platform, in fact, we've got a run rate of revenue that is $300,000,000 a year. They're good signposts about our adulting through this as we scale it. Now that said, we don't want to get in the habit of putting out these metrics every single quarter. We're doing this because we're early on in the launch and we want to provide the confidence to the investor community that we have the ability to do this.
John, Dan, it's Jamie over on the side. Jamie from Susquehanna. So I appreciate that the narrative has moved over to the marketplaces. It's a great direction for the company. I just wanted to ask about large merchant gaps though, which was kind of the conversation a while back.
What are those conversations like now? You obviously had a lot of success standing there. Former shop you shared with us the Walmart progress. So what are the gaps in the large merchants if there are and like what does that dialogue look like at this point?
We have a pretty good relationship with almost all the large merchants. I mean, we're one of the few real scale platform players that can help the largest of merchants in their view of what their existential threats are. And those are predominantly around Amazon and other large players. We obviously can drive a tremendous amount of traffic to them. We have we talk about OneTouch seller sign up that we're doing to send merchants to marketplaces that we're doing that with Walmart right now where we can qualify merchants and then those merchants can sign up into the Walmart marketplace without having to enter in all of their information.
It's basically 1 touch seller sign up. We can do the same thing with consumers into merchant apps. So we can do a one touch consumer sign up into a merchant app. And if you look at what Chipotle was trying to do with us and other large merchants trying to do, they're trying to use this incredibly large consumer base that we've developed right now to really populate their apps and their apps. Many of them are driven by us.
Many of them are now much more prominently putting our mark in place as well because of the base of consumers we have. And many of them now are going to start taking incremental capabilities. One of the reasons we bought Simility is not one of our acquisitions we talk about a lot. But Simility, we thought was a best in class sort of front end and also back end sort of risk platform, but one that we could take those capabilities and offer them out to large enterprises, where large enterprises can basically look at things in a sort of a green, yellow, red banner for transactions. So we know where a transaction is bad.
We know it's a bad I'm not going to say how we know it's a bad fraud transaction because bad guys are listening to this call right now. But there are loads and loads of ways where we know something is a bad transaction. And it's red in our system and we will block that from occurring. There are also tons that we know are green, right? But then there's always that yellow area.
And what we want to basically say to a merchant is, look, we these are yellow to us and we might block them. But for you, you might know that customer or want to accept that transaction. If you take the loss associated with that, we'll just let that come through and we'll give them dials to be able to look at how do they want to do their acceptance of transactions with more data and information to set their dial the way they want to. It's a very sophisticated way of looking at risk management at a transaction and customer level, but those are the capabilities we're now fully capable of doing with the largest merchants out there. It's just one example.
Sanjay Sakhrani from KBW. I was hoping you could share with us the philosophy around all these investments you're making. Is it will you make these investments if you think there's a commercial opportunity there? Or should we think about you making these commercial these investments even for the sake of upside related to the specific company deal that you have? And how large could that portfolio become?
And where is it coming from? Is it coming from proceeds that would have been used for M and A or others? Yes.
So we endeavor just making investment for a financial reason on it. That's not what we do with our money. You guys are in that business. We're not we're in a business of driving growth for PayPal and for the platform. And so any investment we make, whether it be in our venture portfolio and we have a quite an extensive venture portfolio that Jonathan and his team manage.
It's either for market sensing mechanisms. We always have Board at least a Board observer, right, if not Board feet on those typically a commercial arrangement and we are constantly sensing in the market. Some of the larger ones that we've done will be with full multi year extensive commercial relationships that allow us either a Board observer or a Board seat on that to assure that the relationship is as close as it can be. And those dollars come out of that acquisition pool that we have. So $1,000,000,000 to $3,000,000,000 $1,000,000,000 to $3,000,000,000
Either in March for acquisitions. Yes. Like each quarter or each year. As you will see, there'll be sometimes opportunities to do more on the M and A front, sometimes more better times to return cash to shareholders. But over that medium term timeframe, we think that's the right allocation of capital for our business.
No shortage of opportunities that come our way. We look at 100,000, 150, 200,000, Jonathan saying 1000,000 opportunities a year. It's immense the amount of things going on across the world and we're pretty plugged into it and we're obviously a great partner for them to have if we decide to make that investment. Sure.
Sure, sure. Maybe one more, if there's one more.
I think I This is the Wyeth side of the room over here. All right.
Lisa Allen. Hi, Lisa. Hi, guys. Hi. From MoffettNathanson.
Strategic question about small merchants. So as you're expanding your relationship with platforms now in the post eBay era. And then you're also developing capabilities like this one touch merchant onboarding where you have this direct relationship with the underlying merchant that then you can bring to these marketplaces. I can see how that can work one time when you're perhaps pulling them away from eBay. But as you think about iterating that marketplace after marketplace after marketplace, how do you just think about managing that tension?
And for you, is your relationship PayPal's 1st and foremost with that small merchant. And so we'll see a lot of marketing and development around almost independently nurturing your relationships with those 22,000,000 little merchants or is your relationship more 1st and foremost with the marketplace and they own that relationship?
It's primarily our relationship with the small business merchant. That's kind of that is our bread and butter as a company. It's where we are growing. And the reason we think it's so powerful to do, One Touch seller sign up is that the more marketplaces that a small merchant is in, typically, typically what we've seen so far is the larger their sales are. So if they can expand greater than one marketplace, their sales go up pretty dramatically.
Now it may be at some point, you saturate into as many marketplaces as you can. But we want to make 2 things happen. We want to 1, make it frictionless for small businesses to move into incremental marketplaces, because we think marketplaces is a big future of commerce. And number 2, we want to make sure that from marketplaces make it easier for them to get qualified merchants into them. One of the things that BOGO large marketplaces have found out is it's hard like they're trying to screen the sellers that come in.
All of our sellers have already been screened. We do the KYC. We make sure that what they're selling because we have buyer and seller protection is legitimate. And so I think our primary relationship is with that small business merchant, who we serve and we want to help them move to multiple marketplaces. And that is a big reason why so many of these marketplaces besides our platform capabilities also want to work with us is that we have that capability of bringing them both consumers and merchants into the marketplace.
Thank you. Okay. Now what? Yes. All right.
Now we got to your favorite part of the evening, cocktails.