Good morning. Let's get started. Welcome to PayPal's Investor Day. It's terrific to have you all here. We've got a great program and a lot of ground to cover.
So I'm going to start with a few housekeeping items to start the day. First, we expect the day to go until about 1 p. M. And we plan to take a 20 minute break at about 10:30. If you didn't visit our innovation showcase area during breakfast, it will be staffed during the break as well.
In addition, on the tables, please find our Safe Harbor statement. Please take a moment to review our Safe Harbor statement as we'll be making forward looking statements throughout the day. In addition, at the end of the program, we'll be hosting a Q and A session. Please write your questions down on the cards provided on the table and we'll be picking them up throughout the morning. With that, I'd like to bring up Dan Shulman, our President and CEO to kick off the day.
Hi, everybody. Good morning. Welcome to our 2nd Investor Day. So nice to see a lot of very familiar faces and a number of new faces as well, which we look forward to getting to know you over the next quarters years ahead because I know you're all going to be long term shareholders. I know that.
So anyway, you saw the agenda very quickly from Gabs. We have a ton that we want to share with you. All the initiatives we have underway, the product and services we're putting out, why we're doing that. And I hope at the end of this, you'll feel the same sense of confidence that we do that we are just at the beginning of our growth as a company. And what we'll do is we'll put all that together and then at the end, John will take all of that, wrap it up and we will update our medium to long term guidance for you, which we're really looking forward to doing.
So you'll see all that. You'll understand why we're putting that out. And I think it'll be a great day for all of us. So this is the team that's presenting today. The reason I love these meetings is that we get to showcase our talent as a company.
And what I really like about this and what's interesting about the speakers that we have today is that they come from different walks. So if you look at Bill, Amit, John, Koons, those all came to us from acquisitions. John was the CEO of Zoom. Bill, of course, all of you know him, the CEO of Braintree, Amit, the COO of Braintree. And then you have John Rainey, who we brought in from the outside, along with me 3 or 4 years ago.
And then Jim, Sri and Leah, who have been with PayPal for quite some time and know their business, know the industry inside and out. And so what I really like seeing about this is it's a mix of what's actually going on in PayPal. We really have these teams coming together, working together as one team, focused on being customer champions, and there is a ton of excitement inside the company in terms of what we're doing. If there's one thing I'd like you to take away from this is that we are just beginning to scratch the surface of the opportunity in front of us. The world is rapidly moving to digital payments.
Our total addressable market is gigantic, and we'll talk about that in a second. And we think we have the assets and the talent to take advantage of that. We obviously have tremendous scale right now with over 19,000,000 merchants, some 220,000,000 consumers on our platform. But really importantly, the scope of the services that we're beginning to offer those consumers and those merchants has expanded dramatically as we've moved from being a product company to being a platform company. And so we'll talk about that.
Why that's so important is that every incremental service we add to a consumer or to a merchant, their CLV or their lifetime value doubles when we do that. Much stickier, CLV goes up dramatically. I'd be remiss if I didn't point out that the decision to move to Choice, which we made about 18 months ago, and I won't ask for a show of hands here how many of you believed in Choice when we first announced it, But I know there were at least 3 of you that did. But that was probably one of the most significant things we've done as a company in our recent history. Not only did that significantly enhance the value proposition that we gave to consumers, They're more engaged, they're more active, they're spending more, they're calling much less into our service centers as a result of understanding our value proposition.
But it fundamentally shifted our position in the ecosystem. Many, many competitors or people who were frenemies at the time have become very deep allies of ours right now. And this partnership that we have right now has redefined our competitive positioning, and we are increasingly becoming the digital payments platform of choice for financial institutions, for the networks, for tech companies and for wireless carriers around the world. And finally, you'll see in the presentation one of the things that's night and day difference from 5 years ago is our tech stack. We were kind of a monolithic C plus plus stack.
We would put out maybe one release a month or so. You'll see in Shri's presentation that where we were doing things one time, we're now doing them thousands of times. And you'll see I don't even know like how to put that in percentage improvement, but you'll see from Shri that our tech stack is radically different. And what that's enabling us to do, because we have a service oriented architecture, we have programming in the latest engineering languages. It's allowed us to bring in the best and brightest product and engineering talent into the company.
And that is something that we are tremendously fortunate to have. Part of the reason why so many people are attracted to work at PayPal is not just our mission, which I'll talk about, but it's the size of the addressable market that we have. We believe that we operate in an addressable market that is $110,000,000,000,000 $110,000,000,000,000 Any way you look at that, we think our market share is under 1%, under 1%. And when we talk about kind of no one company is going to be the leader in all of this, it's because it's such a massive market. It's massive and it's growing nicely.
Parts of it that are kind of our spot in the market are growing very rapidly. I'll point that out in a moment. But this is a huge market and every one of the services that we're innovating and developing internally and the acquisitions we do to put and integrate into our platform are done with a purpose. They are done to address a part of this addressable market that we have in front of us. And so we think we can play in almost every single one of these spaces here, and we're just getting going on that.
One other thing I'd point out is that today there are about 3,500,000,000 Internet users. We think if you look out over the long term that there are going to be about 6,000,000,000 Internet users in the world, say, in about 10 years' time. And our long term aspiration as a company is to have somewhere between 10% 15% market share of that. So we think internally our goal as an aspiration is to have a 1,000,000,000 people on our platform over the long term. By the way, we have about a quarter 1,000,000,000 today in that area, if you extrapolate out a little bit.
And in a lot of the markets where we're in, we have larger shares than 10% to 15%. But we think that is a reasonable aspiration for the company to have over the long term. Now as exciting as this is and the fact that we're just beginning in our journey along this is that the places in the market that we play in today are growing the fastest as well. If you look at just global e commerce trends, global e commerce today is about 12% of all retail. But as all of us know, the mobile phone is blurring the distinction between online and offline.
It's really just creating commerce in general. And this study said that in the next 4 to 5 years, that will grow by 100 percent to about $5,600,000,000 to $6,000,000,000 My bet, if any of you want to take this, but we'll have to be around in 5 years to pay it off, is that that's going to be a much higher number than that. I believe we're hitting a tipping point right now where much of the in store traffic will move to digital payments going forward. And so I think that 100% is understated. But if you think about what's driving that, it is the mobile phone.
Today, dollars 1,800,000,000,000 in 4 to 5 years, that grows to $4,300,000,000,000 or 75% of the e commerce marketplace, growing at 135%. If you look at our results, our mobile growth has been in excess of 50% every single quarter that we've represented that. So we're obviously growing faster than the market. Why is that? It is because there is nobody out there that has a better mobile checkout solution than PayPal.
Our mobile checkout, thanks to a lot of the work that Bill and his team have done around OneTouch, our One Touch mobile checkout is some 80% better than the next best than the industry average, 80% better. Think about how much that matters for a merchant and for consumers when you have that kind of differential in your mobile checkout and when you see how much of commerce is moving to mobile. So I think it was like three and a half years ago here in this hotel down on the opposite hall, I gave my first presentation about PayPal. And I remember 2 days before that I had lost my voice completely and somehow struggled through that. But the vision and strategy that we laid out then have been reasonably consistent.
What I talked about then is that PayPal aspires to be the world's largest open digital payments platform. Now 3.5, 4 years ago, that was a hard thing to imagine because we were predominantly a single product company. We really didn't have an integrated platform. As I mentioned, it was pretty much of a monolithic platform. And today, you'll see through all the presentations and you'll see in my presentation just how much we've evolved to being a platform and a solution to retailers' problems and their pain points as well as for consumers.
And we have 2 segments of the market that we serve. We serve consumers on one side, and our goal there is to look at the 2,000,000,000 people that are outside the financial system and give them a full platform to manage and move their money. And that we call that democratizing financial services. We think we have a tremendous competitive advantage to do that, to bring those citizens into the digital economy, to afford them the opportunities that all of us have as we move into a digital world. We also are working obviously with banks, financial institutions for those who are already banked and looking to bring our platforms together to give incremental value to our mutual customers, and I'm going to talk about that a little bit more going forward.
On the Merchant side, it is all about providing an end to end one stop shop solution for digital commerce. And I'm going to talk about that in our next slide. But increasingly, retailers are turning to PayPal as a must have platform in order to compete with the likes of Amazon. So this is one of my favorite charts in the whole presentation because it shows you just how much we've evolved as a company. 5 years ago, that little PayPal processing checkout with PayPal would have been basically what our offering in the market would have been.
And it's a strong offering and it still is a strong offering for retailers. But if you look now at the platform and breadth of services that we offer to merchants, it is why they are now increasingly coming to us and having their most strategic conversations with us. Before, when we were selling the PayPal button, it was either to treasury or to purchasing. Today, we talk to the CEOs, CMOs of all the largest, midsize and even small businesses about their most strategic issues. How are they going to morph into the digital commerce world?
How are they going to compete against the likes of Amazon, how are they going to take advantage of mobile. And what we have now is a full platform, a full commerce solution for them to write their application on top of our platform, connect into our platform and then we provide all of these different services underneath, whether it be a full omni channel solution, it's part of the reason why we bought iZettle, whether it be marketing solutions, we are increasingly not just being a checkout solution, but moving up the funnel in the middle of the funnel to turn prospects into buyers and to help merchants identify high value prospects and then how to convert them into buyers. And so we are more and more becoming a solutions company, a platform company than a button company. Same thing is happening on the consumer side. We are offering a suite of services to help people manage and move their money.
To me, I think over the next 5, maybe 10 years, you are going to see the vast majority of people move to mobile digital wallets and get rid of what we call dead cow wallets. These leather wallets you carry around with you, they will be a thing of the past. People will move to digital wallets. And just like in the physical world, you don't carry around 5 or 6 different wallets. You have 1 wallet.
You have many financial instruments inside that wallet, but you'll be able to do that through a digital wallet and you'll be able to not just move your money like you do today in wallets, but manage your money as well. And for those who are underserved, we want to make sure that we have a fulsome platform that allows them to do transactions quickly, to not wait in line to make those transactions, to do them securely, to make sure they're accessible and understandable, and very importantly, that they're very inexpensive. And we think we can bring on a tremendous amount of the underserved population and fully provide a platform for them to manage and move their money. But for those who are in the banking system, today, we are working hand in hand with our partner financial institutions, with the networks, with tech companies to basically take the best of our platform. And many of the financial institutions today think of PayPal as their largest digital distribution channel.
Why? Because we drive tremendous growth for them. And we look at the assets they have, like rewards points and that kind of thing, and we think to ourselves, how can we take the best of their assets, the best of our assets, combine them together into a value proposition for our mutual customers that neither of us could do alone. And if you look at our Funds Inn over here on the left hand side, you can see rewards points. Later on this year, many of the world's leading financial institutions will begin to put rewards points into our wallet.
And you'll be able to take those reward points and basically spend them at any of our 19,000,000 merchants. And so that will open up really our platform, which has been a goal of many platforms for a long time, to be a consolidator of rewards points and to enable people to get much more value out of those points than they otherwise could have. And so we think there's a tremendous amount we can do with consumers. And as all of you know, today, a PayPal customer uses us about 3 times a month, a Venmo customer multiple times a week. But our goal is for that to happen 1 to 2 times even daily, because we believe that if you're managing and moving your money on our platform, that's an app that you use all of the time.
So a lot of people, talk about like why PayPal, why are we going to be successful going forward. I think there are all sorts of reasons for that. But first of all, at a macro basis, the payments industry is a very difficult industry to get into. You miraculously need a 2 sided network at scale. A lot of people come in with either a lot of consumers, some come in with a lot of merchants, very few with a lot of consumers and merchants at the same time.
So scale is incredibly important when you're coming into, but scale on both sides, on the merchant side and on the consumer side. And we're fortunate that the network effects right now of having 220,000,000 consumers, 19,000,000 plus merchants has created a tipping point where for merchants around the world, whether they be in the IR 500 or small businesses, PayPal is a must have for them. And so that network tipping point is helping tremendously as is the scope of the services that we can offer. And we will increasingly offer scope and solutions to our merchants. We subdivide our merchants into different segments.
We subdivide our consumers into segments and provide solutions specifically for them. It's important to understand that unlike most other digital wallets out there, we are one of the only ones who fully control the end to end value proposition. It's very important to understand because it allows you to do things in your value proposition that others can't do. So for instance, we onboard, we then look at a transaction and we have some $9,000,000,000 to $10,000,000,000 transactions we'll do this year. We look at those carefully.
We understand the risk associated with that. We allow transactions to go through or block them based on our algorithms, on our machine learning. If you have a problem, you call us for customer service. And because of that, we can do things like buyer protection, which is incredibly important for things like cross border, where you may not know the merchant, but you want to purchase. It's why 80% of the market would prefer to use PayPal for a cross border transaction because of things like buyer protection.
And other companies out there rely on third parties to do the things that I talked about. So if you're using, for instance, like an Apple Wallet, they rely on the banks to do the onboarding, the banks to decide whether a transaction happens or not. If you have a problem, depending on what financial instrument you use, you have to call a different bank or credit union to fix that problem. For us, it's all an end to end and we control that value proposition. Any survey you look at, PayPal in terms of trust is one of the top 5 brands across all financial service and tech players.
If you look at us just in general, we are always one of the top 100 brands in the world in terms of our prominence and people knowing of us. And every year, our brand has increased in terms of its recognition. We're one of the fastest growing brands in the world according to Interbrand. Depending on the survey, we can be in top 10, top 80, but we are one of the top 100 constantly in every survey and always one of the most trusted. When you talk about being a fintech player, different people emphasize different parts of it.
There are people who emphasize the technology part. There are people who emphasize the financial services part. The truth of the matter is you have to be world class in both. And when you're a financial services player at the scale we are, fraud, risk, security, enterprise risk, compliance, AML, FinCEN, all of that is absolutely essential for you to be a world class company and for you to scale and to operate in 200 countries around the world. It's a huge moat for us.
We've been doing this for 20 years. We have incredibly sophisticated algorithms, very sophisticated models that allow us to do this better than anybody. Our 19 bps of loss for online is world class out there. And so we feel really good about this and we are radically improved from where we were 4 years ago on all elements of this. I've talked about our open tech platform already, and we're going to hear a lot more about our revamped tech stack, but these are all incredibly important value differentiators for us.
Most importantly is this is not a side hobby for us. We have 20,000 people in our company. All we focus on is digital payments. That is it. We have thousands upon thousands of engineers, product managers that just focus on digital payments.
This is our passion. It's what we do. And we spend, well, practically 24 hours a day thinking about it. And these are the results that come by being focused, by having differentiation. Over the last 3 years, despite tons of competitive announcements that have come out, and I hope you can understand now seeing the rest of this why those competitive announcements don't impact our growth going forward is whether it be customer metrics or our financial metrics.
Over the last 3 years, we've increased all of them substantially. Just as importantly, we take our commitments to all of you very seriously. We put a ton of time and thought and analytical rigor into the guidance that we provide. We try to be relatively accurate on it. We don't want to say we're going to be here and come way up here.
We try to be accurate, but we know how important our word is to you. Look, the future is always inherently an uncertain place, but we work very hard to be sure that we can meet our commitments to you when we provide our guidance. And so I want to wrap up by just saying 3 things. 1, I hope you agree at the end of the day that we're just beginning on this journey. We feel by far and away the best days of PayPal are ahead of us.
2, we have a unique set of assets, talent, scale and importantly financial flexibility to be able to not just stay a market leader, but to widen our position as the market leader in digital payments. And I think you'll see from everybody that comes on stage here, it's a team that is quite passionate about its mission, about serving our customers and very importantly, about delivering on our commitments to all of you. So thank you very much, and let me bring up Bill. Yes. All
right. Good morning. As you just heard from Dan, we think we have some pretty amazing opportunities in front of us, and we're excited to get to have the day with all of you to share them with you. We think that there's a huge market out there that is growing rapidly. And there's a real opportunity for PayPal to become an iconic company for the next decade and beyond in the way that we can go serve that market.
And when you think about companies that manage to do something that is truly iconic and enduring, they tend to have something distinctive they do that others can't easily replicate. And they're offering those things at a moment in time when those services are really needed and aren't able to be provided by others. And so what is that for PayPal? What is that thing that is distinctive for PayPal? And what is that moment in time for us?
And as you heard Dan talk about, our 2 sided platform, our ability to connect consumers end to end is truly distinctive. PayPal is the only player in the payments ecosystem that operates on both the consumer and merchant side of the payments landscape and is able to connect the experience end to end and do so at scale around the world, which means that there's things we can solve that others just can't. And you may see people who do pieces of that, that are on the consumer side, but not the merchant on the merchant side, but not the consumer or maybe they're on both sides, but can't control the end to end experience or they're on both sides, but they're geographically constrained and they don't operate around the world. So when you say, who can operate on both the consumer and merchant side of the payments ecosystem, control that experience end to end and do that at scale around the globe, PayPal is the company that is doing that. And that really matters because as you heard Dan alluding to, there are huge changes afoot.
If you're a consumer, you've moved to mobile as your primary computing device. You're spending the majority of time on mobile device, yet you don't yet have the majority of commerce happening on the mobile device. You would expect that over time commerce should happen where people spend their time. So why isn't commerce happening predominantly on the mobile device today? Because there's too much friction involved.
It's too hard to get access. And so our 2 sided platform, our ability to deliver those end to end experiences us solve that for consumers in ways that others cannot. On the merchant side, if you're the CEO of a major retailer, you wake up every morning and think about what am I going to do about the fact that a couple large e commerce companies are really, really taking share in the space and how do I go compete in a digital world for customers? How do I go compete for customers when they're demanding seamless buying experiences that they can get to things on a mobile device in a matter of seconds? If you're a small business, you're thinking about, well, there's an explosion of places to sell, but how do I connect to all those places to sell?
And for both large merchants and small businesses, you're thinking about how do I bridge that gap to meet my customers where they are? My customers have moved to mobile. This totally new channel for me. How do I meet them where they are? This is the place where PayPal uniquely stands in.
So we're going to talk more about that. Let's dive into the merchant side of that. You heard Dan talk about the digital commerce platform that we now deliver. Certainly at the core of that is the PayPal branded buying experience. But we have become a full merchant services provider, offering a number of solutions across the range of things that a merchant would want to become a digital commerce platform, an operating system for digital commerce.
And importantly, as you look at each of these things, 1, we're doing them at scale, we're doing them around the globe, but every single one of them is enhanced by our 2 sided platform. So even when we do things like risk services or invoicing or these types of things, it's enhanced by the consumer side of our business. So even when you're consuming something like risk services from us, it's the fact that we know not just the 237,000,000 users that are on our platform, we've seen nearly every bad actor out there. And so we have a tremendous network effect in the way that we can deliver the rest of these services that sets us apart from other players in the Merchant Services business that generally have very little idea how to play on the consumer side. Yet we bring that information from the consumer side of our business into all these offerings that we bring to the merchant services space.
