2016 Market share : Blue color 82.9%
2021 Market share : Blue color 49.9%( source from Stastia)
The global digital
payment market size is expected to reach USD 361.30 billion by 2030, expanding
at a CAGR of 20.5% over the forecast period
PayPal's Pay in 4, Sezzle, and Zip pause gains in 4Q: We began tracking these players in 3Q21, and noted that PYPL was able to leverage its existing platform of 34M merchants to quickly expand acceptance of its BNPL offering to 7% by count just one year post-launch, while Sezzle and Zip lagged behind. However, PayPal's Pay in 4 acceptance growth stalled in 1Q, as it lost and gained two merchants for net zero additions
PayPal Checkout acceptance keeps expanding, attrition remains low: 客戶流失率跟同業比較, 相當低水準, 這是好現象, 維持Paypal 競爭力
In the second half of 2020, Bitcoin started receiving more support via corporate adoption, initially with Square and MicroStrategy and last October with Paypal. Paypal’s adoption of Bitcoin was a big step toward corporate support for Bitcoin, which in turn appears to have triggered demand for Bitcoin by institutional investors such as family offices, hedge funds and even insurance companies such as MassMutual. Some of that institutional impulse into Bitcoin likely came at the expense of gold based on the more than $4bn of inflows into the Grayscale Bitcoin Trust and the more than $7bn of outflows from Gold ETFs since mid-October (Figure 3). There is little doubt that this competition with gold as an “alternative” currency will continue over the coming years given that millennials will become over time a more important component of investors’ universe and given their preference for “digital gold” over traditional gold. Considering how big the financial investment into gold is, any such crowding out of gold as an “alternative” currency implies big upside for Bitcoin over the long term. As we had mentioned previously in the Oct 23rd Flows & Liquidity, “Bitcoin’s competition with gold,” private gold wealth is mostly stored via gold bars and coins, the stock of which, excluding those held by central banks, amounts to 42,600 tonnes or $2.7trn including gold ETFs. Mechanically, the market cap of Bitcoin at $900bn currently would have to rise by 3x from here, implying a theoretical Bitcoin price of $146k, to match the total private sector investment in gold via ETFs or bars and coin
"Lowered outlook implies a much higher view on [average revenue per unit], as PayPal is making a surprise pivot to focus on quality versus quantity of users," said Huang. JPMorgan cut its price target on PayPal stock to $190 from $272 and held to its overweight rating.
Among the top
500 e-commerce merchants that we track, AFRM lost 1 net merchant in 1Q through
March 25 (adding 1 and lost 2), bringing its total to 62 merchants (13% by
count). The pause in acceptance growth comes as AFRM is busy focusing on its
large integrations with Amazon and Shopify, though AFRM's merchant count
expansion has been notably slower for the past several quarters In 4Q21, AFRM's
acceptance on a volume-basis jumped to 43% from 10% previously as it added
Amazon. While we think Amazon should boost usage and engagement of AFRM's
product, we don't think the e-commerce giant will stick with one BNPL player
post January 2023(when its exclusivity agreement with AFRM ends).
Afterpay added net 1 to reach 62 merchants (13% by count). Both the BNPL players saw a significantly slower pace of adds from the 8-10 new adds they posted in 4Q21. Block, which closed the acquisition of Afterpay in January, in the process of integrating Afterpay into its Square and Cash App businesses, We'll be watching to see if and when Block mgmt will introduce new installment loan pricing and products to Afterpay, as well as how the combination can accelerate Afterpay's adoption with consumers and merchants. As we noted in our Block resumption of coverage report, we currently think AFRM is relatively better positioned vs. Afterpay to gain loan share among the Gen Y/Z demographics due its broader range of credit products 終於找到原因, 沒錯 ! 就是瞄準Z世代消費市場( 目前30歲以下客群, 他們的財務狀況更嚴峻, 難怪推出Buy now Pay later ) 難怪PYPL 被殺成這樣 .......
Buy now, pay later (BNPL): Since launching in August 2020, the service has processed more than $3.5 billion in TPV, with more than $1.5 billion coming in Q2 alone—and the company has expanded into new markets in the last few months, like Australia. Unlike other BNPL providers, PayPal has the advantage of a significantly larger existing merchant base that it can use to capture business and increase BNPL revenues.
