Okay, great. I think we're basically ready to start. Thanks for coming. Thanks for leaving your desk during earnings season. We've never done this before. I told John and Dan when I pitched it was going to be casual and intimate. I'm not sure it's either of those things. 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&A session, and that would have been an effective use of time. We thought this year, in lieu of doing a full analyst day, we would just do a Q&A session. We think it's particularly timely after earnings last week. We've also had a few announcements that are interesting and exciting. It's a good time to talk to all of you.
Just a little bit in terms of logistics, we'll do Q&A for about 45 minutes. Then we'll just have a cocktail hour or so. Our innovation showcase, which is over here on your left, is open. It's staffed. If you want to walk around and do some of our experiences, that's available. We'll have mic runners. Lucinda on our team and Cindy on our team are going to be doing mic running up and down these stairs. Raise your hand, we'll get a mic to you. I think that's about it. I'm going to read some forward-looking statements. That's the important part. This presentation contains forward-looking statements relating to, among other things, the future results of operations, financial conditions, 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? Yeah. Great. We just had earnings last week. We won't go over numbers or anything. Since our earnings, we actually had three, I think, meaningful developments that have occurred, two of them today. 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's in its quiet period right now. 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'll be global. It'll 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 two announcements that happened today, one is the CMA out of the U.K. announced the provisional full clearance of our acquisition of iZettle that in the U.K. was being examined. They came out with their preliminary assessment that is pro-competitive. We're real pleased, quite pleased with that outcome. They've got another month or two before they put out their final announcement, but this provisional clearance was obviously a piece of really welcome news for us. We went into phase 2 with the CMA knowing that really we just need more time to explain what point-of-sale competition looked like there and what omni-channel commerce was really evolving towards. That was a good outcome.
Just announced later on today, which maybe most of you 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 mark there. It's a 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. I think with that, we have enough time, I'll end there. Maybe we can just open. Oh, let me maybe introduce a couple of people who are here who are members of the senior leadership team of PayPal.
Jonathan Auerbach right there. He hates me introducing him.
I'm going to do it anyway. I'll probably mangle Jonathan's title because I don't really pay attention to those. Jonathan basically runs all of our strategy works. He runs our partnerships, our data elements, and all of our sort of M&A and venture investing. Aaron Webster 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, of 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. Those two 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. Be ready. Be ready. Franz, be ready. Okay. 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-
Let's do mics because this is webcast.
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?
Yep. I think 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. Frankly, we thought just checkout alone was interesting, but we had a big share of that, and it was going to commoditize over time. 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. 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. Digital commerce could be in-context selling on a marketplace. It could be omni-channel selling across different physical and online virtual worlds.
That we wanted to provide a suite of those services. We've put together quite a comprehensive and very powerful set of capabilities right now. That's probably a little unappreciated. We don't talk about it a lot, but even just our tokenization capabilities. Facebook avails themselves of our tokenization capabilities. Part of what we're selling with them in this infrastructure are risk management tools that they have inventory management type of capabilities, returns functionality, invoicing capabilities. It goes well beyond just checkout. If you think about, we've said this a couple of times, our top 20 marketplace relationships, ex-eBay. That's over $90 billion of TPV growing at 39% right now. You should expect to see us doing more and more of that. Our capabilities are becoming more and more sophisticated. That difference between five years ago and today is night and day difference.
We were a monolithic C++ platform. We at PayPal could do maybe 10, 15, 20 releases a year off of that. Whereas today, we do tens of thousands of releases. The power of that platform is evident in the relationships we have with Uber, Airbnb. I mean, it's the major mobile applications and emerging applications tend to partner with us.
Thank you.
Yeah. Thank you. John, anything you'd add on that?
Thanks for hosting this event. David Togut with Evercore ISI.
Oh, hey David.
I'd like to ask a question about the B2B market.
Yes.
Are there ways that you can leverage your unique two-sided payment network, especially your relationship with 22 million merchants, to really go after either the SME B2B market or the enterprise class market? Seems like a lot of focus is starting to turn to B2B, and you have some unique assets.
Yeah. We think of our addressable market when we talk about this $100 trillion market. That of course is not all digital right now. It's 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. I feel it's a big opportunity for us. 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 in the B2B space.
Yeah, 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. It's been almost a year since-
Any other information you want to tell us about yourself, Jason?
I'm sorry?
Any other information you want to tell us?
I like the hats you guys gave in the bags. I was going to put it on, but figured I'd wait till the reception. 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. Now we're almost a year later. Maybe just to reflect on that, your confidence level now versus then. I guess if I just think about the EPS, for example, you talked about a 20% CAGR. I think you did 27% the first year of that guide, and you're tracking at least 20% this year. Would just love to get your latest thoughts on those dynamics. Thanks.