And so as we've gotten into those, it's not just that we're competing side by side with other players that have been in Merchant Services for a long time, it's that we're able to bring something new, something different. And the most differentiated thing is that in a world of Merchant Services businesses that oftentimes are just sort of selling access to undifferentiated dial tone effectively. We're selling access to customers. We're playing a fundamentally different sport than others that you would see in the merchant services space. And even as we're offering things that may look like what others in the merchant services space do, we're playing a fundamentally different sport because not only do we connect customers into those merchants, but we use our ability to understand the consumer to enhance all these different value props, whether it's things like our risk services or invoicing where you can send an invoice with others as well.
But when you send an invoice with PayPal, you're going to get paid with by more people, get paid faster because we bring that consumer side of the value proposition. Or you can offer private label credit separate from PayPal, but when you do it with PayPal, we're going to have consumers that we can bring into that in a single touch. So this operating system for digital commerce really matters. And at a moment in time when you have small businesses all the way up through large retailers really, really trying to figure out how they compete in a digital world. We're giving them the tools to go compete.
We're democratizing access to the things that had previously been the exclusive domain of only a few major e commerce companies. We're taking fire from atop the mountain and giving it to the masses so that everybody can go compete in this world and we're using our 2 sided platform to do that. So let's talk about what's happening on the consumer side of this. So if you're a consumer, as I mentioned earlier, you've moved to mobile as your primary computing device. And that's not just in developed markets like here in the U.
S. Or Europe. If you're in developing markets, you didn't move to mobile as your primary computing device. Mobile is your first computing device. You are native mobile from the very beginning.
And so as a consumer, you're spending majority of your time there, but you don't yet have all the commerce services that you want there. So for that, we have expanded to say, how do we get great access to digital commerce experiences to consumers on mobile devices or however it is that they're going to go meet a merchant. We do that through great checkout services, things like PayPal One Touch. That's now 96,000,000 plus consumers and over 9,000,000 merchants, the most rapidly adopted product in the history of PayPal and far outpacing other new entrants that you've seen come into the digital wallet space. But we're also giving one touch access to brand new buying experiences.
We're giving great access to person to person payments. As Dan mentioned, we're giving access to go pay with reward points at millions of merchants. Things that you previously would have seen again only at a few of the biggest merchants. Now you can do that everywhere. We're giving instant cash out to cards.
These are all huge parts of the digital commerce experience that we're taking to consumers. So that when you're a consumer and you're going across the digital landscape, PayPal is your best way to access all the best new commerce experiences that are available to you. But then on top of that, there's a whole group of people that are either unbanked or underserved that if you don't have a debit card or a credit card, you're locked out of the digital economy. And that's billions of people around the world. So we've now also turned our sights to say, well, for those that have a debit and credit card, we're going to give great access to how to use those in a digital world.
But for those that don't have that, we're going to help to bring them basic financial services so that they can now be full participants in the digital economy. And we think that tremendously expands the market available, not just to us, but to our merchant partners and the many partners that we work with. So how does that come together for the 2 sided platform and the flywheel effect there? The ability to go connect consumers and merchants across these is really, really at the core of these things. When you have scale, you talk about this as a network effect.
It's consumers want to be where merchants are, merchants want to be where the consumers are, Because consumers see PayPal as the drop dead simplest way to access all these great new experiences, consumers are demanding that PayPal is how they want to go pay, it's how they want to access these experiences because consumers are there, merchants are coming and saying, okay, PayPal is of the way I'm going to go connect with these consumers. And if you're at scale, that's a network effect and it's a flywheel and it really, really enhances our value to each of those constituents. But if you're subscale, that's called a chicken and egg problem. And so this is really, really difficult to replicate. And that's why you've seen many players try and they'll get pieces and parts of it, but you can't get the whole thing because consumers look at something new and say, well, how many places can I use it?
And if the answer is not many, you don't get a lot of consumers signing up. And merchants look at something new and say, well, how many consumers do you have? And if the answer is not many, merchants don't want to sign up. And so this is why you've seen us significantly outpace the many new offerings that have been out there in terms of bridging the gap between consumers and merchants in the world of mobile and why we're doing that with such pace. And importantly, as we do that, that's added another element to what we do in that 2 sided platform that many of the players that people might have thought of as competitors to PayPal 3 years ago when we first spun out as an independent company.
Many of those players that were thought of as competitors have now become our partners. Because what are those players looking to do? They're looking to go create great new digital commerce experiences. And as they do that, they've had some of their own direct efforts in that. They've surveyed the landscape and they've seen that PayPal is doing that better than anybody else out there.
And so that's enabled great ability for us to partner closely with others. And as we bring more partners in, that only enhances the value we provide that consumers increasingly see more and more that all the best places to get great next generation commerce experiences, PayPal is the best way to access those. Merchants see that all the new places they can sell. PayPal is the easiest way to get to those places to sell. Both of those constituents see that when they meet one another in a new context, when a consumer meets a merchant in a social news feed or on an Instagram feed that they know PayPal is going to bridge the trust between them because we're providing buyer protection, we're providing seller protection.
And these are the types of things that you don't get if you're just doing one little slice of the value chain, but not controlling the end to end experience. And so those partners, they stand for us technology platforms and banks, networks, issuers and technology platforms, as I mentioned. They're thinking about how do they create all these great new experiences? How do they create all these interesting new context where buyers and sellers will meet one another? But we're working closely with them to help bridge that connection to go create that trust, to go create that great experience.
And so we'll talk more about some of those. But with banks, networks, card issuers, we started to work very closely there as well. As Dan mentioned, if you're a card issuer, all the growth is in digital. There's been much discussion of how physical world retail is flat to declining. But where do card transactions happen?
They historically happen mostly in the physical world. Well, if that's flat to declining, where's all the growth? All the growth is in digital. At $450,000,000,000 plus of volume last year, we're arguably bringing more digital to those partners than anybody else could. And even if those are at scale of note, we are clearly a partner to those banks and card issuers and networks versus you see others that have scale increasingly looking to impede on their turf.
And as others are encroaching on their turf, we're reaching out a hand to partner to help bring them into those digital experiences. So that if you're a card issuer or a major network, you know that PayPal is going to be a great partner to you to make sure that you're present and available and getting great access to serve your customers in a digital environment. So a few examples of that. On the technology platform side, Google and Facebook are 2 companies that we partner with closely. We've launched a number of experiences with those.
We're going to talk more deeply about each of those. And of note, it's about how do we go enable great new experiences for customers on those platforms. There's different focuses for each of those, but the common thread is that we're able to go bridge that connection between buyer and seller when they meet one another in a new context, whether it's a social news feed or buying digital content, we're bridging that gap in ways that others cannot. And across the bank and network ecosystem, you've seen us partner with Visa and Mastercard and Major Card Networks. You've seen us do that around the globe.
You've seen us start to work with the biggest card issuers out there and we're continuing to do that. We're launching more and more new things with the major card issuers that you know here in the U. S, but we're starting to do that around the world. So let's go a little bit into one of those partnerships with Google. We're going to talk about a few examples of how we bring that flywheel effect that 2 sided platform to life.
So we're not going to go through all the examples. We'll pick a few just to really make it tangible. So this isn't just hyperbole that this becomes very clear as to how we're doing this. So Google, for a while we've been working together on Google Pay, where we announced a while back that you could use PayPal as a funding instrument in Google Pay and that would allow you to use Google Pay and PayPal to tap to pay in store. It was also the case that we were bringing those users that had linked Google Pay and PayPal to PayPal's millions of merchants and really expanding the ability for a Google Pay user with PayPal to go pay across our millions of merchants.
Before I go further into this, we actually have some new news that we're announcing with Google today. So we've seen great results from that and we're significantly expanding our partnership with Google such that you will now when you link PayPal into a Google experience, you'll be able to use that across Google's many different assets. So for example, if you link PayPal into Google Pay, it's not just that you can use that to go do a tap to pay purchase in store, you'll be able to use that when you're buying digital content on Google Play or if you're doing a P2P transaction in Gmail or anywhere that you would engage with the commerce experience within Google, PayPal is going to be there and available for you. So that's a meaningful expansion of our work with Google that now you'll be able to use PayPal across Google's many properties and assets. And when we give that seamless access for a user into that first commerce experience inside of the Google ecosystem, right away, that user is now seamlessly able to engage across all of those.
So that maybe I came into that linking PayPal with Google Pay for a tap to pay transaction. But when I go put on my new Google VR headset and I decide to go buy some digital content, I'm not typing in user ID and password. I'm not entering a card number. I'm pressing a button and all of a sudden I can watch the movie I wanted to watch or play the game I wanted to play without having to do anything additional. And that's an example of how we can go bridge that gap between buyer and seller.
How we can bring people into great new commerce experiences in super low friction ways. And of note, when that happens, the consumer knows they're protected even though it was a drop dead simple transaction that they didn't have to go enter a user ID and password, they didn't go have to provide extra information. The consumer knows they're protected. The seller knows they're protected. And so we're giving both seamless access as well as protecting both sides of the transaction.
So let's go a little further into exactly how that works. So this is an example of adding PayPal into Google Pay. Of note, on a mobile device, on a tiny little touchscreen, people don't want to sit there and tap out a 16 digit card number and an expiration date and give me that 3 digit code on the back of it and then give me a shipping address and a billing address. This is the experience to go add PayPal into Google Pay. And the thing to note, 0 typing.
Couple taps, you're done, PayPal is loaded, you're ready to now engage in all those great experiences across the Google landscape because of the partnership between PayPal and Google Play and how that's creating great new commerce experiences across the Google ecosystem. This is an example of how you could further use that. You can use all your different funding instruments inside of PayPal. So choice is absolutely there. You can also use it in P2P, as I mentioned, and see the different transactions you've conducted across those experiences right inside of Google Pay.
And Google Pay and PayPal is very clear to the user how Google Pay and PayPal are working together to make that happen. And you'll see this really start to enhance things that we can do not just in the sort of Google assets themselves, but how we do things in a Chrome browser, how we do things even beyond, say, the Android operating system that as those services become embedded in things like the Chrome browser, PayPal is there and available and ready to use right away because we're engaging with Google on how to do those things with the operating system and browser capabilities that they have, so that we're working together to go light up great seamless commerce experiences. So let's move into another partnership. With Facebook, we have a number of things that we do with Facebook. We're a primary payment platform for Facebook across many experiences.
You can use PayPal to go pay for ads in Facebook, you can use PayPal to pay for goods inside of Facebook, you as a seller can use PayPal to come and sell
on the
Facebook platform. So we're a primary payment provider both PayPal and Braintree across Facebook on a number of fronts. A specific area we're going to delve into is what we're doing with Facebook on Messenger. So we announced a while back that you could link PayPal and Facebook accounts and that would allow you to interact with PayPal over Facebook Messenger. And this is an example of that experience.
Again, just as I said before, to go link those accounts, 0 typing, no user IDs and passwords, no typing, tap a couple of buttons and you're done because of our ability to go secure the user without having to require those things because the 2 sided platform that allows us to understand how users behave across different contexts, we're able to light that up without the extra friction of a user ID and password or even of biometrics. So a couple of taps and you've linked your PayPal and Facebook accounts. That makes PayPal a funding instrument across Facebook experiences, but it also makes Messenger a communication channel for PayPal as we want to go interact with users. We've had more than 5,000,000 users come into this experience where they've said, I want to use Facebook Messenger as the way that PayPal communicates with me. And of note, as we do that, when we communicate with users over Facebook Messenger, it's not just that they can now use PayPal across other places where they would have transacted in the Facebook ecosystem.
When we interact with those users, are able to provide customer service right inside of a chat session. And through bot functionality that we have built on top of the Facebook Messenger platform, we're able to service things that are way beyond just a hello world type of functionality. This is if people have questions about a refund, a dispute, they want to reset a password, significant issues that you would think would be quite difficult to serve, we're actually serving quite well in a fully automated context, but right where the user is spending their time. So we're meeting the users where they spend time. And that opens up other possibilities for us as those users start to engage in commerce experiences inside the messenger context, whether that's P2P as the example here would show, you can use PayPal to do P2P transactions inside of Facebook Messenger.
But the things that we're powering with our tokenization platforms, with the things we do with Braintree, we'll talk about a little more later. If you and I were having a chat inside of Facebook Messenger and talking about the great Beyonce concert that's going to happen and we want to go get tickets to that, we could go buy tickets from Ticketmaster right inside of that Facebook Messenger context because of the tokenization services that we're providing. So again, an example of buyer and seller meet one another in a whole new context, but instead of that being awkward and full of friction and people having to go enter in a lot of new information, that's a one touch transaction. They're able to transact seamlessly and a seller is able to meet a buyer wherever they are and a buyer is able to engage with great new commerce experiences wherever it is that they encounter them because of PayPal. And this is an area across each of these that we've partnered more and more over time and we think there's a lot more that we can do together as we work together with major tech platforms to light up great new commerce experiences and make sure that we're helping their users to be ready to transact across all the many different properties and assets they have as they're launching new product and commerce experiences.
So let's shift a little bit to how we perform. Again, I said, I wanted to make this tangible and real and not just hyperbole. I think in the world of tech and especially amongst entrepreneurs, sometimes it's hard to discern between what's sizzle and what's stake. So how much of this is sizzle and how much stake is there? So we talked about how differentiated these services are.
This is a Comscore study that was across a 1000000 users, so pretty wide panel. And they found on those that of that panel, 55% made more online purchases because of PayPal One Touch. 47% made more online purchases just because PayPal's offer. Even if it wasn't One Touch, 47% made more purchases because of that. But then this last point is really interesting.
You have a full 30% plus that just won't transact if PayPal is not there. It's just not worth the hassle because they know that the majority of merchants out there are now offering great one touch buying experiences with PayPal. And so now when a consumer shows up someplace and PayPal is not available, they're starting to say, it's just not worth the hassle, I'll go someplace that has it, which really truly makes PayPal a must have buying experience for both the consumer and the merchant. And you see that reflected when you further dig into what are our conversion numbers? So that's the survey of those users sort of what the users are saying they do.
Well, this is a measure of what users actually are doing. So not just what they say they'll do, but what they actually do, which is conversion rate, the percentage of users that have placed an item in a shopping cart, they've gotten to the payment page and there's nothing left to do except to pay. How many of those actually complete the purchase versus how many abandoned? Those that complete the purchase, that's the conversion rate we're talking about here. PayPal converts at nearly 90%.
When you look at that for the checkout experience overall absent PayPal, it's less than half the time that that user would convert. So if you're the CEO of that merchant, you're thinking about my consumers are coming to me in different contexts, they're coming to me on mobile, but more than half the time, even when I got them all the way to putting an item in the cart, all the way to the checkout page, more than half the time, it's too damn hard to finish and they just bail out. And of note, even with other new digital wallets that have come in, it's still almost half the time people bail out versus with PayPal, nearly 90% of the time they're going to complete that purchase because the consumer knows they can press a button and they're done and we're going to have all the different ways they want to pay. We're going to have the different places they want to ship to. The consumer knows that they're guaranteed.
The merchant knows that they're protected from fraud. And so that's why you see 90% nearly 90% conversion from PayPal. And this is the kind of experience that when we say we want to go democratize access for retailers, for small businesses, for a vibrant thriving retail landscape to have the access to the capabilities that were previously the domain of only a few large e commerce companies. This is the thing that we're making available to everybody. So it's not just the 96,000,000 consumers that are on PayPal One Touch,
it's 9,100,000 merchants. And you
hear us talk a lot about next generation commerce
chat and these
kinds of companies that we power and work with on the commerce front. But we're taking this to everybody. So this is just a sampling of some of the merchants that we've brought on board in the last 18 months. And as you look across these, it's not even just e commerce companies, not even just physical retailers, you're starting to get into B2B services, you're starting to get into a broad array of all the different places people are conducting commerce that all of them are seeing that the customers on the mobile device and PayPal bridges that gap in ways that no others can. That's why we have 79% of the Internet Retailer 100 now offers PayPal One Touch.
And we see that growing significantly, not just across large retailers, but across small businesses as well. So let's shift into another way that we spin that flywheel. How is it that we're bringing more into that equation of connecting consumers and merchants together, buyers and sellers together? So with P2P, sure everybody is thinking about, okay, P2P, we're going to talk about Venmo, we are going to talk about Venmo. But before we talk about Venmo, it's appropriate that Venmo has become one of the most beloved apps in the millennial of the millennial generation.
But of note, PayPal's P2P business outside of Venmo is actually much larger than Venmo. PayPal has a huge P2P business that is international and quite a significant part of how we bring consumers into our 2 sided platform and bring those to merchants. In fact, one quarter of all new PayPal consumers come through P2P. So when you see how PayPal's consumer growth rate has accelerated, a quarter of those new users are coming through P2P. And again, there's more of that P2P happening on PayPal branded platform even than Venmo.
And then when those users come in, 2 thirds of our most highly engaged consumers are also using P2P. And then those people who come in through P2P, they become 2x more likely to use PayPal at checkout. So when you think about how do you go monetize that across these different contexts, there's an amazing halo effect of 1, P2P feeds the fly wheel and brings consumers into these experiences. But then we've had tremendous success bringing those consumers from a P2P experience into commerce experiences. In fact, PayPal started as a P2P company, P2P only.
The first PayPal transaction ever was beaming money between 2 palm pilots. It was a P2P company that then went from P2P into online commerce, connecting buyers and sellers. And so that's one of the things that we've really focused on of late is using P2P as an accelerant to that flywheel and how we bring consumers into these great experiences.
So let's go through a few
of the different ways that we do that. So I think people may not be fully aware of all the different ways we do that. So this is what people would think about when they hear P2P. This is using PayPal for friends and family transaction. This is you're paying your friend back for your share of the bar tab.
You're going to go use PayPal friends and family to do that. It's also the case that over the course of last year, we've added the ability to cash that out instantly for a nominal fee. And we've seen tremendous growth in that. And it's a good example of how we partner with card issuers and card networks to go bring forward the value props that they offer. As you heard from Dan earlier, that we're working with those card issuers and networks to make it such that you can cash out within seconds to your Visa and Mastercard debit card across nearly all the issuers on their platforms.
But then on top of that, this is an area of P2P that I think is often not fully understood. A lot of the P2P transactions that happen are between individuals, but for some elements of commerce. It's I'm buying concert tickets from somebody or it's a small seller on Instagram that's posting photos of sort of the handmade goods that they have and they're selling things person to person, but it's actually a commerce experience. And this is when you hear about new entrants to the space and you hear about how there's a lot of fraud happening and a lot of people that are upset because, oh, well, I didn't get the thing I paid for, but oh, I don't have any recourse. Like who's going to cover that transaction for me?