PayPal's Pay in 4, Sezzle, and Zip pause gains in 4Q: We began tracking these players in 3Q21, and noted that PYPL was able to leverage its existing platform of 34M merchants to quickly expand acceptance of its BNPL offering to 7% by count just one year post-launch, while Sezzle and Zip lagged behind. However, PayPal's Pay in 4 acceptance growth stalled in 1Q, as it lost and gained two merchants for net zero additions
In 1Q, PYPL's acceptance at the top 500 US internet retailers rose by 1 net new merchant and remained at 81% by count. Despite PYPL's massive scale and wide acceptance lead over other digital wallets, PYPL has continued to grow its acceptance among the largest online merchants, especially on a volume-basis. Volume-weighted acceptance (ex-Amazon) has increased 5 percentage points to 86% since 2Q21 as PYPL added large merchants like Staples, Lowe's, and IKEA.
Affirm 2021Q4 ~ 2022 Q1 continu to grow in New acctive account, it's quite evident to the explaination of Paypal' sharp fallen down in price, there are some numbers as following :
Active merchants increased from 8,000 to 168,000 in 2022Q2, Active merchants increased from 168,000 to 207,000 in Q3 2022, driven primarily by the adoption of Shop Pay Installments by merchants on Shopify's platform
Active consumers grew 150% to 11.2 million and increased by 2.5 million, or 29%, compared to the Q3 2021.
Active consumers grew 137% to 12.7 million and increased by 1.5 million, or 13%, on a sequential basis compared to Q4 2021.
Active merchants increased from 8,000 to 168,000 in 2022Q2, Active merchants increased from 168,000 to 207,000 in Q3 2022, driven primarily by the adoption of Shop Pay Installments by merchants on Shopify's platform
Active consumers grew 150% to 11.2 million and increased by 2.5 million, or 29%, compared to the Q3 2021.
Active consumers grew 137% to 12.7 million and increased by 1.5 million, or 13%, on a sequential basis compared to Q4 2021.
Mwanwhile, Paypal Net New Accounts(NNAs) growth decline quarte by quarter :
2021Q4 - 49M net new active accounts (NNAs), +5M merchant accounts; 17% growth in active merchant accounts to 34M
- 2.4M net new active accounts (NNAs), it didn't reveal how much adds to the merchant account, a rising concern for the scale in more robust market.
parallel with market rumors that account for its strongly competition on the way
"Lowered outlook implies a much higher view on [average revenue per unit], as PayPal is making a surprise pivot to focus on quality versus quantity of users," said Huang. JPMorgan cut its price target on PayPal stock to $190 from $272 and held to its overweight rating.
2022 Q1 Analysts earnings call
I wanted to dig in a little bit on the underlying assumptions. I think last quarter, as you formulated your outlook for the year you had kind of anticipated that ecommerce growth would be around 10% for the year. Can you give us an idea of how you’re thinking about that now as part of the revised outlook? Then I just have a follow-up question around margins.
Answer :
Sure, James. We opened the year and our expectations were around 10% ecommerce growth in the U.S. What we’ve actually seen in Q1 is actually a little bit lighter than that. So while we haven’t seen a lot of third-party sources recalibrate their expectations, given that we’re only one quarter in, we’ve actually done that kind of in our own forecast, and so that’s what you see reflected in the guide. Our view is that the U.S. falls short of that 10% on the year; U.K. we think could even be sort of half that, so we’re really seeing weaker U.K. trends. Probably early to call for the full year but we’re definitely seeing that play out with an even weaker ecommerce growth in the U.K.
Question :
Got it. Then from a profitability standpoint and margins, I know you called out a few drivers there. It seemed like maybe the greater contribution from Braintree, you said mix. I don’t know if that was revenue mix or funding mix, etc. Can you just deconstruct what the elements are there that have contributed to kind of the lower margin outlook for the year?
Answer :
Yes. I think the revenue and the funding mix in some ways move together because we really did comment that Braintree was outperforming. We expect that to continue through the year, and so with Braintree outperformance the funding mix is higher [cost], more card-based funding. In conjunction with the slower ecommerce growth that we’re seeing in the broader landscape, that affects our ecommerce growth on the core PayPal platform as well. It’s a much bigger platform too, so we’re just expecting to move alongside what we think is sort of the ecommerce growth trajectory on the year, so the funding cost goes up. I think when we think about the operating margin contraction on the year, the biggest contributor of that contraction is, first, the transaction expense dynamics, followed by the lapping of the [credit] reserve release. You really see that all come through predominantly on the transaction margin side. Then I did call out some additional costs. One is just sort of general additional investing in the business, and while we do expect to see some savings in year from some of the strategies that we’ve talked about, we do expect to be reinvesting those savings, both in our people as well as in our platform. And then maybe just to clarify, we called out Russia. In our earnings materials for Q1 we called out a $0.03 impact from suspending those transactional services in Russia. For the full year it is $0.08 and that contemplates the $0.03 in Q1 as well as an additional $0.05 throughout the year.