Sure. The guidance that we laid out was over what we had described as the medium term, call it a three- to five-year period. You're right, we said that over that period, we expect to grow earnings 20%. It's interesting, Jason, because I think there were a lot of questions after this last earnings call around our ability to grow earnings at 20% and expand margins. 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. 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. Remember, we had talked for a long period of time about our ability to go partner some of the largest and fastest-growing marketplaces.
That was just a statement until you hear of something like today. There are other conversations going on too, with other platforms, other marketplaces. Our guidance is somewhat dependent upon the achievement of them going out and doing other partnerships. 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. 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. 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, last year we grew our other operating expenses $0.13 for every incremental dollar of rev.
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, we feel like we're threading that needle to continue to invest for growth, 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. We feel really good about the guidance that we put out there.
I'll also say just philosophically. We think long and hard before we put out any of that guidance. Our conviction should be stronger just by definition, a year later on guidance that we put out a year ago. Just philosophically speaking, that should be the case. Obviously what we've been talking about and the partnerships we're talking about give us stronger conviction. Just from a philosophical perspective, a year later, you should expect that.
Hi. Up here.
Yeah.
Way in the back.
Yeah.
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. How far would you go in banking? We see Square sort of flirting with a banking charter and the Alipay model versus yours. Thanks.
I'll start and then John can come in on that. We have no desire to be a bank. In fact, we have very close relationships with the financial institutions around the world right now. My view is we can be much more in the middle of how consumers manage and move their money. Our aspirations for PayPal is for it to be an app that people use on a very regular basis. That is our aspirations for it. We've more than doubled the usage in the last three to four years of people use it, but it's nowhere close to what our aspiration is. If you think about our partnership with Uber's 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 points is a really good example of that. A lot of people ask us, are we going to put out our own rewards capabilities. 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." 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 million merchants.
The FIs are providing those rewards points on our platform. 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. 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 be that interface. The underlying capabilities, some we'll develop, some we'll acquire, and some we'll partner.
Just add that as much as we believe and hear from our merchant base that there's a lot of utility in having a platform that provides 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. The approach that we're taking by being an open platform is just that, to allow consumers to use us however they want. It allows them to put whatever bank instrument or whatever partner that they have into our wallet, which provides a lot more utility to them as well. 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 unbanked segment. In each of those segments, we'll put together different value propositions and different ways of bundling things together to address 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 Darrin Peller from Wolfe. Look, there's two parts to this question that relate to the net new active members, which have been very strong. One of them is on the underbanked 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 underbanked drivers with a payment system. 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 underbanked that you've talked a lot about penetrating as a bigger addressable market. On the international side, we've talked about MELI. India had some traction. Can you just give us other examples of how we're going to see other big international market opportunities to expand?
Yeah. Thanks, guys. Let me start. Go ahead. Yeah. 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 five years ago. You'd start out in the U.S., then maybe that would be the full suite of services. Then you would export maybe to the U.K. a couple of years later, then to Canada, then maybe Australia, then eventually we'd 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. 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 eKYC, which is so important in Japan. We hadn't had eKYC capabilities. That unlocks the Japanese market for us. Basically assuring that we could take 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. The platform extendability that we've had right now again, we talk a lot about how we've upgraded our 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.
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 quite a large opportunity for us. On the underbanked, I think just the 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 Xoom functionality, and Xoom is going to be expanding quite significantly on a send basis than just U.S. and Canada. 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. We're really starting to try to figure out how do we take cash out of the system and put it into electronic platforms so that the unbanked can be part of the digital economy. There are a lot of different ways to go and do this, and really, I would say probably in the second inning of that right now. Anything you'd add on that, Scott?
Craig Maurer with Autonomous. Thanks.
Hello, Craig.
Good to see you guys.
Good to see you, too.
Wanted to ask about iZettle. 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. 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. How do you use the PayPal e-com presence and growing omnichannel presence to appeal to the micro merchant and small merchant community?
First of all, we looked really carefully, obviously, around every company that was looking at omnichannel solutions. From Square to iZettle, and there are a number of others out there as well. iZettle was the only platform that we saw that was truly international. What I mean by international is multiple markets. 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 iZettle into more markets as well. Really, omnichannel is a requirement now for small merchants. We have 22 million of them. If you look at the number of people that are using any of the competitors to iZettle or 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. Really, we had to put most of those activities on hold until we went through the CMA review. This CMA provisional clearance is a big step to enabling us to be able to really provide to small and micro merchants a full omnichannel solution through our sales force and through our 22 million merchants and all the go-to-market channels we have. To be able to invest more in that and put it into more markets as well. I think, 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, it's a point worth emphasizing. We often talk about 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. I think we've demonstrated that we've used it as such. The iZettle acquisition really fits into that as well. The fact that this is a scalable platform across multiple markets is a not insignificant asset that they have and something that's very important to us as we want to be a global player omnichannel eventually. This is the asset that we wanted.