Oh, I didn't know it wasn't covered. PayPal stands in to go protect the buyer and the seller on those transactions. And that's a big part of our P2P business for PayPal. And it's a natural segue into the fact that these P2P users then end up becoming 2x more likely to use PayPal at checkout. So this now as we shift gears and come to talk about Venmo and how we're monetizing Venmo, there's certainly elements of Venmo that are unique.
But this creates a clear roadmap for how do we think about monetizing those P2P users inside of Venmo because we're not creating it anew, we're actually following a well worn path that PayPal has already been down and we're following that same path for Venmo even though there's some very unique things we can do with Venmo and the social elements there.
So
as we move into these experiences, as everybody knows, one of the things that makes PayPal quite or Venmo quite distinctive within the PayPal family and broadly is the social element of Venmo that has become one of the most beloved apps of the millennial generation because it's where their friends are. And it has changed a lot of the painful experiences that they had around shared transactions. And the millennial demographic is a demographic that is about experiences over things. Experiences tend to be shared. That means much more of the expenses and transactions are shared.
And so having a place where not only you can talk about those things, but you can split those transactions with people, right? If a group of us go have dinner, maybe one person picks up the check and we're all okay with that, and we'll sort of catch each other the next time. If you just got out of college and you've got a whole lot of student debt and you go to dinner with 5 of your friends, you need to get paid back. And that matters tremendously to you. And so that social aspect of Venmo is both the conversation as well as the ability to easily split transactions is huge for the millennial demographics.
And so what do we do with that? There's a lot that we think we can do beyond just the transaction in Venmo. People in Venmo, people are talking about the experiences they had with their friends. So they want to talk about the great restaurant they found the night before. They want to talk about the cool boutique that they found something they think their friend might like to shop there too.
And interestingly, that's a very high fidelity signal to a user that what's more powerful as a signal to me as a user of what I might be interested in, where I might like to buy something than where one of my friends bought something. It's a very powerful signal. And so as we brought commerce experiences into Venmo, we've made sure to keep the social element of that. And you see as people are starting to engage with that, these are some social feeds of people commenting on those new experiences. Consumers are really, really enjoying the new experiences we brought and we've made sure to bring those in a way that Venmo isn't just another buy button for them.
It's yes, it's a seamless transaction, but it's a seamless transaction where they can split the tab, they can share, they can talk about these things, which is the thing that has made it such a great experience for those users in the P2P format, we're bringing that to the commerce format as well. So let's go through some of the specific experiences within Venmo. We started by taking Venmo to PayPal merchants and making it such that every merchant that had PayPal could accept Venmo. And they didn't have to do work to get it and Venmo users don't have to go through some extra setup to get it. So there's over 2,000,000 PayPal merchants here in the U.
S. That are now accepting Venmo. And those include huge brands. You can use Venmo to pay on Target and Walmart and many of the nearly every place you would see PayPal, you can use Venmo to go pay in those places. On top of that, we've added the ability to go split and share those transactions.
So that when you do have one of those that one person picked up the tab or one of the roommates made the Grubhub order for dinner that night, they're not going and doing a separate transaction, they're able to just take that transaction and automatically split it right within the transaction between all their friends that need to pay them back. We've also added a thing that we internally talk about as smart buttons. And this is the ability for any merchant that is now integrating PayPal. The PayPal button is dynamically presented and that means we're also dynamically presenting Venmo buttons as well. So that when a Venmo user shows up to these merchants, they'll see a Venmo button, a clear indication that they can pay.
So initially we launched it across the 2,000,000 PayPal merchants. A Venmo user knew that they could go click wherever they saw PayPal and they could use Venmo. Now increasingly you're seeing merchants say, oh, if I can make just a very small change and I can dynamically present a Venmo button to a Venmo user and make it even more likely that I engage with that coveted millennial demographic, they're really, really excited about doing that. We've had great brands already that have started to do that. We talked about last earnings call, Williams Sonoma and their family of brands.
Certainly apps like Grubhub and others are doing dedicated Venmo buy buttons. But this is both next gen commerce apps like a Grubhub Seamless E24 as well as major retailers like a Williams Sonoma, Pottery Barn, these kinds of places. And that brings you into dedicated apps or native mobile apps that are seeing fantastic engagement with Venmo users like the Grubhub example that I just gave. And as you look across the Braintree ecosystem that tends to power many of the most noteworthy mobile apps out there, we see really great engagement from those native mobile apps that are wanting to bring a dedicated Venmo Buy button into that. And interestingly, just as you would imagine food ordering is a great repeat activity that really habituates users.
We're not only seeing that many of those native mobile apps want to go engage with Venmo. We're seeing that the ones that have some of the best repeat usage, some of the best habituated experiences are really excited about engaging with Venmo. And so you'll see more of that to come because we really, really feel great about the pipeline of merchants that we have coming into that. In addition to that, just the P2P experience itself, we have expanded significantly. Instant transfer that I talked about for PayPal P2P, we've also made available inside of Venmo and we've seen great uptake on that.
We're making that available for a nominal fee of $0.25 but users are quite willing to pay that fee and that's a nicely monetizing transaction for us. We have a nice margin on that transaction and it's seamless for the user. It's also the case we talked about how much retailers really want to go get access to this millennial demographic. We're bringing new and interesting ways for those retailers to connect with Venmo users. So this is an example of some co marketing with Anthropologie.
We have a lot of desire for these things across the merchants that we're working with. We think there's much more we can do there. And we've been in pilot on a Venmo card. We talked about for those unbanked users that may not have a debit or credit card. We see those on Venmo as well.
We've been testing a Venmo card. We'll bring that to many more users very soon. But then you get to, okay, well, we've really, really just started to launch these things at scale. How's that going? And I think as we move into some more information about that, keep in mind, this is sort of a freemium type product and how would you typically think about what is success for a freemium model?
Oftentimes for a freemium model where you have many users that are free and a small portion pay to actually monetize the overall experience, you would often see 10% would be a great place to get to if you're providing a freemium service. Even in just the 1st few months that we've really had these things at scale, in the 1st few months, Venmo is already well past 10% of users engaging in a monetizable experience. So we're at a place now already just a few months into having this basket of services available to Venmo users, the 10% plus are now generating revenue for us. And obviously, we expect there's a lot more of that to go. We think this is something that unlike other freemium models that would be quite content if you got to 10% or 20% of users, we think this is something that is very broadly applicable.
And that's why you see such tremendous growth as we've now really opened this up to the broad base of users over the last few months. So a couple more places that we'll talk about that really spin the flywheel. Partners and Marketplaces. So one of the most interesting phenomenons recently has been that as a small seller, a decade ago, there was one place you could sell online, and that was it. Over the last decade, though, there's been an explosion of places you can sell online.
And PayPal is there to help those sellers across as many places that you can sell online. This is really one of the core premises of PayPal spending out of eBay that it didn't make sense for PayPal to be wedded to only one of those places that a seller could sell online, but we could go serve the whole world of places that sellers were now able to go provide their services online. And so we nearly 3 years ago took a step of separating from eBay. We had an operating agreement in place that created a path for us to further separate those services. You saw us recently take another step on that where eBay continues to be a partner.
We renewed the branded part of that business, which is the vast majority of the volume, but we also let go part of that business because we wanted to be unrestricted in our ability to go serve the rest of the ecosystem and all the other marketplaces and places that small businesses can go sell. And so I think over the last several months, we've heard a lot about, well, if you gave up a small slice of that eBay traffic, well, what are you getting on the other side of it? What is that opportunity on the other side of And the interesting thing that I'm going to share a little more about is that we've been working on that already. That was the premise of us spinning out from eBay. And so we've been building a tremendous business serving all the places a small business might now go sell.
And that business of places that small businesses can go sell outside of eBay in the last 12 months was over $65,000,000,000 of volume. So of note, that's more than we did for eBay in the last 12 months. So where do you find the next eBay? We've already found the next eBay. And again, to be clear, eBay is still a great partner of ours.
We continue to work closely with them. We want it we're committed to their success. That's why we re upped the brand a part of the relationship. But we're already doing over $65,000,000,000 of volume with all the other places a small business can sell. And of note, that for us is growing at 42% year on year.
So even on a huge denominator like that, that's growing at 42% year on year versus our eBay business that for many years has been a single digit grower. We now have a business that is bigger and growing at 42%, many multiples of what our legacy eBay business is. So again, we're committed to the success of eBay, but we're committed to the success of our small businesses and the many, many places they can sell. And of note, the restrictions that we had, we've been able to do this even under the restrictions we had with the operating agreement. As those restrictions fall away, we think there's even more we can do to fully serve small businesses and fully serve all the different marketplaces and all the different partners where those small businesses want to sell.
And this by the way, I should note, this is just for the top 20. This isn't even the full business there. This is just for our top 20 partners. And these are some of the representative examples of those top 20 partners. So just the top 20 is already exceeding what we do for eBay.
So let me share a little
bit about how PayPal wins. We have, as we talked about, some significant structural advantages with our 2 sided platform. We're able to connect the buyer and seller in new context. There's an explosion of new context out there. When we started building for mobile, the thing that we believed was that mobile was just the first of many new contexts for buyers and sellers to meet one another.
But we believe there was a common thread across those, which is that across as many new places, whether it was on a mobile device or in a VR, AR session or the dashboard of a car, the common thread, the users don't have a great input device. Voice activation, these are all places. The users don't have a physical keyboard anymore. They don't have a great input device. So having the context to go light up the experience for the user and connect the user to those great experiences wherever they encounter them is critical.
And that's what the 2 sided platform allows us to do. And as you have a continued explosion of those new places, we clearly become the partner of choice across all those. And that's why you've seen us become a major partner to the tech platforms that are creating those because we're able to do that. And so we think there's a lot more to come from that. It creates real advantage for us.
One other thing to understand though, and we've talked about this some in the past, is that our 2 sided platform and our ability to control the end to end experience creates a real distribution advantage for us. You first saw us do this with one touch, where we've gotten to over 9,000,000 merchants, but those merchants didn't have to do work to get a great new experience. Those merchants just woke up one morning and they had a great new buying experience. They just had a better conversion rate. They didn't have to go do a new integration.
They didn't have to do work to get it. And we talked about it then. This was a really special thing we had created, the ability to go deploy new experiences without merchants doing work. And then you saw us do it again with Google Pay that we could take Google Pay to millions of merchants without those merchants doing work. And then you're seeing us do it again with Pay with Venmo.
The 2,000,000 plus merchants got Venmo got access to Venmo users and they didn't know where to get it. Now as we're working with issuers on rewards points, paying with your rewards points, there were a couple of big merchants who could do that, but you couldn't do that everywhere. As we roll that out, that will be available across millions of merchants on our platform, and they won't have to do work to get it. So what that does for us is that if you think about the next decade and there's an explosion of new context and explosion of new experiences, we have the ability to go deliver things far faster than anybody else could do them because others that don't control that end to end experience, they have to go knock on a merchant's door every time there's something new. Please, Mr.
And Miss Merchant, why don't you go do a new integration for this? And then how many consumers do you have? Oh, I don't have a lot of consumers yet. Well, why should I bother doing this new integration? We just show up and deliver value and the merchants don't have to do work to get it.
That's a material advantage for us. And it also means that as we're testing these things, we have the ability to go test many, many more experiences. In the world of baseball, if you bat 300, you're in the Hall of Fame. In the world of product development, probably 100 would get you in the Hall of Fame. And so in a world where the batting averages are low, the number of at bats matters tremendously, because we can control the end to end experience.
We're testing variations on these experiences across millions of users, not just millions of consumers, millions of merchants every single day. And so we get orders of magnitude more at bats to go figure these things out than others do in the ecosystem. That's a very significant advantage. And when you compound that advantage over years, that's why you've seen us outpacing other entrants into the market and why we think we can continue to outpace other entrants into the market. So I'm going to close with how we continue to propel that.
You've seen us fundamentally change the way that we're able to build. As Dan mentioned, we've rebuilt nearly every major product experience in PayPal over the last 3 years. You see that reflected in our results. We've also changed the way that we build. And so Jon Koontz is going to talk to you about how we do that for consumers.
Amit Jower is going to talk about how we do that for merchants. Leah Sweet and Sri Sivananda are going to talk to you about how we do that in terms of how we build, how we deliver great technology platforms. Jim Magas is going to come up and talk to you about how we partner, how we become a great partner to the ecosystem. And we think that as we have these natural advantages and these distinct capabilities that we can offer and a great ability to go build them ourselves, a great ability to partner with the ecosystem and an ability to go buy when we need to because we have a strong balance sheet and we've built tech platforms and distribution capabilities such that when we do buy something, we have great distribution capabilities. We think the composite of those gives us great ability to continue doing something quite distinctive well into the future.
So as I opened with, to be a truly iconic company that's enduring, you need to do something distinctive and
you need to do it at
a moment in time that that distinctive thing is in great demand. We truly believe that's the opportunity we have here at PayPal. So with that, I'm going to turn it over to Amit Jhaer to come up and tell you about how we're doing that for merchants. Thank you all.
Hello, and thank you for coming today. I know many of you are interested in learning more about our merchant side of our platform, and I'm excited to have some time to explain that to you. As COO of Braintree, I spent 100 of hours every single year talking to existing and prospective merchants. And one thing is becoming increasingly clear. They all need help.
They need a partner who's going to help them maximize their business. They need great technology and tools and support to continue to grow around the edges. They need a way to go compete with Amazon. They're looking for partners who can bring them new customers and new experiences, so they can focus on their core business, while we can help them on the edges. We believe PayPal's focus on innovation makes us distinctive in the way we can serve small merchants and big merchants all around the world.
To understand our advantages, we talk about 4 main topics. 1 will be where PayPal focuses in the transaction lifecycle. The second will be understanding the evolution of PayPal's product as it's happened on the merchant side. The third will be looking at the PayPal and the Braintree flywheels and how they feed one another. And finally, why we're so excited about the future and some of the innovation that's coming up.
With that, I'd like to start with why we think PayPal's focus on the transaction is differentiated from other players. So we'll start with a very simple transaction flow here. It's a cardholder entering their card information into a merchant's website. The merchant then sends it on to the processor. The processor then sends it on to the acquiring bank, to the card brands, to the issuing bank.
Most of you guys know exactly how that works. If we start at the end of this process at the back end, processing a transaction and settling funds has been around for decades. It really hasn't changed. It's the same thing that we've been doing over and over again and basically a core function of banks. As you see more and more players enter the space and less and less differentiation, this has become more like dial tone.
They're not competing on anything but price. Price is what's used to drive new business, to try to win new customers and try to compete. Ultimately, the lack of innovation and differentiation here makes this more like a commodity.
Some of the
players in this space have tried to add new geographies and add new alternative payment methods as a source of differentiation. Unfortunately, when looking at geographies and alternative payment methods, this work is very much laid out in detailed integration guides. There's often a certification process to go live. So, these are not enduring advantages. Anyone can do them.
Any development team can get these done. You just need a little bit of time. What is also really true about these alternative payment methods and geographies is there is a very rapid diminishing return on incremental payment methods and geographies. So the first couple add to the offering, but after that there's a rapid follow. On the other hand, PayPal focuses on the front end of the transaction.
This is where the consumer and the merchant meet. The consumer wants to buy something and the merchant wants to sell. We want to help merchants maximize their business and remove as much friction from that transaction as possible. Today, consumers are readily adding items to their carts and abandoning those transactions without clicking buy. They've invested the time to pick out exactly what they want, put it in a cart, but not complete the transaction.
And we think PayPal's innovation and particularly the way we focus on removing friction from the front end of the transaction by bringing consumers and merchants together really makes us distinctive in the space. A great example of this would be Braintree when we first decided that we were going to invest in mobile. We realized back in 2011 when the iPhone 4S was the device that everyone was using, in the small form factor of mobile, there was going to be new challenges that merchants weren't prepared for. People were purchasing on the go. They were purchasing in between text messages, emails and phone calls.
They were looking for ways to conduct commerce, but they didn't have a way to balance a credit card, type in all the information and make the transactions happen. Braintree released its first mobile SDKs back then in early 2012 and started learning and developing relationships with the best tech companies in mobile. And that continued to evolve and ultimately became Venmo Touch, which was the first evolution of PayPal's One Touch product, which has been the most rapidly adopted product in all of PayPal history. And this is just one example of where we focused on a specific customer need, a specific customer problem, put our innovation to work and really drove differential value in the marketplace better than anyone else. PayPal's focus on innovation has made us a partner for these merchants.
As we look at PayPal's product evolution on the merchant side, it's really been a massive transformation over the last several years. PayPal is no longer satisfied just being a button at checkout. We are a platform. You integrate to PayPal, you get access to all our assets. You can get PayPal Credit, you can get working capital, you can do the branded button, you can do unbranded.
All these are available through a single integration today. These used to all these separate integrations, different groups driving them, it was hard to upsell and cross sell. Like Bill said, everything was a separate integration. We need a lot of work done by merchants. We've taken that away now.
The platform has also deepened our relationships with these customers because now we're the one stop shop for our customers. We have more interaction with them. We're connecting our tech team directly with their tech team. We're understanding their problems and we're solving those problems and understanding what new innovation we can bring out to solve issues that are coming up and that are on the cutting edge. We want to help them maximize their business and drive their conversion and talking to our customers with that relationship is the best way to get it done.
PayPal is also mobile. You heard from Bill and everyone about OneTouch. OneTouch was a massive product for us. It showed that we were leaders in the mobile space. We're a leader in payments.
We're thinking about what was coming up. But not only that, that's the first order piece of it. The second order piece is we have some of the best mobile companies in the planet on our platform using the Braintree SDK. And the deep relationships we have with those customers allow us to spend time understanding what they need next. For example, reducing the number of calls between a mobile device, a merchant and ourselves.
Internet connections are spotty. We need speed in transaction. Latency matters a lot. So we've been continuing to push our innovation directly at the places where merchants are telling us they need help to improve their conversion rates, to get merchants to be as big as they can and to have consumers convert as high as possible. There also is the Braintree SDK.
So the Braintree SDK is a big innovation on the PayPal side. So it's one technical integration, one software development kit that gives you access to the entire PayPal platform. It also gives you the best experiences immediately as you integrate. So one touch is implemented there. Some of the testing capabilities Bill mentioned come directly as part of the mobile SDK and the SDK package you can get with Braintree.