I can add some extra color on the $0.03 in the first quarter, some of the impact there was below the line [reflected in “Other Expense”] related to some currency dislocation we saw as we looked to [suspend transaction services in Russia in the first quarter]. That’s not really reflective of the run rate of the Russia business by itself. A little bit of an anomaly in the first quarter.
Question :
Sorry, just last thing from me to tie those two pieces together. Look, I think we can all come up with our own assumptions around ecommerce growth and kind of how that recovers and what pacing and to what level, but on the mix, particularly on the extra contribution from Braintree, is something that we should be anticipating as permanent? Or persistent at least? Or is that something to do with the mix and consumer behavior, and so we should expect normalization of the relative growth rates there that are impacting margins.
Answer :
It’s some of both, James, but I’ll say that over the last several years we’ve been able to manage the mix changes in our business and still see our margins increase. We are a diversified portfolio of products when you consider Braintree and Venmo and the many other aspects that we have, and so we have to manage that. But what we’re seeing right now is actually more acute to some fundamental shifts in consumer behavior related to pandemic trends that make the pressure in this quarter more acute.
Question :
The question I had was with regards to getting to that mid-teens type of growth, If I was to break that down, does that sort of break down as mid single digit account growth and then call this 10%, 11%, 12% type transaction per account, which you can then nearly fully monetize? Is that how you’re looking at it? Then the TPA [Transactions per Active Account] part of it, if you could help understand sort of the major sources of engagement that have built up over the last four quarters where it’s been pretty consistent double digits.
Answer :
Some of the acceleration that we’re seeing in the trends really is just lapping the eBay pressure in the first half of the year. That has a pronounced impact on our trends as we go through the year. Also, lapping some of the pandemic trends. We’ve got pretty modest expectations around account growth for the year, as we noted on the call, most of the sort of core acceleration in the business is really coming from the increase in TPA or the engagement activity of our customers. Gabrielle, Dan, anything?
If I was to kind of figure out the—is that TPA monetizing and to what extent is that monetizing? How do we think of that ? ? ?
Answer :
Yes, the TPA is monetizing. One of the reasons that we continue to focus on the ex-eBay numbers is because of the strong growth that we’re seeing there. I think both Gabrielle and Dan noted almost 20% [ex-eBay] growth in the quarter on TPA, and we’re continuing to see good growth there across all aspects of the business. But as Dan noted, one of the things that we’re really trying to do is kind of get down into that medium- and lower-engaged cohort 族群特徵and get them transacting more. This kind of goes to the point that we’re making around the penetration of the digital wallet because we see that when we add or when we allow customers to avail themselves of additional experiences and products that we have, they’re going to be much more engaged with us. So our strategy really is around that.
I wanted to ask about the Venmo monetization. Obviously, parts of the forecast certainly contracted. It certainly seems like a lot of it is related to what’s happening with discretionary spend in the U.S. and obviously the U.K. as well, but it certainly seems like the monetization story is still on track with respect to Venmo. Just curious as you think about maybe the growth this year and next in respect to Venmo, what are going to be some of the key levers that you need to pull to kind of sustain this very high growth level?
Answer :
I think first of all it’s good to see that the revenue streams are much more diversified than they’ve been in the past. Pay with Venmo is beginning to pick up. Clearly at the end of the year we’ve got the launch with Amazon, which has the potential to be meaningful. First time we’re doing something with them. The team is working on a host of initiatives. Debit card refresh is going to be a big one for them. The revamping P2P, putting on business profiles and really turning that into more of a storefront than just a business profile. They are looking at new segments of the market, potentially including teen accounts and that kind of thing. They’re clearly looking at how do they open the aperture as well as diversify on the revenue streams. On the instant transfer, you probably saw that pricing is going up. That pricing just puts us at market rates, just to be clear. We have a strong value proposition. There’s no reason why we need to be below on market rates. We see a lot of new revenue streams coming in. Amazon could be a big deal, and the potential expansion of kind of the aperture 相機光圈 of Venmo in general.
Question :
The main one I wanted to clarify—and I apologize if we hit this already—was the normalized 15% growth of EPS exiting the year, the second half comment there. Clearly mathematically from the guide that’s not the reported EPS or what you’re guiding to. What was included in the normalized EPS second half comment?