Hey guys, it's Georgios Mihalos from Cowen. Sorry. Thanks for doing this. Two strategic questions, if I may, just to 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? 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 a third-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. Just like we accept Apple Pay and Google Pay and any other pay that you might have through Braintree, if we want to be the solutions provider to marketplaces and to merchants, they're not just going to accept PayPal. No merchant is going to 100% just accept us. We want to be the overall solutions provider. The relationship that we have with Uber both the extension of that.
We have a very close relationship today with them, the extension of that globally, the extension of their future payments initiatives, which we're quite familiar with, we have very close relationship there all the way up and down that company, is a real excitement for us. We think that it's a great opportunity. What was the other question? Oh, I see. Yeah. There will be some verticals where we'll do some specific capabilities, we may do a lot of partnering on that front. I think what we're doing with Paymentech is a good example of that. We've done a couple of things internally to make sure that they can connect into all of our underlying platform capabilities, we're going to use their capabilities to go into bill pay and others.
Again, neither Uber nor Paymentech, nor MercadoLibre, none of those are exclusive in any way whatsoever. We want to partner with everybody out there, just maybe some players that will have a more extensive partnership with. Yes.
Hi. Harshita Rawat, Bernstein. Can you talk about your M&A strategy in emerging markets? It's encouraging to see partnerships like the MercadoLibre partnership, Uber partnership. 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. Can you talk about your strategy to gain domestic traction in these countries? 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. MercadoLibre is a good example of that, where we decided to do an investment as opposed to a full acquisition and a commercial partnership. 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. As I mentioned before, part of the problem that we had in developing markets is we did not have a full product suite.
If you're just doing on checkout and that's it's difficult to get full traction. India, we've got pretty full product suite right now. We're getting great traction on it. Like Brazil, our partnership with Itaú right now is really taking off as well. 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 three or four banks that are the majority of that market. Germany is different in that 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. We look at each of those markets to make decisions. Do 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 in that we have over 20,000 people that wake up each day, and they're just focused on payments. 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. Because we've got 22 million merchants across the world and several hundred million consumers, people want to partner with us. We bring that scale to bear. Lastly, there are very few companies that have our growth profile that also have our free cash flow generation. 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.
All of those things point towards growth, we have a lot of leverage, whether it's organic development, partnering with others or going out and acquiring other companies.
Just to point out, some of the capabilities we're developing are going to be incredibly important for that international development, like Smart Payment Buttons. This Smart Payment Button is, for instance, we're doing this partnership with Meli right now. Meli, they use Mercado Pago to power their payments. 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 Mercado Pago wallet to make that transaction. We want to do is when somebody comes to that merchant site, render a Mercado Pago button there so that they can automatically purchase, and then we get the same take rates, all that kind of thing that we were talking about before.
We don't have to educate or re-educate consumers who are using different wallets to be able to shop at our 22 million merchants that we have and growing. 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 million merchant base. Huge advantage that we have having that two-sided platform and now much more dynamic capabilities as opposed to static capabilities.
Keith, 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 that you got from the eBay relationship?
Yeah. Our transaction costs are specifically transaction expense. Over the medium term, we don't expect to change a lot from where it is today. 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. There's a mix of things happening there. You see with new customers, we make it very easy for them to bulk whatever is the most convenient instrument, the credit or debit card. Over time, as they're moving cash in and out of the wallet, maybe they augment that with ACH or if they start with a credit card, maybe they use a debit card. That initial customer that comes to us often comes with a higher average transaction expense.
At the same point in time, you've got areas of growth like Venmo and that demographic, which is sort of predisposed towards using debit or bank. As that's growing in the last quarter, 73% year-on-year, those have been sort of naturally offsetting. There may be some inflation in the wallet over time, but certainly not far from what we've seen historically. 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 even beyond what we see today. That could be offset by the very way that we manage risk. Today, when we manage risk, it's very transactional, right?
We look at you, Keith, have completed or went through a purchase with a certain merchant. We look at everything sort of in isolation right there, taking into account a lot of the things. We know your history. We can take a more relational 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. 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 the take rate pressure piece of it.
Hi. Over here on the west side.
Oh, hi.
Ramsey El-Assal from Barclays.
Hey, Ramsey.
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. I was just curious, year to date, what can you share with us about that mix?
Sure
How it's progressing now?
I'll try to then turn it over to John. Well, in the last three days, not that much has changed since we talked about that. Let me just say this, then I'll let John talk about Venmo. I think obviously Venmo monetization is a big focus that we have. When we talk about Venmo monetization, it's really about adding incremental services to the Venmo user to give them more functionality. Again, it'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." It's more capabilities to them.
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. Those are accelerating and we're adding more services on top of that. 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 two data points in a row in terms of $200 million annualized run rate coming out of last year, $300 million coming out of Q1 just to give a sense of the acceleration of that.