Braintree is also the only way that you can get PayPal, Venmo, Apple Pay, Google Pay, cards, local payment methods in one integration. No one else in the planet can do that. If you want those payment methods, you would have to have multiple integrations, you would have to have multiple tech stacks, you'd have to have multiple reconciliations, multiple dispute processes, and tech companies are looking to simplify their lives, not complicate them. So we can offer all those advantages in one integration. We also continue to extend our advantage with a product called Braintree Extend.
What Braintree Extend is, it's really allowing mobile commerce to happen in ways where consumers are present. So as you think about contextual commerce, Bill gave a great example of Facebook. So, you can be on Facebook, you can be chatting with your friends, you discover a new event you want to go to and you can purchase tickets directly from Ticketmaster or Eventbrite without leaving the Facebook property. In context, relevant experiences, maximizing the sales for merchants, connecting consumers with merchants, it's only the way we can do it. Another great example of the Braintree Extend product would be card linked offers.
So today, if you do a card linked offer with an issuing bank, typically you don't know until you get your statement if you've actually qualified for the card linked offer or not. With Braintreeft's extend product, we're able to do this real time. Merchants didn't want to hold the credit card information, check with the issuing bank to see if they qualified and then show a different price to the consumer real time because no one wants credit card information in their environment. But with Braintree, we are able to connect directly to the issuer and send that information on behalf of the merchant. And then the merchant can dynamically display the price with the discount already in it after verifying with the issuer that that discount is indeed warranted for that consumer on that transaction.
So the consumer sees the price they want. The merchant is getting a lower overall value proposition a lower price for the consumer, but a higher value proposition overall. And we're connecting consumers and merchants in ways they didn't get connected before. And the results speak for themselves. As you look at these brands here, every single one of these companies up here has decided to integrate with the Braintree SDK to solve their payments needs.
Some of the most discerning tech companies on the planet are on this list. Google, Facebook, Pinterest, Live Nation, Ticketmaster, Uber, Airbnb, Wish, these are a fraction of the merchants, but some of the most compelling, fastest growing businesses are using us as their technical integration, not just a route to get last mile merchant accounts. We have a technical integration between our tech company and their tech company. There's feedback going back and forth. This is differentiated.
And we really are using this relationship to extend our advantage. We're understanding what they need. We understand the problems that they're facing. We understand what to go build next. And we're taking this advantage and continuing to make it available to the masses, such that whether you're a small customer and a startup or one of the largest customers on the planet, you use the same SDK to integrate with us.
The depth of the integration can be different, but all those capabilities are available to you just as they're available to New Year's Eve on New Year's Eve for Uber or for a new T Swift concert that Live Nation is selling. As we think about the PayPal business and the Braintree business, they really propel one another. So the PayPal brought the consumer side of the business that Braintree didn't have, And Braintree brought the merchant side. And as you've seen, every single quarter, we're increasing the number of consumers on the platform and consumer engagement. So those consumers are using PayPal more on Braintree merchants.
That creates more Braintree merchants wanting PayPal. So we have merchants using the Braintree SDK adding PayPal. It doesn't take any more code. It's that same integration. You don't have a big change.
You can test it very quickly. As we add more PayPal buttons all across the Braintree merchant base, more consumers are using PayPal, right? We're adding new consumers to the PayPal ecosystem. And these both are propelling each other faster and faster than we grow independently. One of the things of this is that this is actually a multiplicative effect, right?
That if you just looked at PayPal or you just looked at BrainFree, you wouldn't get nearly the same size growth. But together, we're getting much faster growth because we've combined them together. And we're doing it with the best capabilities we have on the planet, right? The Braintree SDK is always being updated, always being tested, always innovating there to try to see what's working and to deliver new solutions and technology to our merchants. If we think about what we've done on the Braintree side of this portfolio now, more than a third of Braintree's merchants, top merchants have either improved their PayPal integration or taken PayPal for the first time because of this flywheel effect.
That's phenomenal. When you think about the names, this is like wish.com and Airbnb, have changed their integration or taken PayPal for the first time because they were brain free customers and they wanted to test the product out. On the flip side, there were merchants that were PayPal merchants that weren't Braintree merchants that have now taken the Braintree SDK and integrated their whole platform that way and we've expanded our relationship to them. These are merchants like StubHub, Vivid Seed and Grubhub. And then there are net new merchants that neither of us had.
These are new accounts that make our sales team so excited because we've gone after white space. Neither of us had it. We weren't being successful on our own, but together we've won. These are merchants like Live Nation, Crate and Barrel and Williams Sonoma. The platform that we offer with all the different solutions are making new ways for consumers to connect with merchants.
And we're driving higher conversion rates, we're driving better results, we're allowing businesses to reach their potential. PayPal's innovation is making us a core partner for merchants. And if you think about why we're so excited about the future, there's a lot of innovation that's happening over the next several quarters that we're ready to release. Bill mentioned smart buttons. Smart buttons are becoming more and more relevant for our merchants every single day.
It's almost every week now you hear a new type of pay being announced. A merchant can't have 20 different payment buttons on a mobile checkout. So they need help. They're asking us how do I simplify checkout? How do I maximize conversion rate?
Which ones do I show? Smart buttons are exactly that. We heard the customer need, we went and we built a solution for it. We can tell the merchant which are the most likely payment methods to show to allow them to get the highest approval rates on each consumer. And it will be dynamic by consumer and by their trends.
We're also democratizing access to many of the capabilities that PayPal has. PayPal has some fraud capabilities that are largely unmatched in the world. We guarantee 100 of 1,000,000,000 of dollars in payments through our protections. Right now, we traditionally leave that mostly for our branded side of the business. Well, we can expand that capability.
We can let others use our risk engine to modify it for their specific risk profile and risk tolerance. So risk as a service is something that we are actively working on and testing the merchants, so they can and use the rules that we have as PayPal to build their business and expand it into regions and countries and transaction types that they wouldn't have done before. There's also the processing optimization of PayPal. PayPal has a massive sophisticated box that's built on getting the highest approval rates, lowest latency and lowest cost. Right now, we reserve that really for the PayPal branded portion of the business.
We can expand that and allow merchants to access that same capability on credit card transaction and all other types of processing that they do through us. This is something we will bring to bear in the next several quarters and allow merchants to benefit from the higher approval rates, connecting consumers to merchants using innovation to differentiate us from the competition. As we come to the end of this part of the conversation, there are a few points I want to leave you with. The first is PayPal focuses on the innovative part of the transaction lifecycle. We focus on the front end where the consumer and the merchant intersect and we work extraordinarily hard to drive out any friction that exists there.
We're not a button anymore. We're a platform. We're a set of solutions. We're a set of assets. One integration can get you access to all of it.
We've taken our advantage in mobile and we're extending it. We're using the relationships we have to deeper technical connections and figuring out what we need to build next. The Braintree SDK is the best way to accept PayPal and is also the only way when you have PayPal to accept Venmo, Apple Pay, Google Pay, cards, local payment methods in a single integration. Any other solution will complicate your technical stack, require a lot more work, both in your back office, front office and your tech team. Braintree and PayPal's businesses have propelled one another.
PayPal has brought the consumer side, Braintree is being the merchant side, and we're seeing them speed up because of one another. And the innovation right around the corner is truly remarkable. We have the smart buttons coming out that are going to help the problem of which payment methods to show at which times to which consumers. We're unleashing the capabilities that we have in our fraud platform and our payment optimization for all merchants to consume and to benefit from. We're focused on making merchants as successful as possible so they can maximize their business across the globe.
As you guys as analysts today, I hope this is helpful in explaining a little bit of the PayPal merchant strategy for you. And we're really excited for the future because we think innovation wins this race more than anything else. Thank you. I'd like to turn over to Jon Koons, who runs Global Consumer Strategy and Product for PayPal.
I just love hearing Amit talk because every time I hear him talk, I'm so excited about what's happening on the merchant side because that drives so much value into the consumer side of the business. You can't overestimate the power of this 2 sided network. And Amit just did a great job talking about what they're doing for that 2 sided network. And now I'm going to talk about what's happening on the consumer side related to this 2 sided network. We will continue to build the basic value proposition for consumers, which I'll talk about in a moment.
And we will also continue to build consumer segment by consumer segment on a global scale. And in combination with that 2 sided network, the power of that 2 sided network and this amazing onset of partnerships from issuing banks and ecosystem partners, we aspire in the long run to reach a 1000000000 consumers. A little bit later on in the program, you're going to hear from Leah about how we build software now, how we put the customer first, how we do discovery, how we work on end to end solutions. We have this literally maniacal, tenacious, relentless attitude to build the best possible solutions we can, not the minimally viable, the best solutions we can for these segments of consumers. And that we think makes this objective, this aspirational long term objective of 1,000,000,000 consumers realistic.
And let me tell you a bit about why I think that. You heard Amit Bill and Dan talk about PayPal being more than just a button. And Amit did a great job talking about it from the merchant perspective. Well, I'm going to talk about it from the consumer's perspective because we are way more than a button. We offer 3 things in the basic value proposition for all PayPal consumers.
The first thing we do is we make consumers more confident to shop online. We have the world's best risk management, anti fraud technology, compliance technology that presides over all transactions to protect consumers. But if there was by some chance, let's say you buy something from a merchant overseas that you've never bought from before and the goods don't come or the goods don't come as expected or you just change your mind. Well, guess what? PayPal protects you.
You can return those goods with our free return shipping on eligible purchases. Who does that? Who in Payment Processing lets customers just unilaterally return goods and let them do it easily and for free? Well, PayPal does. And with the onset of mobile, and you guys can all appreciate this, people expect more convenience.
When was the last time you whipped out your mobile phone and you used an app and it was kind of wonky? And you said, that's a stupid company. And that's because you're expecting more as a consumer. We know this. We know that customers expect with that little device to be able to do things more easily, which is why One Touch was so important.
It made commerce on mobile, which is where everyone is buying stuff now, much easier. Because of this amazing technology we have, we can have high confidence that you are you. And so with the click of a button, you don't have to give a username or a password or your shipping address or your billing address or your financial instrument. You can walk down the sidewalk while on a conference call looking at your phone and buy something from nordstroms.com that you promised that you would buy without really thinking about it. And thirdly, we offer our customers the greatest flexibility in Choice.
You've been hearing about Choice for 18 months or so now from us. Well, it's become a central part of our value thesis. Simple, let customers do what they want to do and they'll be more loyal. Let customers buy from any device, from any operating system, from any place. Let customers fund the way they want to fund things.
It's all the discussion on rewards points you heard earlier is going to be a tremendous part of providing more flexibility. And now when you receive money on PayPal, you can more and more instantly access that money to either buy things, send things in P2P or withdraw that money right into your bank account or onto your debit card instantly. So flexibility and choice and speed are all becoming part of this basic value proposition. You think about when someone we hear someone say, yes, we compete with PayPal on payment processing. And again, earlier you heard Amit talk about the back office versus the front office.
Well, we always ask ourselves, well, do they really? Do they have buyer protection? Do they have free return shipping? Do they have the most convenient, most secure way to buy on mobile? Do they have flexibility and choice for their consumers?
Do they let people in Germany pay after they've received goods? That's what we call pay after delivery. No, probably not. So, it's really important as you think about the ecosystem that you also think about the consumer value proposition as I've just outlined. And obviously, if this was all I just had to say about consumer value prop, I think that'd be fantastic.
But it's not the only thing I'm going to say today because while we're extending the value prop that I described, we're also segment by segment delivering value for our consumers that goes well beyond the basic value proposition. I'm going to give you 2 experiences I mean 2 examples. One is well known and proven at PayPal, it's our P2P business. You heard Bill touch on it a little bit, I'm going to touch more on it. The second is something we've been talking about in our vision that we're just now beginning to execute on with a product portfolio for the unbanked.
Let's start with P2P. The power of 3 wallets. I like to say it's sort of different courses for different courses. Even in one use case called P2P, we have decomposed this use case into 3 consumer segments. And we have targeted 3 brands for those segments and those brands each have focused all of their efforts on building the single best solution for that customer.
So we have Zoom serving 1st generation immigrants here in the United States on a very emotional use case of sending money back home from here to loved ones back home. Now loved ones back home often don't have a digital experience. So that money has to go directly into a bank account or has to be paid out in cash. That's all that Zoom does is focus on that 1st generation immigrant use case and they do it really, really well. Then we have Venmo, which of course everyone in the room knows about, specializing in a millennial demographic who's grown up in social digital social circles and expects the movement and management of money to be social.
We have an entire business unit focused just on that use case. And then there's PayPal, very biased towards Global Money Transfer and global commerce. You can buy something anywhere in the world with PayPal's P2P rails. The numbers are astounding. Dollars 103,000,000,000 of processed volume in the last 12 months.
Year over year growth rate over the last 3 years always better than 40%. And it's important to note that this is all or mostly all consumer to consumer volume. And oftentimes when you hear about volume metrics in the P2P world, you will hear about volumes that's business to business as well. Ours is all consumer to consumer when we talk about these numbers. And according to Business Insider, by 2021 this business on mobile will be about $336,000,000,000 It's nice to know that our numbers are as big as they are already.
And trust me, we're not stopping here. It's only going to get better. We never stop at PayPal. We're always moving. We're always pressing forward on these customers' needs.
On the Zoom side, which today is focused on U. S. Remittances, that team is now focused on global origination and globalizing the solution. On the Venmo team, which was just focused on social P2P payments are now focused on drawing that into commerce use cases as you heard Bill talk about. And on the PayPal side, this gigantic business in P2P for purchasing goods and services worldwide, we're going to make that use case easier to use, more prominent in the wallet and even more fun in social.
So these brands are moving forward according to where their customers are taking them. And as you saw on Bill's slide, I'll just mention one important thing here that it's a quarter of our new customer acquisitions, but it's also our fastest growing channel of acquisitions. And when you think about a P2P customer checking out twice as often as a non P2P user, what does that point out? It points out that even within the consumer value proposition, we have our own flywheel because as we're moving people from one feature to another, they get more engaged in the entire platform, which is why we want to bring P2P into new context. We want to give more and more of our consumers reasons to use this use case.
To give you a great example of that is a new feature we just launched recently called Money Pools. This is taking the concept of person to person payments and moving it to group payments. So now if you're with 5 of your friends going to go to a wedding in a few months, you can all pitch in and buy the bride and groom one big wedding gift. You can set aside money as a group to go on a group vacation. Or I don't know how many of you have experience managing a classroom as a volunteer room parent or if you're a coach of a sports team for your kids, trying to raise money in that context super hard, very awkward actually to ask people, oh, can we have $15 to give the teachers so they can buy school supplies?
Now we can just launch a money pool and ask people to donate that way. There have been 250,000 such pools launched since we launched this feature. And this is really cool. 1 out of 7 contributors to a money pool are new to PayPal and 1 in 4 contributors to a money pool are new to P2P. So that means they were just using us for commerce.
They see this new context, this new experience and now they start using P2P. And on average if history holds true that customer will now start checking out twice as often. That's what I mean by that consumer flywheel. Even inside the consumer business, we have a flywheel. We just keep adding value.
And we always want to be where our customers are going. And with that platform that you've heard us talk about and you'll hear more about it later from Sri and Leah where we have this ability to efficiently integrate into new experiences like Facebook or Google or Alexa or Skype where you can send money and interact with people using PayPal in these new experiences. And in context payments, we built this PayPal. Me link so that you can sell goods and services and charge through a link that you can put in Instant Messenger, on Facebook, and Pinterest. And already we have 17,500,000 links have been established.
So we're always trying to think through the new context and how we can be there before the customers get there so that when they come we're there with a complete solution. So P2P is an example of tried and proven segmented use case and even in P2P we had 3 segments, right? Well, here's another whole new segment. You've heard us talk about democratizing financial services, helping people move and manage money, making access to money easier, simpler, more secure, more affordable, bringing more people into the world of digital payments. And that's where our unbanked portfolio comes into play.
Boy, if you can't get up out of bed in the morning and race to work to serve this use case, I don't know what could possibly get you out of bed. 2,000,000,000 people around the world don't have access to bank accounts. They live outside the circles of our traditional financial services. 30,000,000 Americans spend 9.6% of their income with alternative financial services providers which just so happens to be the same percent of income the average U. S.
Family spends on food. This is why we like to say it's expensive to be poor. We can do a lot better than this, can't we? We know that half of Americans, if you were to walk down Main Street USA, every other person you see wouldn't have $400 in savings to pay for an emergency, wouldn't be able to fix the car, wouldn't be able to take their child to the emergency room without being an abject fear of how they were going to pay for it. We know that 85 We know that 85% of today's transactions are still in cash and in checks.
And if we brought that business into the digital world with all the convenience associated with it, while lowering all those costs for doing business outside of our financial systems, we would see $3,700,000,000,000 of GDP added to the markets of emerging markets while doing good for so many consumers. So this is what PayPal is doing about this and we've just started. We launched a portfolio of features recently. Starting on the right side of the screen you'll see the PayPal Cash Mastercard, which allows the unbanked to join the world of digital commerce. They can now pay for goods and services online.
By the way, lots of online goods and services are cheaper than you can get them offline. But of course because it's a Mastercard you can also use this card to shop offline. So now we have a card that enables digital commerce and offline commerce simultaneously, ubiquitous payments in other words, how do you get money onto the card? Well, if you're an unbanked customer and you are getting paid by payroll, just put it onto the card via direct deposit. If you're one of the many unbanked customers who are paid by check and you walk down the mission after the program is over and find your first alternative financial services provider and I can promise you many of the people online there are going to be handing checks over the counter to get cash at a huge cost.
Well now you can just scan those checks and bring them into PayPal instantly at a small cost or over time for free. And for those living in the cash world, gee, we have 30,000 retail locations, CVS, Dollar General, 711 are just examples of retailers where you can now walk in, put $100 on the counter and see it show up in your PayPal balance seconds later for a very, very small fee. And once that money is in PayPal, of course, you can spend it the way I just described, but you can also manage it. So we talk about the movement and management of money. When we go out and talk to the unbanked customer, one of the things that we see rings true is that they store cash in secret places because they want to immunize themselves from unwisely spending that cash.
The spot in the money in the shoe box is for rent. The money under the mattress is for the car payment. The money in the cookie jar is for food. And boy that little piggy bank over there I put my coins into that's for date night once or twice a month to go see the movies maybe. Well, we have this thing called goals.
These are digital places to put money to help people from unwisely spending their funds. It turns out if you just remind someone to save $1 or 2, they will. And if you don't remind them they probably won't. So you're going to see a growing portfolio of functionality in this category of management to help these customers live financially healthier lives. So exciting.
Let's cut to a video now to show you a customer who's used this.