Answer :
A big component of that is just tax rate oriented. For the full year, I think just the increase in tax rate is about 12 points of headwind to EPS, and then the rest is really some business mix that we have. But the biggest driver really is the tax rate.
Because I think this is an important point. Of the ~7 % point increase in tax rate, the single biggest piece of that is the mandatory capitalization of R&D in the U.S. There is some discussion that that could be overturned or reversed back to what it was previously, and if that were to happen, the way that that’s accounted for is that reversal happens all in one quarter. So, it could create lumpiness if that does hold true, but I just wanted to point that out for the benefit of everyone.
Question :
The next one is on OVAS [Other Value-Added Services]. Previously, I believe last quarter we had talked about low to mid single digits or so for OVAS for the year. Could you update us on what the expectations are for the OVAS revenue line guide? We’re clearly understanding that there were some one-time benefits last year.
Answer :
Sure. In Q1 we grew Other Value-Added Services revenue by 18%. We did open the year by saying our expectations were low single to mid single digit growth. We’ve sort of shifted up a bit so I would say right now we’re thinking about mid single digit growth as what we’re seeing on the performance of OVAS on the year, and that’s in part without good performance on the Synchrony gain share in Q1. Then it’s also clearly we’re earning a little more interest income on our customer stored balances, and I’d say that the credit piece is the bigger contributor. One other component is that our merchant lending business, which had contracted a bit through COVID, we’re now starting to grow that again and that’s also contributing on the credit side.
Question :
I want to ask about the reserve assumptions that are contemplated in the ’22 guidance. How should we be thinking about how reserves are going to trend for the year? Secondly, how should we be thinking about the relative growth of international versus U.S. for the year?
Answer :
The big impact on the year really is just the lapping of the reserve release in 2021. Full year 2021 we released about $312 million in reserves. It’s about a 125 basis point headwind to op margin in the year. It really is predominantly kind of front half loaded. Q1, we’re lapping an $84 million release. In Q2, and part of what affects EPS growth in Q2 is we’re actually lapping $156 million reserve release, which is about an $0.11 impact. Then we’ll expect we’re growing the book now, but honestly, the way we’re growing the book, it is more weighted in the direction of shorter duration credit products, and so I’d say the big impact on the year is kind of just the lapping of last year and then we are seeing some normalization. I think in quarter credit losses as a percent of the TPV was about 1 basis point 0.01%, and we did see that kind of grow maybe a basis point or two, but the big driver really being the release from last year.
For international business, It’s a great question. The full year guidance update, that full year growth rate of 11% to 13% does contemplate what we expect to see. Based upon what we’re seeing in Q1, which is sort of some of the unbranded processing volumes growing much more rapidly, that is much more weighted towards the U.S., and so that divergence where you see stronger U.S. growth on a relative basis and slightly more pressured international growth, I think as a trajectory we expect to see—where we sit right now, I think it’s hard to know when international inflects and part of it is based upon the macro. Q1 was worse than Q4, and I don’t think right now we have a view as to whether we’ll start to see improvement until the back part of the year. So, obviously, we’ll keep updating you, but we did call out some of those international pressures on the main call and they’re quite real and they’re macro related. We still have a lot of the year to see in terms of how things clear up in Europe and in China.
Question :
You called out in the prepared remarks—or maybe in reference to a question in the earlier call—that you’re going to be focused on fewer things and doing those things really well, as opposed to maybe a broader array of services and kind of doing those, I guess just okay, or maybe not to the level of standards that you’re expecting. The question I have around that is, one, are those services that you might look to de-emphasize, are those being embedded in this kind of revenue guide? Is there an implication for that, or is that just a broader statement about how you want to steer the organization towards checkout, and as you said, doubling down on digital wallets?
Answer :
No, that’s just kind of—I mean everything is included, including where we’re de-emphasizing other initiatives, to be sure that we advance our position in checkout and continue to drive incremental engagement opportunities in the digital wallet and really focus on cross-selling and moving people into the digital wallet. As you saw from kind of the stats, that’s an opportunity to move the business significantly, the more people that can move into the wallet and the better our checkout flows are. Our initiatives have certain assumptions in them; those are included in our guidance, and those that we’ve deprioritized, we’ve taken that out of our guidance.
Question :
Clearly Braintree is a success story and it’s clearly growing much faster than everything else. I guess the question is, what’s the message that you want to leave with us around unbranded transactions growing just that much faster than branded transactions? Structurally, I know it’s maybe a part of what’s happening in terms of maybe the post-pandemic consumer mix shift, but it would seem to suggest that there’s parts of the business that you really need to, I guess focus on paring or maybe even shifting materially. Thank you.