The only thing that I would take issue with on your point is I think Venmo monetization is going to be a great driver of growth, but I actually think other things that we're doing will be as large if 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 Venmo monetization is and obviously that's an important thing for us, but they're all clearly growth drivers in my mind, not just Venmo monetization.
I would just add, Ramsey, that as you're aware, there's actually four ways that we monetize Venmo. We've got the Venmo card, we've got Pay with Venmo, and then the instant transfer. The instant transfer has been the bulk of the opportunity thus far, simply because the use case thus far has been for P2P. That will change over time as we expand Pay with Venmo and use more of a merchant take rate model. We do, as we announce sort of the number of customers and the amount of volume around Venmo, we do have a fourth way, which we do earn a slight amount of interest on the balances that are held. It was less material previously when it was smaller, but it's worth mentioning. Our focus very clearly is on growth. That is what we want to do.
This is a great opportunity for us, we feel like we've got the luxury because of some of the other parts of the business that have performed 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. We feel like with data points like 40 million customers that are on the Venmo platform, the fact that we've got a run rate of revenue that is $300 million a year, they're good signposts about our ability to do this as we scale it. 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 this side. Jamie from Susquehanna. 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, Dan, at your former shop. You shared with us the Walmart progress. What are the gaps in the large merchants that there are, and what does that dialogue look like at this point?
We have a pretty good relationship with almost all the large merchants. 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. Those are predominantly around Amazon and other large players. We obviously can drive a tremendous amount of traffic to them. We talk about one-touch seller sign up that we're doing to send merchants to marketplaces. 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 one-touch seller sign up. We can do the same thing with consumers into merchant apps. We can do a one-touch consumer sign up into a merchant app.
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. 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. Many of them now are going to start taking incremental capabilities. One of the reasons we bought Simility. It's 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. 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 manner for transactions. We know where a transaction is bad. I'm not going to say how we know it's a bad fraud transaction because the bad guys are listening to this call right now. There are loads and loads of ways where we know something is a bad transaction. It's red in our system, and we will block that from occurring. There are also tons that we know are green. They're green. There's always that yellow area. What we want to basically say to a merchant is, "Look, these are yellow to us, and we might block them. For 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." 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 it. It's a very sophisticated way of looking at risk management at a transaction and customer level, 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.
Yeah.
I was hoping you could share with us the philosophy around all these investments you're making. Will you make these investments if you think there's a commercial opportunity there? Should we think about you making these investments even for sake of upside related to the specific company deal that you have? How large could that portfolio become, and where is it coming from? Is it coming from proceeds that would've been used for M&A or for others?
Yeah. We would never just make an investment for a financial reason on a business. That's not what we do with our money. You guys are in that business. We're not. We're in the business of driving growth for PayPal and for the platform. Any investment we make, whether it be in our venture portfolio, and we have quite an extensive venture portfolio that Jonathan and his team manage. It's either for market sensing mechanisms. We always have at least a board observer right, if not board seat 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 board seat on that to assure that the relationship is as close as it can be.
Those dollars come out of that acquisition pool that we have.
The $1 billion to $3 billion.
$1 billion to $3 billion.
is earmarked for acquisitions.
Yep.
Yeah. That's included in that. I will remind you that that's a framework to think about our business over the long term. We're not going to be held to that by each quarter or each year. As you'll see, there'll be sometimes opportunities to do more on the M&A front, sometimes better times to return cash to shareholders. 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, 150, 200,000. Jonathan's saying 1,000. 1,000 opportunities a year. Honestly, 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. Maybe one more, if there's one more.
I think I-
This has been the quiet side of the room over here. Oh, all right.
Lisa Ellis.
Hey, Lisa.
Hi, guys.
Hi.
From Oppenheimer & Co. Strategic question about small merchants. 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.
Yeah.
I can see how that can work one time when you're perhaps pulling them away from eBay. As you think about iterating that through marketplace after marketplace after marketplace, how do you just think about managing that tension? For you, is your relationship, PayPal's first 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 million little merchants, or is your relationship more first and foremost with the marketplace, and they own that relationship?
It's primarily our relationship with the small business merchants. That is our bread and butter as a company. It's where we're growing. 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 what we've seen so far, is the larger their sales are. 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 two things happen. We want to, one, make it frictionless for small businesses to move into incremental marketplaces because we think marketplaces is a big future of commerce. Number two, we want to make sure that for marketplaces, we make it easier for them to get qualified merchants into them.
One of the things that a lot of large marketplaces have found out is it's hard. 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. I think our primary relationship is with that small business merchant who we serve, and we want to help them move to multiple marketplaces. 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? Yep.
All right.
We go to your favorite part of the evening, cocktails.
Let's go.
Look forward to more.
See you at next station.
Yep.