Being a freelance worker, I don't have a steady income. 1 month I get one check, the next month I get 4 checks and I have to find a way to use that money. My name is Amy and I've been using Pay Pal for about 4 years. I use my Pay Pal cash Mastercard to pay for everything I need, groceries, pet supplies. I love having it because it's free to sign up.
The fees are lower than the other prepaid cards and there's no minimum balance.
What I
used to do is when I got my check, I'd go to one store, cash it, have to get a prepaid card, pay the fee, whatever it was, load it and then I'd use it and at the end of the day I would end up losing a portion of my paycheck just to pay. It was very time consuming, it was very costly and it was real pain in the butt. Then I learned a secondary option for me would be to use PayPal. Now I get my checks mailed to my home, I open up mobile check capture,
take a
picture of my check and I have my money in my PayPal account. It is way better than the old inconvenient way. I feel like the world is not set up for people who don't have bank accounts and PayPal makes my world easier. I have a life and I have much better things to do than go from store to store in order to get my money that I've earned.
Love that video. And we love these customers, and we love solving their problems. And it's working. And the money that goes on this PayPal Cash Card,
a third
of that money is re spent on the PayPal platform either in checkout or P2P. And if it's not spent on the PayPal platform as we know it today, it's spent on that card expanding our merchant base to places like McDonald's and Amazon and Walmart because they're using the card at those merchants offline. And the interesting thing is that the card customers using this portfolio features are using PayPal 5 times a week which is of course a lot more than 2 to 3 times a month on our averages. So this just proves that if you focus on a customer segment, deliver the single best solution for them that they will engage at higher and higher rates. And I think that is a great illustration of things to come.
We have an architecture that allows us to globally deploy but configures itself for local relevance by customer segment or by geography. So let's just say we went to Mexico and said what does the general market in Mexican need? We know they want digital commerce. They want P2P. They want the ability to bring cash into the system.
They want the ability to pay their bills. Otherwise they have to stand in line to pay their bills. They want the ability to pay for local transportation, to pay a prepaid mobile phone. We can add these use cases into a focused segmented solution for a market like that and bring it to market now because of the way our technology is organized and because of the way we build software now. If we were to build this for people who live and work in Manhattan like probably many of you do, you could tell me during the break what use cases we would want in that solution and we'd have the ability to deliver that.
So that's just part of the overall story here. We have a generic consumer value proposition that applies to all PayPal consumers. And increasingly you're going to see us delivering customer segment by customer segment value proposition to drive an internal consumer flywheel that drives a 2 sided network because of our global products and because you're going to begin to see a multi use walled experience that goes beyond just commerce and P2P. And drives engagement that is much higher than our averages today. On top of the ability for us to reach 1,000,000,000 consumers.
That is a story from the consumer side of the house. Great value prop, focused segmented value propositions, multi use wallet, a 1,000,000,000 consumers. Thank you very much. I'd like to bring up Gabrielle now.
Thanks, John. That was incredible. We're ready for our break. We're right on time. So let's plan to restart at 10:50 in approximately 20 minutes.
As a reminder, again, please fill out any questions on the cards on your tables so we can collect them and answer them during the Q and A session. Thank you.
My name is Rose Morris. My company is Abrams Nation and we are in Gibsonia, PA. The company started because of my son, Abram. Come sit right up here. He has autism.
And when he was 2, we were having a really difficult time keeping him in bed. He was crawling out. I thought it was a danger. We needed a way to contain him and keep him safe so that we could also sleep and not be worried that he would be doing all sorts of things in the middle of the night that a 2 year old shouldn't be doing. So we created a safety sleeper for him and it was an amazing gift.
Bedtime now is a cinch.
Getting a safety
sleeper, good night, kisses, and you leave, they go to sleep. As soon as I had the safety sleeper and I knew how great it was for us, I figured there had to be other people.
Please welcome back Gabriel Rabinovich.
Hey, so we're back, home stretch. Everyone, if you could sit down, that'd be great. We are going to start with a video and then Jim Magat is going to come on stage and talk about Choice and Partnerships.
As we were coming out of the eBay split, we were thinking about who we wanted to be. And we made the real important decision for us to be an open platform. And in being an open platform, what we wanted to say is, let's get as many customers onto our platform as really excited really excited with the progress that we've made.
To have PayPal and Visa come together is something that just made a lot of sense for both of us. The agreement that Visa and PayPal struck first in the U. S. In 2016 had several beneficial elements for consumers and our joint clients. The first is consumer choice, simply allowing a consumer to decide how they want to make a purchase.
The second would be simple money movements. And so this is making it easy to move money into and out of the PayPal and Venmo environments. Data integrity, making sure there's good, clean, understandable data for PayPal transactions. And then finally, security and safety and the provision of tokens to PayPal so that PayPal can proceed to attack new verticals and new use cases for their consumers.
One of the things I think that's most exciting about the partnership with PayPal and Citi is what we're bringing to our mutual customers. And the trust people have in PayPal and the trust they have in big banks around keeping their information safe and secure, the power of bringing all that together makes for a really great partnership.
The partnership between Banorte and PayPal means Banorte is going to be able to continue evolving in the digital spectrum, but now doing it hand in hand with the leader in payment processing.
Choice strategy, we've been able to PayPal and we've aligned around the choice strategy, we've been able to really accelerate the partnership and find a tremendous amount of common ground.
The payment space is evolving and changing constantly. And now is a great time for us to leverage our long standing relationship and lead together in the next generation of what payments will become.
Our aspiration is to be the platform of choice for all of these partners as we go forward. Thanks for coming back. This morning, I had a bit of a divine Providence moment. I decided to take a run and I came out of the hotel, I made a left and a right on Market Street. So I went one block, I saw a Citibank branch on my left.
Went another two blocks, I saw a Bank of America branch. Another two blocks, Wells Fargo, then Chase. Then I saw another Citibank branch. And finally, I ended up by the Ferry Building and I looked across the street and I saw the Visa Building. 0.6 miles, but a long journey that we've come over the course of the last 2 years.
Who would have imagined 2 years ago if you were at our last Investors Day that we would be sitting here today in words coming out of the mouse of Visa, Mastercard, Citi and others trust, partnership, collaboration, digital leadership. 2 strategies came to fruition for us to make that 0.6 mile march and absolutely come to fruition for us. Number 1, our decision to move to customer choice. Customer choice is enabling our customers to pay however they want, whenever they want, wherever they want. In moving to customer choice, we not only removed the friction for our customers, we moved the friction for us to partner with members of the ecosystem.
Concurrently, we made the decision to be an open platform, not a walled garden, not a place where we did it our way. We embrace network standards. We embrace partnership as a way forward because we knew only together that we can collectively accelerate digital payments. Don't see these as 2 individual strategies. See these as 2 complementary strategies.
Choice begets partnerships and partnerships gives better choices to our customers. Collectively, this viral impact drives engagement for us and our partners in better, frictionless and more flexible payment experience for our customers. Now I've had a privilege of having a front row seat for our movement to choice and the creation of many of the partnerships that we've had, especially with the ecosystems and networks as well as the issuers. What I want to do today is answer a few questions that I've gotten for the last several months. Number 1, how is Choice performing?
Number 2, why would anyone want to partner with PayPal, especially a bank? Number 3, what are the encouraging and early signs that we see in partnering with banks and networks? And why ultimately we think we can be the payment partner of choice for all ecosystems. So let's begin with choice. Now as Dan alluded to, I've been with PayPal for a long time and I've had the privilege or pleasure of sitting in many a town hall meeting.
And when Dan came into PayPal, at the time, there was a bit of an existential battle going on within PayPal. Are we a tech company or are we a payments company? It was like the old beer commercial, going back and forth, payments, tech, payments, tech. And then one town hall right after Dan started, some brave soul had the audacity to ask the question, Dan, what are we? Are we a payments company or are we a tech company?
And I remember Dan looking down, looking up and answering neither, which I said, good job, Dan, you've just alienated 100% of the company as we've gone through that. But what Dan went on to say is that we are and will be a customer champion company. And as a customer champion company, we will do things that are in the best interest of our customers even though it may be misunderstood by the public, even though it may have short term financial impact to us because in the long run being a champion of our customers will always be the way that we will maintain growth and maintain our position of digital leadership. And so as we reflected on that profound proclamation of being a customer champion organization, we basically looked at what are the most core experience that our customers have and what we can do to make sure that we are always a customer champion for them. And Choice is a very subtle change.
Now you could look at these 2 different experiences go, what's really different? And to the naked eye, it doesn't appear that there's very much. But from a customer point of view, it's a very profound chase. Number 1, what we have done is we've made it possible for a customer to set any one of their funding instruments as a preferred method of payment. Number 2, we basically made it so you can see all your funding instruments as you check out.
As Bill referenced and John referenced, we want to create the digital manifestation of your physical wallet in a digital environment for you as you go forward. Previously, when we weren't acting as a customer champion, we made it very hard for you to do what you wanted to do. So imagine you're a Bank of America customer and you want to use your Bank of America rewards card and you're on PayPal and you're about to check out and you just happen to have had balance in your PayPal account, well guess what, you weren't able to use it. We made it impossible if you had enough balance to use your Bank of America Rewards card. If you had an ACH or bank account attached, well, you could get to your Bank of America rewards card, but it would take many steps to be able to do that.
And so we came out and said we want flexibility for our customers. We want frictionless experience. And while choice has become an experiential change for us, as John alluded to, it's a principle by which we operate. Choice and flexibility is embedded into all that we do. So about a year ago, as the NBA finals were just about to launch here in Oakland, on TV, we decided to come out and show what choice really meant to our customers in an ad that went out right before tip-off of the NBA finals game 1.
And for us, we were tipping off our entree into giving choice for our customers. And I believe this ad really demonstrates the flexibility and the convenience of using the PayPal wallet. Can you roll the video please?
PayPal lets you check out with any of your payment types because sometimes debit makes sense. And other times, credit makes sense.
Flexibility, ease of use, these are the operating principles that we operate with our customers. Now I can't tell you 1 year later who's going to be the NBA finals, but I can tell you unequivocally that our customers love Choice. We're now a year of launching Choice in the U. S. Around the world, roughly 85% of our active customers have Choice available to them today.
Our intention and expectation is by the end of Q3 Choice will be fully live globally. In addition, what we've seen globally is that we have roughly 40,000,000 adopters of Choice, meaning 40,000,000 customers have set a preference of how they want to pay in transactions going forward. What's also interesting is what they have said as a preference. From our calculations in the U. S.
And this trend is now holding true globally, 70% of what they are setting as a preference is what we would consider a lower cost funding instrument, I. E. A debit card, ACH, PayPal Credit or PayPal Balance. What's also interesting is the flexibility that our customers are showing and really what is unique about the PayPal Wallet. Think about it.
25% of the time that someone has set a preference, they're using another funding instrument, 25% of the time. Just like your physical wallet, when sometimes you pay want to pay with debit and sometimes you want to pay with credit, PayPal's unique advantage is that we give customers that flexibility. In addition to that, Choice has created an environment where customers are calling less to us and they're also staying with us longer. Just look at the U. S.
Alone in the last year, we have 2,000,000 less customer contacts from Choice. That means 5,000 customers a day are more satisfied. They're not calling into our centers. What's also important to see is the halo impact of Choice. They're using us more and spending more when they're using PayPal.
We have seen an incremental lift of more than 10% for those that adopt a preference on PayPal. So they're using us more than 10% more if they set a preference over all other users that we have. So taken together, Choice has made good business sense for us, but more importantly, it's made great sense for our customers. What Choice has also allowed us to do is to create a network of partnerships, which Bill alluded to and Dan alluded to. And why this is important is the potential of these partnerships.
If we just look at the U. S. Alone and the U. S. Bank partnerships that we've created with 7 out of 10 of the top credit and debit card issuers, plus we look at the partnership that we have with FIS that gives us access to thousands of small and medium sized banks.
Those partnerships alone give us an opportunity to work more closely with over half of the spend that is today done on credit cards and debit cards. In addition, if you think about tech platforms and social platforms, which Bill alluded to, we have the opportunity now to work more closely with tens and hundreds of millions of more consumers and merchants around the world. While it's easy to see why partnerships make sense for us, let's take a step back and let's see why do partnerships make sense for our partners, specifically banks. Now Bill alluded to this before that digital spend has been one of the greatest source of growth for banks, Where they're seeing their increase of usage is in digital environments, P2P environments, mobile payments. PayPal creates an additional accelerant for digital spend for these banks.
Bill referenced the Comscore and the different surveys that we have that in essence when a consumer is shopping with PayPal, they're twice as likely to make a transaction. So if your Discover card and your customer is going on to walmart.com, they're twice as likely to make a transaction if they use PayPal versus any other funding mechanism. Incremental volume for the issuer, a better experience for the consumer, more volume for PayPal. The 2 sided network, think about it. PayPal in essence is a huge distribution channel for banks and networks.
When Visa wants to roll out its Visa Direct product or Mastercard wants to roll out its MoneySend product to many customers around the world, one integration to PayPal gives them the opportunity to have their customers have their debit cards be used as an exit vehicle to withdraw money instantly. One integration to PayPal gives them the distribution power of over 200,000,000 points of presence for that experience. In addition, we are a free, open and collaborative customizable platform. We are free. We don't charge our partners to use our platform.
Number 2, we are customizable platform. So if you're Barclaycard and you're in a position that you want to offer a specific merchant offer for customers on PayPal that are shopping at House of Fraser in the U. K, PayPal can do that for you through customization. So taken together, incremental volume, distribution and customization is why banks and others are choosing to partner with PayPal in bringing our unique advantage to them. Now we are in the very early innings of this journey on choice and partnership, but we are extremely encouraged by what we're seeing.
I want to go through a few examples of things that we have launched or about to launch within the next 6 to 9 months. And this is a really good example of an initial thing that we're doing right now with Bank of America. And so what this is, is account linking. So if you go on to your Bank of America app, you can in essence within a few simple clicks create a new PayPal account. If you're an existing PayPal card user you can with a few simple clicks add any one of your Bank of America cards into PayPal.
In addition, when you do that, those cards will always be good cards for you. They'll never expire or they'll always be usable within PayPal as we go forward. Now why is that important? Number 1, customers love choice. Customers like flexibility.
So if you give a customer the ability to have multiple funding instruments, it's highly likely that they're going to convert more and they're going to have more spending power within PayPal and on the bank's instruments and they're going to be more satisfied. Another issue that customers are facing more and more today is what we call stale cards. In essence that we've all something we've all experienced. It is estimated that each year a third of all cards go bad, meaning that they're either lost, stolen or need to be replaced. It's probably something we've all experienced, right?
We put our cards into Netflix or Comcast or any vaulted experience. Our card goes lost or stolen. We kind of go, now we're going to retype that into all those different locations. This is a very acute problem for recurring billers. We see with some of our recurring billing merchants that they decline over 20% of the time their transactions because cards go stale.
Through this service, your card will always be fresh. You always will have a funding instrument available to you. So now instead of thinking about having to put your card into all these different locations, just put your card into PayPal. It will always be fresh and you always will have flexibility. While it's very early with Bank of America, we're seeing thousands of Bank of America customers per day go through this experience, many of them new to PayPal.
In addition, what we're seeing is a pretty powerful pre post engagement lift. For those that have gone through this experience, we're seeing as much as a 30% increase of spend on our platform from this experience alone. Giving people fresh instruments in flexibility is a powerful way to drive engagement. Good for Bank of America, good for PayPal and more importantly good for our consumers. In addition, you will see this experience roll out completely with Citi, Discover, Chase, Benorte and Shinhan Card in Korea by the end of 2018.
Another thing that we are doing is trying to reduce declines. Again, this is something I'm sure we've all experienced. We're in a moment of trying to make a transaction real quick and then the message comes up, please call your issuer, your transaction has been declined. Well, what happens? Basically, because issuers are a one-sided network, they're operating with imperfect information.
They only know you and they see some pattern of behavior that you've had. PayPal is a 2 sided network. Bill did a great job of demonstrating the power of that 2 sided network. What is interesting is that we have close to 50 petabytes of risk data. We have seen pretty much every online transaction that has happened.
We've seen good users. We've seen bad users. So now what we're doing with issuers is infusing our risk data into their scoring mechanisms because we've seen both sides of the transaction, PayPal can give them more perfect information to decision a transaction. We started to pilot this with some of the leading issuers in the U. S.
And around the world. And we estimate that we can see order of magnitude of about a 50 basis point improvement in their overall approval rate. And in this way, we can make sure that A, the customer is happy, B, the bank again is driving as much volume as possible and C, we benefit from incremental transactions. The other area of focus is how do we drive more flexibility in how people pay and be paid. Bill referenced our instant transfer solution that we've been rolling out over the course of the last several months.
Again, instant transfers is the ability to add your debit card to a PayPal account and instantly within seconds get that money into your bank account. It's your money. You deserve to have it as quickly as possible. The pain point that customers have historically had is that it takes several days to get your money out. In the existing world of ACH Networks and whatnot, it could take as much as 3 days to get your money out of a PayPal account.
So if you basically say I get paid on a Saturday, I have to wait for Saturday, Sunday and Monday to actually get my money. Now with instant transfers, instantaneously you have access 20 fourseven, 7 days a week. And this solution has been rapidly adopted. If we just see over the course of the last couple of months, we have over 8,000,000 unique users of this solution that we're also able to monetize. In addition to just being able to create a great service, we're seeing benefit on our overall platform.
For those users that use Instant Transfer, specifically our active users, we're seeing an increase of accepted volume or increased receipt P2P and overall volume of over 7%. When you have liquidity, people want to use you more. Great for Visa, great for us, great for our customers. Now the other area that has been mentioned a few times today, which I think warrants a few minutes on is reward points. Now the problem statement that we see today is that there is over $100,000,000,000 in the U.
S. And Canada of unused credit card rewards that sit on the sideline. Think about it. I'm sure all of you in this room, you probably have a portion of this $100,000,000,000 sitting in this room, that in essence you have reward points with banks, you have reward points with groceries, you have reward points with different retailers and $100,000,000,000 sits on the sideline, namely because you don't have a very liquid way to use those reward points. This issue is extremely acute amongst banks.
Financial Times estimate is that the top 6 banks in the U. S. Alone generate about $30,000,000,000 of reward currency per year, of which only 2 thirds get used. So if you're a bank, a third of your rewards points sit as a liability every year. If you're a customer of a bank, you have very illiquid ways to utilize them.
And so now what we are doing within PayPal is enabling those reward points to be real currency for you at any one of our 19,000,000 locations. You can use all of your reward points for a transaction. You can split the transaction among reward points. And in doing so, you have a liquid place to utilize all those reward points. What we anticipate is that by the end of the year, we will have this capability available for Citi, Discover and Chase in 2019 with Barclays.
So we're very encouraged by the power of reward points for us. The other thing that we are doing is co marketing programs and these are mostly funded by the issuers. And in these co marketing programs what we're trying to do is to let our customers know about the choices that they have within PayPal, in certain cases where they can get better value by using PayPal. So over the course of the last several months, over 20 issuers have ran promotions to have their customers utilize PayPal, in certain cases, incenting them with money to do that. So imagine 2 years ago, banks like Citi, Bank of America, HSBC paying their customers to use PayPal.
Now we're there because we're their partner. So you have 2 examples right now that are currently in play. So if you're a Chase Freedom Card user, now through the end of Q2, you're going to get 5% or 5% cash back bonus by using your Freedom Card within PayPal. If you're in the U. K.
And you're on Facebook, you can win free tickets if you're a Visa cardholder to the World Cup. These are all opportunities for us to extend the value of using PayPal in conjunction with banks. What we're also looking to do in 2019 is to create the opportunity for banks and others to message in our properties the value of their specific funding instruments. So if Chase wants to indicate in that checkout flow that you saw earlier that use your Freedom card and you're going to get 5% back, they can message that in our flow. It helps our customers make better choices.
What we also see is a lot of network effects for the issuers in PayPal. On average, what we are seeing when we're running these marketing programs is a 10% lift in actual issuer spend on our platform. So by just running these marketing programs, issuers are seeing more volume, PayPal is seeing more volume and better benefits are coming to our customers. Let's think about this from a global perspective because what we've talked about so far has been mostly in the U. S.
We are taking these experiences and we're moving them global. If you look at the partnerships that we've announced, over half of them focus on outside the U. S. And what's interesting is that we can customize our partnerships based upon the geography. So for example, with Barclays, we're leveraging PSD2 and Open Banking to give Barclays SMB customers the ability to see all of their PayPal transaction history within the Barclays banking environment.
In addition, think of the global scale that we now have the opportunity to participate in. Markets like Korea with Shinhan Card or Benorte in Mexico, these are markets that PayPal has been traditionally nascent from a consumer side. By now partnering with these 2 banks alone, we have an opportunity to work more closely with over 50,000,000 potential consumers. Power of this is unlimited for us and we're very excited to take this globally. So Bill talked to you about tech platforms and the opportunities that we have there.
I've talked to you about the power of payment networks and issuers and the potential that we have there. We have over 30 different partnerships. Now it's important not to see these partnerships as unilateral partnerships between 12, But these are a collective effort that give mutual and reciprocal benefit to all members of the partnership ecosystem that we've created. So think about this, If you're a bank and the partnerships that we create with banks, that benefit accrues to tech platforms. If you're a tech platform and we create a partnership with you, that benefit accrues to our banking partners.
Classic case that's been described today that I'll reiterate because I think shows the power of this. If Google on Google Play wants to enable reward points as a currency for its customers, it does not need to create one partnership with Discover, one with Chase, one with Citibank. One partnership with PayPal creates that capability. Conversely, as you saw from Bill, if Citi and others want to make sure that their customers have a very seamless experience in Facebook Messenger or they have a seamless experience on GPay, one partnership with PayPal unlocks that. So collectively, one integration gives you the power of issuers, tech platforms or even PayPal.
Frankly, the beneficiary will be customers. Today, they're living in a very disparate world. Payment experiences are fragmented. And PayPal has the unique power to be the connective tissue that brings all those experiences together. Whether you're shopping in India, Indiana with reward points, with your debit card, in a marketplace, in store, in app, PayPal has the power to deliver that connective tissue to create that one common experience that reduces friction, creates flexibility and always has a consistent experience wherever you're at.
And so today, while it is very early, we are extremely encouraged that PayPal can be the partner of choice for all ecosystems and its customers. And with that, I give you the great pleasure of introducing Sri Srivanandan, who will talk to you about the tech platform that's powering that. Thank you.
Good morning, everyone, and thank you for being here. You heard a lot of conversation about the platform this morning. Every single talk so far has mentioned the platform. I'm sure many of you are curious about what powers this platform. And what I'm going to do today is take you under the hood and show you that a little bit.
In my 20 years as a webscale technologist, I've never been more excited about what technology can do to create value for the business. Today, I'm going to take you behind the scenes and show you a little bit of how the platform is laid out, give you an idea of the scale at which we operate internally, show you a few of the core tenets that we apply to technology, some of the journey we've been on and some of our focus on the future. Let's get started. Let me take you under the hood and show you what the technology platform is all about. It's best to think of this in 4 layers.
The first layer in the technology platform is the infrastructure and operations layer. This includes our data centers, which house all our servers and support all our applications around the world. It includes all of the hardware that we purchase and run on a continuous basis, which we design with our partners, we supply chain with them and we cycle it through every few years. It includes the network that connects all our data centers globally and connects us to our customers and our customers back to us the cloud environment that helps us mechanize, automate, manage and operate all of this infrastructure and finally, the 20 fourseven operations that helps the billions of payments that happens every year on the PayPal platform. Up from here is the 2nd layer.
This first layer that I talked about, think of that as the skeletal backbone of the PayPal technology platform. The second layer from here is a technology platform. This is a system software layer, which makes our developers extremely productive. They can work on ideas and make sure that those ideas hit the customer in a quick way. This helps them be productive through tools, language utilities, and this is the layer that takes care of all the common aspects like cybersecurity, key management, cryptography and so on.
This also includes the analytics platform. We are a data rich company and we use all of that data to process it on a continuous basis and use it in decisions on internal processes and on customer experiences. Think of this layer as the nervous system of the technology platform. Up from here is the payments operating system. This includes our identity platform, which we use to manage our customer manage which we use to generate and ensure that all of the transactions that we have on PayPal are safe for our consumer, for our merchants and for the platform the compliance platform, which helps us ensure that we are compliant with all the regulations around the world and finally, the credit platform that allows us to give lending options to our customers.
Think of this as the brain of PayPal. And finally, up from here are the experiences, the consumer experiences and the merchant experiences on web, mobile and through APIs, the POS devices that we have out there and also the customer service experience where we make it whole when something goes wrong for a customer. This is the heart of PayPal. These are the experiences with which our consumers and merchants interact with us on a daily basis, and collectively, this makes the PayPal technology platform. Of course, our number one priority in technology is security.
It's important to make sure, because we are in the business of trust, to ensure that security is something we think top to bottom through the stack and side to side as well. I'll talk about security more in a little bit. Let me give you an idea of the scale internally. As you are very well aware, last year we did $456,000,000,000 in payments. These are payments that we did in 200 different markets and 100 different currencies.
Internally, that scales to our peak day in 2017 being 29,000,000 payments on a single day. That's about 14,400 and 50 payments per second, which is why every second of reliability is very, very important. This is powered by 2,700 microservices, which are built by about 4,500 engineers around the world who collaborate together. Dan was talking about the talent that we have. This scale that we have at PayPal allows us to attract the best talent around the world and have them work on making sure that we continue to scale further as we go forward.
Last year, we did 17,000 software releases, and this is big. Like I said, in my 20 years of webscale technology, I've not seen this kind of velocity anywhere else. And this allows us to outcompete the industry on every feature that we build. Finally, the infrastructure layer, which has 200,000 virtual servers, and these virtual servers consume about 27 megawatts of power. 92% of this power is green, and we are number 80 on the EPA top 100 list.
And finally, I said we are a data rich company. We have 238 petabytes of data, transactional data, operational data, risk data, and Jim mentioned how we have 50 petabytes of risk data itself. To put this in perspective, if I were to put all of this data on DVDs and were to stack them up, it would be 7 times taller than the Mount Everest itself. That's how much data we have. And this data continues to grow at a great pace every single year.
Hopefully, that gives you an idea of the scale of PayPal. This is massive from a technology perspective. And the fact that we can support this and the fact that we can continue to scale in spite of our growth every single year is an evidence of the technology platform that we built and we continue to evolve. Next, let me give you an idea of the core tenets of the platform. I mentioned to you how security is the number one priority at PayPal.
We've always believed in a principle called paranoid computing. Many of you who use the web are very familiar with HTTPS. When you type in a URL in the browser and you see HTTPS, you feel safe that the communication between you and the server is secure. We've always followed a methodology where we do that even within our data centers. When 2 machines in our data centers talk to each other, they're secure.
So we design security in every aspect of the lifecycle across all things related to data both at rest and in motion, our applications, and we are beginning to apply AI and ML mechanisms to understand what's going on in the ecosystem to put even more sophisticated controls as we go forward. 2nd aspect is reliability. Our vision is to have 100% share of checkout for our merchants. And to do this, we must ensure that we are up all the time and we are reliable. We put a significant amount of innovation focus on reliability.
And in the journey, I will actually talk to you a little bit about how far we have come in reliability. 3rd is the risk platform. This platform allows us to ensure that every transaction is safe. Based on years of data we have, 50 petabytes of risk data, we continuously use big data, ML and AI mechanisms to create a feedback loop that allows us to qualify every single transaction and ensure that the transaction we are taking is safe. This is the reason we enjoy the kind of fraud rate at the 19 bps that was mentioned before.
And finally, efficiency. To run any technology platform, it's important to make sure that through modernization, standardization, optimization and reuse, you can create a platform where every new transaction and every new payment is actually cheaper than the previous one. We have continued to do this over time and we've seen some amazing success over the last few years. To give you an idea of the journey we've been on and some of the progress that we've made, I want to illustrate four examples of the many that we have. Number 1 is on availability.
In 2015, we started the journey. Till then, we were measuring uptime based on how our servers were up all the time and we took an inside in approach to measuring availability. At that time, we changed our perspective and we started to look at outside in views. We took every single customer transaction and we started to annotate that with a success or a failure. That changed our perspective and it changed our priorities.
And this has helped us move from 99% in reliability to 99.99% in reliability. This means that we are there for our customers more when they come to us. Every interaction they have with us is successful. And we continue to evolve this even going further. This has been a whole point of lift for the business.
And it has also significantly reduced the number of customer calls that we get. Also more importantly, it has reduced the unplanned work for engineers and allowed them to innovate on new things in the ecosystem and in the platform as well. 2nd, Dan mentioned about the monolithic code base that we had. We have tens of millions of lines of code at PayPal and all of this was organized in 1 large block. This was very hard to manage.
Every time we needed to make a change, we'd have to figure out what to dissect, where to make the change, test the whole system together, and that was very cumbersome to do. That is one of the reasons the velocity was much lower. And what we did was we took that and we broke it up into small building blocks. These building blocks are composable, they're configurable, they're customizable, and that gives us significant velocity, particularly in terms of parallel velocity as we go forward across all of those building block capabilities that we have done. 3rd is cloud computing.
You've heard of this concept. Traditional methods of managing infrastructure were no longer scaling for us or for the industry for that matter. We started to apply model driven infrastructure. We started to apply closed automation loops. And not only has that helped us manage our ecosystem better, but it has driven higher allocation and higher utilization, leading to much better efficiencies.
Now they can do it in 15 minutes. Now they can do it in 15 minutes. And last but not the least, the speed of innovation. All of this together has helped us move from 8 releases of software in a year to 65 releases a day. And that is velocity that gives us a competitive advantage in the industry.
Let me shift a bit into some of the global leverage that we have created through technology. 1 is global reach. Customer perceived latency based on our research is one of the most important things in engagement and conversion. Bill talked a bit about our conversion compared to the rest of the industry and how we how well we do there with almost 90% in conversion. And this all depends on how seamless the experience is and how fast the experience is.
About 2 years ago, we started a journey where at that point in time, we had 3 network locations around the world that connected our data centers and connected us to our customers. This meant that if a customer in Asia wanted to conduct a transaction, they would have to connect with us back in the U. S. Over the Internet. We now have 17 network locations around the world, and we are slowly beginning to turn that on 1 at a time.
And as we do that, we are going closer to where the customers are, and that is allowing them to connect with us faster, feel the lower latency, engage better, engage faster and feel like they can conduct more transactions with us. This is a huge move. At dinner yesterday, I was talking to one of you and you mentioned the spinning wheel. This is our solution to the spinning wheel and making it much better for our customers going forward. 2nd is the global platform.
Not only have we constructed all the capabilities that we have as a platform, building blocks that we can apply customizability to any segment, any customer population or any part of the world. We can also do this in a way that when we build a feature, it's now available for the whole world. That doesn't mean it's the same plain vanilla feature for the whole world. We have the power of customization where we can create local experiences on top of the global platform as well, yet another competitive asset for the company in terms of being fast to the market when we need to be. And finally, on this slide, regtech.
This is a term that has become more popular in the last 2 years. We took a very different approach to compliance. As I mentioned before, we are in 200 markets and 100 different currencies. Each one of this is a jurisdiction that has laws on money, and we need to be compliant with all of those laws on money on every single transaction that is relevant in that jurisdiction. We took a platform approach to compliance, and we built it in a way that compliance was something that was constructed as building blocks by itself.
And these helped us create a mechanism where we couldn't just use that for PayPal, but we could use it for other parts of the portfolio as well. This allows us to be nimble in a place where the regulatory landscape is changing very, very fast. Most people don't realize, but this again is a competitive asset. Normally, it's a barrier to entry into the payments landscape, and this is something that we are really, really strong at. Finally, a bit of the focus on the future.
I'll cover 3 things here, some of the things that we are doing in advanced development. As I mentioned before, in technology, our number one priority is security. Good yesterday is not good today. So what we've done there is we've applied various new modernization methods, advanced cryptography, a very sophisticated security operation center that's 20 fourseven, applying big data ML and AI to continuously look at all the things that are going on in the ecosystem and ensure that we protect against attacks at the edge. And being sophisticated in a way that we're not only securing PayPal, but through our work with the ecosystem, we've actually birthed a lot of new standards like DMARC, HSTS and FIDO.
We are actively working with the ecosystem to ensure that it's not just PayPal we are securing, but we are trying to secure all of the Internet. No conversation about technology is complete without a conversation on AI. And we are doing various things with respect to AI. But before I come to AI, let me talk a bit about some of the work that we are doing in tokenization and a few other places. We have used tokenization as a methodology in Express Checkout for many years now.
As the industry standardized tokenization, we've taken those standards and included that in our platform and that has given us a ton of leverage too. Identity is changing in big ways around us. Implicit and explicit multifactor identity and new ways of signing on in a way that it is convenient. Bill mentioned how interactions are moving to all the devices around you. And as this happens, it doesn't have a keyboard or a mouse for you to interact with.
And to identify yourself with those platforms needs sophisticated back end and great experiences that can bring it all together. We are working in many areas of identity there. And finally, in distributed ledger technologies, blockchain is very popular and we are conducting a few very early experiments to actually experience what blockchain is all about and see if those capabilities are something that are the best option to use in the problems that we are solving. In terms of artificial intelligence, there are various areas that we are taking all of that data we have and applying it in terms of intelligent insights, decisions and actions. Number 1, in infrastructure.
We have moved from a manually managed infrastructure to an automated infrastructure to now building an autonomous infrastructure. This is a self healing mechanism, a self managing ecosystem, where all of our hardware, it manages itself on a continuous basis. We also apply these to business processes, fraud and risk management and customer service as well, some examples that you saw earlier today. We are also applying ML and AI in security. There are a lot of unknowns in security.
Threat factors are continuing to increase. And the way we are making those unknowns known is through investing in great telemetry and signals, processing real time streams of data and then ensuring that we are using those signals to know exactly what's going on, on the Internet and what's going on in our ecosystem as well. That gives us a leg up from a security perspective. And last but not the least, ambient experiences. You've heard a lot today about ambient experiences already.
Bill did a great job in talking about how the interactions are moving to every device around you. Most of you have taken a ride share. And when you take a ride share, when do you pay? It just happens automatically. Actually, we power many of those platforms.
We are in a world today where we are beginning to interact not just with the devices that we hold, but with refrigerators that have connectivity, with microwave ovens that have connectivity, with cars that have connectivity, with televisions that have a connectivity. Digital identity, subscription economy, immediacy, all of these are driving experiences in a completely new direction. And the powerful platform that we have built with the building blocks that I mentioned that cover not just technology and experiences, but compliance and risk, help us build amazing experience to serve our customers in all these areas. So I'm truly excited about the technology platform we have built so far, the journey we've been on in the last 3 years and also the direction, the trajectory and momentum we have going forward. So thank you all for being here today.
And at this point in time, I want to introduce Leah Sweet, who is our VP of Global Design, Delivery and Operations. And she is going to talk to you about go to market strategies globally and how we develop and launch new and innovative experiences efficiently at scale. Thank
you. All right. Hello, everyone. One more presentation till John tells you the numbers. I know you can hardly wait.
Okay. So you've heard about from my colleagues here today about the vision, the products, the partnerships and the technology. I'm going to talk to you about how in the world did we get this 20,000 person organization to do this? And how are we going to keep doing it as we go forward? So let's start off with a little bit of stepping back and talking about where we were just a handful of years ago.
PayPal was in a situation where, when we were thinking about product delivery and about partnerships, we were not thinking about it from the standpoint of an end customer's perspective. We were internally focused, and we built a lot of our capabilities based upon the ideas of a few folks in a whiteboarded room coming up with some probably very intelligent ideas, but not clarity on the problems they were trying to solve. Those capabilities were oftentimes built in such a way that they worked for 1 market, not on multiple markets. And every time we had to go into a different market, we had to make changes and almost start over from scratch. And finally, when we rolled these things out, we quickly moved on to the next thing and didn't focus on the quality and the efficiency of the products that we delivered.
It was a hard pill to swallow when we stepped back and took a look at ourselves and how we delivered. So we made some fundamental changes to how we do things to be able to correct these mistakes of the past. What have we done? We've rallied ourselves around 4 key pillars of how we think and act as a company. These are best practices of the world's best technology companies.
We didn't just come up with these on our own. We went out and spoke with the broader ecosystem of companies to understand those groups, Facebook, Google, the various players out there who are killing it on the technology and in the innovation front to say, what do you do and how do you do it? And we took those best practices and we brought them into PayPal. And those best practices specifically revolve around some critical points. First and foremost, we have 20,000 people in the company, but we were not one team with one mission.
Dan brought that to us. Thank you. Critically important. Diverse opinions, diverse perspectives, diverse approaches are great when they can be channeled towards a vision. And that's what we've done.
We focus on the customer as our number one priority. We listen to the customer. And I'll show you soon in the upcoming slides some specific examples of how we actually go and understand a customer's pain points before we even write any code or come up with any product solutions. We make sure what we deliver is open. It's open for the ecosystem.
It's open for our partners. We want as many customers as possible. We want as many partners as possible. That is our goal, and we build our products and our ideas with that principle in mind. We also have some core tenets in how we build to make sure what we design is global from day 1, not global 10 years down the road.
And part and parcel to everything we do is we have to make sure we build it with quality from the beginning and that we build in the processes and the structures we need to make it efficient. So I'm going to talk to you about each one of these. Before I do that, I want to walk you into just the last 3 years since we separated from eBay. So since we separated from eBay, this was really our moment of reflection, having to take a step back and say, what do we do? So we took 2015, and we actually spent a significant amount of time in 2015 going out and understanding our customers' and our partners' pain points.
We were delivering a lot of capabilities at the same time, but it was absolutely imperative for us to really be able to say, what are we trying to be in this ecosystem that Amit showed you, that group? Where are we trying to play and how are we trying to exist? We then started executing significantly in 2016 on those strategies. 2017 is our transition to durable teams. And I'll talk to you about that, what that means.
Durable teams is the concept we are using to be able to say we want to organize ourselves, our 20,000 people around the concepts of solving customer pain points. So we put ourselves into 2 different types of organizational structures. And when I say we, I mean not just the 4,500 engineers that Sri talked about. I mean our sales people, our operations people, our marketing people, our product and engineering people, and every part
of the
organization focuses on the customer and or they focus on the platform. The platform solutions, as you've heard Sri talk about, are fundamental to how we deliver anything. So getting a comprehensive point of view about our platforms was absolutely imperative for us to be able to deliver these. You could not have delivered the risk platform if you didn't have lawyers, the legal team in there, the compliance team in there, the operations team in there, in thinking about how that platform needed to function. That's what we've done with every single platform and every single thing we deliver.
The same thing is true with respect to our customer segment solutions. So we have gone through, and John touched on this, and broken out our different possible partners and consumers in 2 segments with the intention of saying we're not going to build a solution that is the same for everybody, except at the edges, we're going to make sure we hear what a small business wants. We give them solutions that work for them. We hear what a large enterprise wants, we give them solutions for them. We hear what a digital native wants, what a Venmo consumer or a financially underserved consumer wants.
Our solutions are designed thinking about the needs of that segment and making sure that we actually craft those solutions to work for them built on platforms that work across all of them. Let me actually take you into an example on our platform services and solutions teams around a video. So one of the things we like to do when it comes to discovery processes is we actually, as John talked about, we like to go into a location and really understand what that customer experience is. And we had a situation where we had our Zoom product, which is our remittances product. And we found that most of the folks that were thinking about the remittances product were thinking about it from the standpoint of the person sending the money, not the person receiving the money.
Why were we thinking about it that way? Well, most of our folks that were writing the code and coming up with the product ideas were senders of money versus necessarily being the people on the end that needed to get the remittances. And there wasn't a fundamental understanding of what are the problems those people on the end, the remittance receivers, actually experience. So we actually went through a process of sending folks to Mexico, meeting with 27 different customers in Mexico to understand what are some of the problems that they have on remittances. And And I want to walk you through a specific video that talks to you about what they experienced.
What was really fascinating from the team that went down to Mexico and talked with those customers was that they learned things that they never would have conceived of. They have to get on a bus for 2 hours to go and get money, and they run out of money at the location they go to pick it up. So they have to go back day after day after day. They have a bad phone signal. They have a bad phone signal.
They have a type it in. Those types of examples are things that you don't think of when you're in an executive boardroom or in a conference room on a whiteboard. Those are the kind of things that you think of when you talk to the people that have the problems, and you understand the issues they have. And it fundamentally changes how you build your products. That is a systemic activity we have incorporated into every single one of our durable teams.
As they discover with the segment or they discover with the broader customer base, if they're a platform, what problems they need to solve. An example of we've been talking about today of one of our best problem statement solutions is OneTouch. You've heard the numbers multiple times, 96,000,000 customers, 9,100,000 merchants, 71% of the IR 100. Why? Because this was solving a fundamental problem that we heard from our customers.
And not only that, but as we went into it, we made sure that it not only solved the problems of the consumers with a fast one touch experience for seamless checkout, it solved some fundamental problems of merchants as well. What's one of those problems? When a merchant walks has a customer come to their site and checks out as a guest, they have no idea who that customer is. With the OneTouch experience, we are able to help that merchant understand who that customer is. We have that ability with them to help them know what type of habitual or not customers they have.
It's a huge strategic advantage for the merchant, and it's a huge strategic advantage for PayPal. Another example of OneTouch and how understanding the problem you're trying to solve makes a significant difference in terms of the usage of that product is on the One Touch acquisition front. So OneTouch is not just about seamless checkout experiences. OneTouch also is about seamless onboarding and acquisition. So we have a case study here.
They made me take the names of the retailers off. But this is real. We had a case study with several retailers where we did an AB test. We actually integrated OneTouch into the apps, the downloaded mobile apps of those customers. And then they had apps where they didn't have OneTouch integrated.
And the way that it works is you when you download the app, if you have OneTouch in the app, you just say, select with PayPal and it signs you up for that application. You don't have to type in your name, you don't have to type in your address. You don't have to type in your credit card information. It's linked. In the case, of course, where One Touch was not there, you had to type all that information in.
By simply having that acquisition feature there, you can see the funnel. 2 times as many people did purchases. 2 times. 3 times increase in repeat users simply by the fact that they had that automated sign up in that application. This is the power of understanding the problems your customers have and incorporating them into your solutions.
The next fundamental tenet has to do with how we approach our platforms. Sri gave you an awesome view from a a tenants from an architectural design standpoint. They have to be open, which means we have to design them in such a way so that you have APIs and SDKs, convenient integration points. They have to be reusable across multiple contexts. Our identity platform, if you think about our identity platform, where did that start?
That started by you going to paypal.com, typing in your name, user ID and typing in your password. Now, we could easily have kept it at that. But you saw the Facebook Messenger experience that Bill talks about. You saw the Google Pay experience as well. Both of those are using that exact same identity platform.
It is offering those capabilities up in a way that you probably never would have thought of when they initially wrote the Identity Platform, but they wrote it in such a way that allows them to easily represent those capabilities in a brand new context. We did not have to build a bunch of new stuff to do that. That makes it faster, more efficient, easier to get these problems out there. That's about 2 years. We would have then rolled out UK and Australia because that's our normal natural ramp next to U.
K. And Australia, that would have been another 2 years. And then we would have moved to the other countries or we would have stopped and said, you know what, that's enough. We can't get it. We can't do it anymore.
It's too much time. Not the way that we're approaching it today. 145, one day. And finally, we're focusing on quality and efficiency. Shri talked quite a bit about what we're doing from a technology standpoint.
We also are changing our instrumentation. We're changing our processes, we're changing our metrics, we're changing how we're holding people accountable for what is success when they roll out a product. And by doing that, we've seen a 75% reduction in daily failures of services on our site by simply asking people to pay attention and holding them accountable to pay attention to it. We've also seen a 40% faster time to market. That faster time to market is all of these things together.
It is the power of the platform. It is the focus from across the enterprise on a durable team that actually works together side by side instead of tossing things over the wall. Significant increase, 40% is a target, but we're seeing a lot of places where it's much faster than that. And finally, quality. So not only have we been focusing on building new capabilities, we've spent a huge amount of time going back and making sure the stuff we've already put out there works.
So you can see here from this chart that over the from 2013 on, we were pretty much trending in line with the as our transaction volume grew, our contact volume into our call centers, our operations support, those were going at the same pace. Beginning 2016, when we put these processes in place and these new approaches, you can see we bent that curve. We've been able to actually reduce our call center call volume by 7% in the last year. At the same time, we added a 1000000000 transactions. That is the power of the transformation.
So to wrap this up, not only have we delivered some amazing experiences and products, but we have fundamentally changed how we function as a company, and we will continue to be able to do this year after year. So I will now turn it over to John Rainey to walk you through the stuff you really are excited about.
All right.
Thank you, Leah, and thank all of you. We know that you all have demands on your time, but your presence here really makes this the success that it is. So we do appreciate that. You've heard from a lot of us today about the strategy that we have, the path forward, some of the products, the merchant and consumer value proposition. I think that if there's one key takeaway from my message today, I would say it's this, that in this fast growing competitive environment that we've talked about, we're not only going to sustain our financial performance, we're going to accelerate it.
We'll accelerate our financial performance going forward. And my talk today is really organized around 3 ways that we'll do that. I'm going to discuss our growth opportunities, both in terms of the partnerships, which you've heard from Jim and Bill about already, but also how we approach the addressable market that Dan talked about at the very beginning of the presentation. And that's different for depending upon the type of market that we go into. I'm also going to talk about cost and how we scale our platform but do it at a very low marginal cost as we've done in the last year.
And then lastly, I'm going to discuss capital allocation. And then I'll finish it out with an update on our financial projections going forward. So at separation, we were very clearly a high growth company, but there were still question marks about us. We did not have a proven track record. There were questions about competition, about our ability to handle the competitive environment.
It seemed in the fall of 2015, with every single pay announcement that came out, our stock price declined. People read into that what the impact could be on PayPal. There were concerns about our relationships with the rest of the financial ecosystem, the issuers, the networks. There were questions about our margin profile. Would we be able to grow but do it in a profitable manner?
And there was an overhang on our business around credit. Credit is a fantastic part of our business, but there were concerns that we were too reliant on it for our earnings or that it was too capital intensive. There were a lot of questions about it. There were even questions, I think, as we were unproven as a management team, right? I mean, for heaven's sake, you hired a CFO from the airline business.
But what did we do to address those questions? Well, one thing is that in the last three years, we've added more customers to our platform than at any point in time in our history. Last year, we added almost 30,000,000 customers to our platform. And this year, we're on pace to improve upon that. We had revenue growth in each of the last two years of 21% on a currency neutral basis.
We've seen our operating income in the last year increase 27%, and we've expanded our operating margin. And we'll do that again this year. And we've had consistent strong earnings per share growth. So what did we do? We added 66,000,000 net new actives to our platform.
We announced major partnerships with 7 of the top 10 issuers and networks. We had 19% compounded annual revenue growth since our separation. And last year, we had the very best cost performance in the history of our company, demonstrating the scalability of our platform at a low marginal cost. Last fall, we announced a major partnership and transaction with Synchrony Financial where they would buy our U. S.
Consumer credit receivables portfolio for $6,000,000,000 and we announced a partnership with them going forward. And lastly, we've returned almost $4,000,000,000 to our shareholders during that period of time. But today, there's a new question, right? There's a question that people have about what the next 3 to 5 years looks like from a financial perspective. How are we going to be able to transition off of the operating agreement with eBay?
Where will our growth come from? Well, I think in part, it's dependent upon our partnership opportunity. You've seen various slides today similar to this, but these are some of our major partnerships, Facebook, Google, Mastercard, Chase, some of the very best companies in the world. This is a slide of those partners that we had 3 years ago. So when we ask where our growth will come from, we'll absolutely come from the partnerships that we have and those that are yet to be announced.
By being an open, technology agnostic digital payments platform, we have the ability to partner with any company in the world. But just as importantly, they have a willingness to partner with us because of what we can bring them, which Jim talked to you about earlier. I want to put a finer point on this growth, though. If you look at this slide, the left side of the chart is what we call Merchant Services. It's the 87% of our business that is not eBay.
And this is the volume growth in the last year, 33%. If you look to the right side of the slide, Bill talked about this. But if you take our top 20 merchants, which is roughly about the size of our eBay volume today, they grew at 42%. I'll decompose that a step further. If you just look at those merchants that are listed there, they grew at 60%, six-zero percent versus eBay.
As we grow with these the fastest growing largest technology platforms and marketplaces out there, it will make our reliance on eBay be much, much less by the time that we get to 2020. I want to shift to how we're approaching the addressable market. So we have 3 distinct categories here, and they all are individual and unique. And our approach in each of those markets is just as individual and unique. We have core developed markets, underpenetrated and rapidly emerging.
And I want to talk about each of those. So core developed markets. These are the markets that we have the full suite of products that you've already heard from earlier today in for the most part. These are the U. S, Canada, the U.
K, Australia, Germany, 650,000,000 digital users in that This is a market that is growing 1% to 2% per year. And we fully expect that in some of these markets, our penetration will get up to be as much as 50%. But net new actives is not where we're going to get our growth here. Our growth in these markets will come through engagement. Engagement through things like omni channel offerings with iZettle, consumer financial services that you heard from John earlier about, Venmo.
We'll focus on engagement in these markets. And importantly, we expect that by 2022 that mobile will be 50% of our volume in these markets. Moving to underpenetrated. These are markets that we have a strong business in today, Mexico, Brazil, China, India. But we have a very small penetration rate.
It's a market of 1,600,000,000 digital users. But if you look at our product, it's mostly cross border for the most part. And the growth rate of this market is 8% to 9%. And so if we can get to even 3% or 4% penetration, we're talking about tens of millions of consumers that can come to our platform. And that's a significant amount of growth for us going forward.
Importantly, as we think about this market, we expect that by 2022, 85% of our volume will be mobile. And lastly, moving to rapidly emerging markets. These are markets that tend to be more fragmented or have very individualized regulatory requirements. Our strategy here is a partnership one. It's partnering with local companies to facilitate cross border commerce.
A good example of this is what we've recently announced with M Pesa in Africa. And again, here, we expect that mobile will be 50% of our volume in these markets. Moving to cost efficiencies. The graph in front of you highlights 2 things. On the left side, we show we illustrate the percentage of our costs that are transaction related or volume related and what we refer to as other OpEx or non volume related costs.
And you can see how the composition of our cost has changed over time. But the important point on this slide is on the right side. The right side illustrates the marginal cost of our growth. So if you look in 2015 2016, the way to read this is that for every incremental dollar of revenue that we brought in, our other OpEx, our non volume related costs, if you will, went up roughly $0.25 Last year, for every incremental dollar of revenue that we brought in, that number went up $0.12 And a full penny of that, a full penny of that was related to acquisitions. So said differently, on an organic basis, we basically our cost went up a dime for every dollar of revenue.
This is the way to scale our business going forward. And I'm going to give you 3 quick examples to demonstrate how we can do that. The first is around customer support. And so the top graph here shows what we call our contact rate. Our contact rate is the number of contacts that we get from a customer divided by the number of transactions that we have.
So roughly 1% of the time, there is some issue that requires a customer to contact us. We have roughly 60,000,000 to 65,000,000 contacts a year. Now I think putting this in a slightly different context, as Leah just described, if you think about the 66, almost 70,000,000 customers that we've added in the last 3 years, despite adding all of those customers, the absolute number of our contacts has gone down. We're doing this by focusing on the root cause of issues that customers have. We have a cross functional team where we work with the product development team and the engineers to really go look in and discover why are customers having issues.
We've talked about password reset being 1. A year and a half ago, password reset was our number 2 issue or number 2 reason that a customer would contact us. It's not even in the top 10 today. And if you think about the cost of these customer contacts, every single time we're contacted by a customer, it costs us $4.60 $4.60 That's the marginal cost that goes away if we don't have that customer contact. We've made dramatic improvements there.
One thing that we focused on is how customers contact us. So today, 77% of the contacts from customers are through phone. It's a very inefficient and often frustrating way for a customer to deal with an issue. One thing that we're moving to this year is we're rolling out chat. Bill talked about chat bots.
That's one thing we're doing in some of our products. But we're also propping up offshore a chat service. Why chat is important is because you can take advantage of lower cost areas of the world to serve that customer, and you can also handle multiple customers at the same point in time. So just as our cost per contact is $4.60 today, that was $5 2 years ago. And we expect that to continue to come down.
And importantly, we expect the contact rate to come down as well. This is one of the ways that we'll demonstrate that we can grow our platform and do it at a very low marginal cost. The second area is a line from our P and L that we call product development, but it really encompasses much more. And I would say the way to think about this is take the last two presentations, Sri and Liam, both how we develop product, but also the cost to support that product. And in 2018, we'll have a 25% improvement in just our platform cost.
But if you look at where this is today, best in class for a platform like us is around $0.03 or $0.04 a transaction. So we've made tremendous improvements. And you heard from the others that came up here and spoke, we've got a great plan in place to continue to reduce this. But this is absolutely one of the key areas where, again, we can grow our platform and become more efficient, but also, very importantly, increase the throughput, our ability to develop more product, to be more available to our customers. The last area, not as interesting but a very important one, is G and A.
And I want to spend a moment just so that you understand what's happened here. So if you look at 2015 to 'sixteen, I think it's very important to understand this is a time period where we were really coming out of another company. We did an IPO. And a lot of the G and A functions, we needed to prop up. So that we spent a lot of money in this area in the early quarters.
We also spent a lot of money in compliance. Compliance was probably our single largest investment that we made in the last year. But we view that as a competitive advantage. As we look at what it takes to roll out product across the world and Sri talked about regtech, this is something that gives us an advantage versus our competitors. So this is an investment that will pay off for years.
But very, very significantly, we don't have to continue to do that. These costs as a percentage of revenue we expect will come down over time. So if you roll all that together and you look at that non transaction related expense and the growth of that, we expect on an organic basis to stay in the mid single digits. This graph shows a slight inflection up because we have an assumption about acquisitions in there. And I'll talk more about that in just a second.
But if you take that and then you overlay what our expectation is around our transaction margin growth, which we expect to continue in the double digit year over year increase range, that allows us to not only keep margins where they are but to actually grow them. And that's while reinvesting in the business. And I'll talk more in a second, but we expect our operating margins to go up. So last area that I want to talk about is capital allocation. The graph in front of you shows how we've allocated capital over the last 3 years.
M and A, funding our credit business CapEx, share repurchases. But I think it's very important to remember that we pivoted now with this Synchrony agreement to where we don't need to fund credit as much as we used to. That gives us a lot more flexibility and freedom to allocate dollars towards alternatives that are higher returning. In the past, as the graph shows, 30% to 40% of our cash each year went to fund credit. And I want to spend a moment on that because we still have a credit business.
We have an international consumer business, and we've got a thriving merchant lending business. And they are fantastic parts of our platform and growing quickly. But the takeaway that I want you to understand about credit is that if those get so big, so large that once again they begin to detract or take away from other things or better returning alternatives, as we've done in the past, we will absolutely pursue an asset light off balance sheet transaction again to make sure that we preserve that we let every dollar of capital sort of fight for itself, compete for itself and allocate it to the highest return alternatives. Another pillar of our strategy is around acquisitions. And I won't read the entire slide to you, but I think there's a couple of elements up here that are important in terms of how we think about acquisitions.
One is that it's got to create value. We're not going to do a deal just for the sake of it. We look for strong value creation. It's got to have compelling strategic rationale. And it's got to be accretive to our growth profile.
A good example of that is the acquisition we just did with iZettle. So with iZettle, we have basically a best in class omnichannel offering and very importantly for our SMB segment. And you can see that the opportunity here is to cross sell. We can cross sell iZettle to existing PayPal merchants and PayPal to existing iZettle merchants. But very importantly, we can combine an omnichannel offering and go out and expand that to markets that iZettle is not even in today.
And we believe this is a very compelling opportunity for us. We expect this transaction will be or that Aizueta will be profitable in 2020. So I'll spend a moment on this in terms of the 1st 2 years. As you see on the right side of the graph there, we expect some dilution. We expect, on a non GAAP basis, a $0.01 of dilution this year.
And then next year, we expect $0.06 to $0.08 of dilution. I'm very excited about what this does for us with an omnichannel offering. So you take all that together in terms of how we think about capital. This is our strategy going forward. The left side shows the balance sheet that we will have.
At the end of the year, given everything that we know right now, we would expect cash, our balance sheet, to be about $15,000,000,000 $15,000,000,000 Our intention to allocate that first starts with we want to maintain an investment grade rating. We're going to balance investment in the business with margin expansion. We'll continue to look at asset light or off balance sheet transactions for credit. And we're going to target M and A acquiring companies spending $1,000,000,000 to $3,000,000,000 a year, dollars 1,000,000,000 to $3,000,000,000 And then we've got more specificity on the amount of cash that we expect to return to shareholders, 40% to 50% of our free cash flow each year. So what does all this mean for our medium term guidance?
Well, in 2016, at Investor Day, as this column shows, we said that we expect over the medium term to have mid-twenty percent growth in TPV. We expect revenue growth of 15% and stable to growing margins with free cash flow growing in line with revenue. We then updated that in October. And the only significant change was around revenue. We increased our revenue guidance 16% to 17%.
Now since this happened, since this guidance, we've had the eBay announcement and we completed the Asset Light transaction. And the Asset Light transaction was not contemplated in here. When we look at our new guidance that we expect going forward, slight tweaks here in terms of the different categories, But this is a 3 to 5 year outlook. And we provided that because importantly, that covers the period that we transition with eBay. We expect revenue growth of 17% to 18%.
We're going to expand our operating margins. We expect EPS growth 20%, approximately 20% compounded annually with free cash flow yield being 20% plus. This includes our assumptions about capital allocation as well. So I want to thank all of you for being here. I hope that you have found our material today compelling.
We've got, we believe, a great strategy. We've got also, I think we believe we've got a great financial plan going forward. And I hope you also understand our conviction and our ability to achieve that as well. So now I'm going to ask Dan, Bill and Gabrielle to join me on stage and we'll fill some questions.
Okay, great. Well, thanks so much for your patience and to wait for John to give updated guidance. Just so all of you know, there are actually USB drives in the back of the room when you exit that will have all the presentations loaded. So to the extent that you didn't catch something you'll be able to get that and then later today we expect to post online as well. So I'm going to start with a question for Dan.
Outside the U. S. What regions are top priority as you go after 1,000,000,000 consumers globally?
I think John did a good job explaining some of that in his presentation. But if you think about the developed markets, we have, call it, about a250,000,000 or so users now. But there's a whole next gen of markets that we intend to enter. Those would be countries like India, Indonesia, Brazil, Mexico, potential of China as well. Those are big opportunity markets for us.
We'll be patient in those markets. We'll develop the right way, but there's a tremendous amount of opportunity. We can do some of that organically. We can do some of that, as Jim mentioned, with partners, we could JV, we could buy in some of those places. And so I think there is a good amount of opportunity in those particular markets.
Great. Thank you. This one is for Bill. How is the Braintree technology stack different from say Adient? And how is the PayPal value proposition differentiated?
Sure. Yes. I mean, this is from the very early days of Braintree and you heard Amit go through some of this. We were always very focused on the front end buying experience. And it's just a fundamentally different problem to solve, giving better access to the dial tone.
There's a lot of players out there that can do that. It's not super differentiated. And as you look at other players in the space, I think giving easier access to dial tone is great, but it's not the same thing as solving the front end customer problem, which is how do you drive up conversion. And this was what we were focused on in Braintree from the very early days. It's why we built Venmo.
It's why we built Venmo Touch. It's why we joined PayPal because PayPal is the only place in the world where you had this 2 sided platform of consumers and merchants, the ability to control the experience. And you've seen us deliver that with one touch and the kind of conversion rates that you saw. So I think in a world where others are thinking about giving access to back end payments, we're just playing a fundamentally different sport. We're giving access to customers.
In a world where you're giving access to back end payments processes, merchants are beating over the head over 1 or 2 basis points because it's all about cost compression. In a world where you deliver customers at twice the rate of anything else, that's highly differentiated. And that's really what the Braintree focus has been and is why we joined PayPal. You see that coming through. And I think you see that in the PayPal results overall.
You see it in Braintree results. Even as much of a platform as Braintree has become and as deeply integrated as it is with PayPal, the premise of the PayPal brand of buying experiences, what we can do with PayPal and OneTouch and Venmo and all these great consumer experiences that you get through Braintree, Braintree even though it's become quite a material platform for us, quite a significant platform for us, revenue at Braintree still growing 54% plus year on year. So even on a big denominator still growing quite tremendously. And I think that's because of that competitive differentiation that it's about the buying experience. And you see that with the kinds of merchants that run on Braintree, merchants that are trying to solve for great next gen mobile buying experiences, Uber, Airbnb, Dropbox, Snapchat, Facebook, Google.
These are the merchants that look at what we do with Braintree and see the value in that differentiated customer connection.
Thanks, Bill. This one is for John. There's a strong debate in the market about exact eBay dilution. Can you talk a little more about what kinds of costs you can take out and what are the biggest areas of cost take out?
Sure. So I covered some of that in the presentation. But I think it's important to understand that if you think about the eBay business today, just take something like risk, okay? The most complicated transaction for us from a risk perspective is an unknown seller and an unknown buyer, right? And that's very often what happens on an eBay platform.
And so we incur higher losses on a transaction like that. If you're Macy's and you're selling a product to someone that shops all the time at PayPal, that's not as complicated from a risk perspective. So when we look at our various cost buckets, risk being 1, we have a higher percentage of losses on eBay than we do the rest of our platform, disproportionately higher. Customer support is another area because of sometimes the nature of that transaction, we see higher call volume into our contact centers because of that. And as I suggested, that's almost $5 for every one of those contacts.
So when we look at our cost structure, we think that some of that will just naturally come down as we transition to or transition or we're less reliant on eBay. But it's not just cost. Revenue is a big piece of it. I think put it in a slightly different way, if you look at our guidance that we just provided, so our revenue growth that we're expecting now, if you were to compare that to the revenue growth in our last medium term guidance, it's $2,000,000,000 higher 5 years from now. And moreover, that assumes that does not have the U.
S. Consumer credit portfolio in it. That was $1,000,000,000 of revenue that was in our previous guidance. So said differently, on an apples to apples basis, our revenue is $3,000,000,000 higher, our expectation is anyway, going forward than what it was before. And it's because of a lot of the things that you've already heard about today.
So it's not just a cost piece, it's revenue growth as well.
Thanks, John. Dan, why not issue a PayPal Cash Card for all stored balances so that you can gain acceptance at the physical POS?
Yes. The PayPal Cash Card, as you've heard from all the different presentations, we're very targeted in the value propositions and the solutions that we're trying to introduce into the market. We don't believe there's an average customer anymore. And we used to develop for the average customer, which meant that we basically developed for no one in particular. And so the Cash Card is developed with other product features that Jon Koons mentioned in his presentation at those that are unbanked or underserved by the current financial institutions.
And for those who are unbanked or underserved, that's a perfect value proposition and solution to bring them into the digital economy to afford them the benefits and opportunities associated by being involved in that way. It will save them money. It will enable them to have better financial health, to save more. But for those who are currently banked, that isn't the value proposition that they're looking for. In fact, we think that working with the banks, working with the networks, that we can actually create different and better value propositions that are more relevant for those segments like the rewards points that we were talking about, where we can take the best of their assets, best of our platform assets, put them together and create a value proposition for those segments of the market.
And we have different names for all the different consumer segments that are much more powerful than we could do alone or that the banks could do alone as well.
Thanks, Dan. Bill, the growth on non eBay marketplaces and with other partners is very strong. How do you think about that business and additional unit economics there?
Well, I mean, 1st of all, as I mentioned, we think there's a lot more opportunity around that, particularly as the restrictions in the operating agreement fall away. We get to serve marketplaces out there that would have been had restrictions applied to them under the operating room. We get to serve those fully with Altus. We think there's a ton more that we can do. And from an economics perspective, those are places where we're bringing buyers in at higher conversion rates.
We're bringing sellers in to those marketplaces. We're helping those sellers get funds out of those marketplaces quickly. So those marketplaces and channel partners oftentimes are the places where our differentiation is most on display. And so it's a very nicely profitable segment for us because it's where our differentiation in our 2 sided platform shines through the most because we're bringing not only buyers, we're bringing sellers and we're really helping to amplify those other marketplaces and those channel partners. So it's not only a very high growth segment for us that we think as we become sort of unfettered in our ability to fully serve that segment, We think there's tons more that we can do, and it's very nicely profitable for us.
Great.
If I can add just a couple of things to that. One, obviously, we can't do certain things until the end of the operating agreement, but that doesn't mean that you won't see us announcing different things with different players as we get closer and closer to that stage. We're under a number of discussions that were that are going extremely well and we have a lot of partnerships already with these largest marketplaces. Second thing I'd point out, and I don't want to downplay this, is we are very close partners with eBay. And the reason we're very close partners with eBay is we both have a mutual interest in serving the small merchants that exist on that marketplace.
Those small businesses count on PayPal. They have integrated PayPal into their back office systems. They count, as Bill talked about, everyone talked about in their slides about driving growth and sales for those small businesses. And eBay and PayPal both realized that the closer we are together, the better off we can serve our mutual customers together. It would not shock me to see that relationship getting closer and closer as we go forward.
And I think there's a narrative that we're drifting away from each other. I'd submit that there is a narrative that as we move forward, you'll see us moving closer and closer to each other in numerous different ways. I think we are both quite dependent on each other and serving those mutual customers and I look forward to working closely with eBay to go do that.
Thanks, Dan. This one's for John. When you talk about margin expansion, sort of can you quantify it in a little more detail? And how low do you think the incremental cost of transactions can go over time?
Yes. So one of the things that we wrestle with the most as a management team is how much to or the sort of the trade off between margin expansion reinvesting in the business. And we could easily expand margins a lot more than what we're doing today. But we also know that we need to make investments for the future. We need to be investing in things like Venmo that are the next leg of growth 2, 3, 4, 5 years from now.
And so it's finding that balance. And I think that we've navigated it pretty well thus far. But you should expect to see margins go up and go up every single year. It's that's the path that we're on. But we'll do that while continuing to reinvest in the business.
In terms of the marginal cost, I would say if you look at it in terms of the incremental OpEx that I talked about earlier, the $0.13 ish range on an organic basis is something that's fairly easy for us to do. Obviously, acquisitions will add to that. And that's a sustainable thing that if we're achieving that kind of incremental cost growth and growing our transaction margins at a double digit rate, then we can continue to expand margins. I think getting much below that, we're getting to a point where you're starting to do unnatural acts and starve the business of investment. We don't really want to go much below that.
Yes. And I'll just add to it. Look, we have a huge opportunity in the market, and we want to invest in the business to take advantage of that growth. When John showed the iZettle charts that he did up there, part of that next year's cost is that we're going to invest heavily in that business. We want to grow it.
We want to expand the markets that it's in. We want to take full advantage of that acquisition because it is so important to small businesses that they have an omnichannel solution. We think we have a best in class solution right now and we want to invest in it. So it's easy to grow operating margins. As I've said many times, the operating margins of this business want to go up.
Our thing that we do as a management team is sure that they do go up every year, but that we invest appropriately back in the business to seize the growth opportunities that are manifest in front of us.
Thanks, Dan. Another one for you. You talk about helping merchants compete with Amazon. Can you talk about Amazon Pay as competition? And can you also talk about offsetting that potentially with your ability to add Amazon as a marketplace customer?
Yes. Why do I get the hard ones? So, look, I think I've answered this question in a number of different forms. I'll quickly repeat myself. 1, if you look at the total addressable market out there and you look at our share of that market, we are just beginning.
There is no one competitor out there that's going to take the vast majority of that market. We are extraordinarily well positioned to be a market leader in there and we're just scratching the surface. I don't care how many competitive announcements come out there. Our opportunity and the unique assets, scale, capability, scope of services, the innovation we have, the platform we have, we'll maintain our market leadership and my bet would be we've widened our market leadership. When it comes to Amazon Pay, we have a tremendous amount of respect for Amazon.
But if you talk to any retailer out there from small to large, the existential threat that they worry about or what is this big change moving to digital and mobile and how do they compete in a world where Amazon is getting bigger. And so for the overwhelming majority of those merchants, PayPal is that must have digital platform to enable them to have the capabilities that somebody the scale of Amazon can have at a much smaller merchant can now take the scale we have, the capabilities we can give them to grow their business.
And so
Amazon Pay struggles against that. Can they really get a ton of merchant acceptance when all that data and information is going to arguably the biggest threat that any of those retailers have. And so, I believe that our platform and our whole strategy and the solutions that we're providing right now and the capabilities is to enable a thriving ecosystem of retail throughout the world and to level that playing field. In terms of potential partnerships with Amazon, I always get myself in trouble any time I even mention anything on this. So I would just say my view on our ability and our capabilities are that they're attractive to the vast majority of retail platforms, marketplaces out there because we offer a wide swath of segments of the market.
We have a wide swath of geographies around the world. And we are typically strong in a place at least where there may be some gaps that others have. So I see the potential of us working with any potential merchant or platform or marketplace out there, but we'll see where all of that goes.
Great. Thank you. Bill, can you talk a little more about PayPal as a distribution channel? Some of the advantages you spoke to, are they only available for Braintree customers?
No. This is across the PayPal platform. It is the primary way we deliver to our merchant customers. So this notion of we can light up new experiences without merchants having to do work. Certainly, some of these concepts we started with Braintree, but we've done these things across the PayPal environment.
And so when you look at the stats we gave of 9,000,000 plus PayPal merchants now having PayPal One Touch, our ability to take Venmo across all PayPal merchants in the U. S. As taking Google to PayPal merchants wherever they see Google Pay to wherever you see PayPal, provided you've linked PayPal and Google Pay together. This is the full set of places where you would see PayPal we have these types of capabilities. So it's not limited to just Braintree.
It's across the PayPal ecosystem. And that's why we think it is a fundamental advantage we have versus others that are having to distribute by the ones merchant by merchant that we can go deploy to millions of merchants at a time. And it's not limited. It is across our ecosystem.
Great. And John, you talked a little bit about capital allocation and your goals. Can you expand on that now?
Sure. I presume that question was written before I went over that slide. But we look, I think the 2 major changes are that we're going to allocate 40% to 50% of free cash back to shareholders. Previously, we said that we would just offset the dilution from share based compensation and be opportunistic beyond that. The other thing is that we've got a target of $1,000,000,000 to $3,000,000,000 a year that we're going to spend to acquire growth companies.
Now that's sort of how we think about free cash flow on an annual basis. And I talked about on the slide that if you look at our free cash flow over the time period that we're talking about, it's anywhere between $4,000,000,000 to $6,000,000,000 plus a year of cash generation. But we do have $15,000,000,000 on our balance sheet. So you could expect us to maybe see higher percentages in the earlier time periods on each of those. But fundamentally, like we as a management team, we're going to allocate capital to create shareholder value.
And not going to necessarily rush out and do a deal just because we said that we've got to do $1,000,000,000 to $3,000,000,000 of acquisitions or go spend it all on a share buyback. We're going to allocate that capital to create the most shareholder value. And we feel that we've got the luxury to be measured about that, and we've done that. I think we've demonstrated pretty well based upon how we've allocated capital thus far that has created shareholder value.
Great. Thank you. Yes.
I mean, I think balance sheet is one element. I think how we're going to be successful going forward. I mean, we've got now the ability to do more and more internally. I mean, you looked at Shri's presentation, we were doing 8 software releases a year. So you think about how much innovation you can put out into the market when you're doing 8 releases a year.
It's little. You have to rely actually on acquisitions, to be your innovation engine. When you're doing tens of thousands of releases every year, it's very different. We're doing a tremendous amount of innovation, development and product introduction internally. And we've got talent now that's taking advantage of that.
But our balance sheet also enables that guidance that we gave for us to feel very comfortable with that. It gives us a lot of flexibility both in looking at best in class assets that we might bring in and return back to shareholders. And so we feel really good about what we can do with that balance sheet. If you look at it, we still have a good amount of capital that we can hold in reserve to be opportunistic one way or another. But we think looking at it in terms of $1,000,000,000 to $3,000,000,000 a year of acquisitions that could come in and then returning 40% to 50% of that annual free cash flow back to shareholders is a good reasonable balance.
Great. Thanks. We have time for one last question, so I'm going to try to put a few together. It's for Dan. Sort of can you talk about how you think about geo expansion and how you think about sort of the opportunities going forward?
And then within that, are there opportunities to work with governments to help increase the use of electronic currency to reduce cash usage?
To reduce what? Cash usage. Cash usage, yes. Okay. The last question before you all get to swarm and ask us more individual questions.
Listen, I think one of the big advantages we have is that we are a company that regulators around the world see as a responsible organization. And the reason they see us as responsible is not only have are we compliant, not only do we have tech infrastructure now that can respond quickly to the regulatory changes, but we are fully aligned from a philosophy and mission perspective with almost all the regulators out there. They all want to drive and take advantage of FinTech for what it can do for their citizens in terms of driving financial health. And so interestingly, whether we're in India talking to regulators, whether we're in the U. S.
Talking to regulators or whether we're in China talking to regulators, they want the same thing from PayPal because we are a good corporate citizen in terms of compliance, AML, regulatory and enterprise risk management. But we also work now within the financial system. So we're not we are where people have no access, we'll provide that access. But where they do have access, we're working with financial companies to create a even better economy for those nations. And they are all quite excited about our ability to attack cash.
Cash has a lot of leakage in it, has a lot of corruption associated with it. The more you can move to digital, the more those most governments want that to happen. And so I actually really couldn't be excited about the state of our platform capabilities, our compliance capabilities to be able to work across the world right now. And we're getting quite eager reception from, as I mentioned, very disparate regulators around the world.
Great. Thank you. Well, thank you so much for coming today. We appreciate your support. I'm sure we'll see lots of you in the coming weeks at conferences and we look forward to working with you.