Answer :
I’d say first off, you called out Braintree; I’d also call out Venmo. I know people are a little focused on the Venmo TPV growth, but Venmo revenue growth was 60% too. Braintree and Venmo clearly are growing very rapidly. Our core business accelerated at an unprecedented rate in 2020 to 2021 period and now we’re seeing more normalized, in-line with ecommerce growth. Some of this I think is likely transitory, and so we’d expect that as ecommerce begins to accelerate again, we’re doing all the things that we’re going to enjoy that acceleration as well. On the Braintree side, we are adding new merchants, new customers, and that helps sort of give us bump ups in different quarters based upon the cadence of when they ramp, but I don’t think we’d call a structural change in our business overall. This is sort of in a reaction—we’re thinking about this over the three-year period from ’19 to ’22 in terms of the things that have happened in our business and what that means for the trends right now.
I would just add that we like that we’re not a one-trick pony, that we have a diversified portfolio of products, and that if some of those products are lower growth and higher margin, others are higher growth and lower margin, and it’s as if we’re almost incubating some small businesses within the PayPal portfolio. We’ve historically done a pretty good job of managing that portfolio and the margin performance overall with what we’ve done. So, we certainly don’t want to shy away from outsized growth in one aspect of our business because we think that bodes well for PayPal longer term. We’re going to continue to focus on this portfolio of products and manage the margin over time.
I’ll just add to it. If you look at the merchants that we’re partnering with, these are the most sophisticated apps, really around, and when you do all of unbranded that relationship gets very tight between us and those merchants. And our ability to cross-sell a number of our other services, whether it be payouts, whether it be working capital loans to their gig workers, whatever it may be there’s that relationship. The more we have with a customer, the stronger that relationship gets. I’ll work hand-in-hand with all of those apps any day. To John’s point, we have a whole portfolio of services that we provide to them, some higher margin, some lower margin, but being tight with those guys is really important.
Great. Any shot we can get a framework about how big Braintree is, in any context?
Answer :
We haven’t provided Braintree volumes to date. We are, of course, aware that others recently have provided more insights in the size of their unbranded processing business. We’ve talked a little bit about increasing some of the disclosures through the year and providing a little more clarity, and so we’re absolutely taking a look at that and we’ll continue to update you, but we’re not going to give Braintree volumes
緊抓PYPL Q2 ~ Q3 earnings call , 公司可能發佈 Braintree 市占數據, 一公佈出來可能市場大量回買PYPL
Question :
The main one I wanted to clarify—and I apologize if we hit this already—was the normalized 15% growth of EPS exiting the year, the second half comment there. Clearly mathematically from the guide that’s not the reported EPS or what you’re guiding to. What was included in the normalized EPS second half comment?
Answer :
A big component of that is just tax rate oriented. For the full year, I think just the increase in tax rate is about 12 points of headwind to EPS, and then the rest is really some business mix that we have. But the biggest driver really is the tax rate.
Because I think this is an important point. Of the ~7 % point increase in tax rate, the single biggest piece of that is the mandatory capitalization of R&D in the U.S. There is some discussion that that could be overturned or reversed back to what it was previously, and if that were to happen, the way that that’s accounted for is that reversal happens all in one quarter. So, it could create lumpiness if that does hold true, but I just wanted to point that out for the benefit of everyone.
Question :
The next one is on OVAS [Other Value-Added Services]. Previously, I believe last quarter we had talked about low to mid single digits or so for OVAS for the year. Could you update us on what the expectations are for the OVAS revenue line guide? We’re clearly understanding that there were some one-time benefits last year.
Answer :
Sure. In Q1 we grew Other Value-Added Services revenue by 18%. We did open the year by saying our expectations were low single to mid single digit growth. We’ve sort of shifted up a bit so I would say right now we’re thinking about mid single digit growth as what we’re seeing on the performance of OVAS on the year, and that’s in part without good performance on the Synchrony gain share in Q1. Then it’s also clearly we’re earning a little more interest income on our customer stored balances, and I’d say that the credit piece is the bigger contributor. One other component is that our merchant lending business, which had contracted a bit through COVID, we’re now starting to grow that again and that’s also contributing on the credit side.
Question :
I want to ask about the reserve assumptions that are contemplated in the ’22 guidance. How should we be thinking about how reserves are going to trend for the year? Secondly, how should we be thinking about the relative growth of international versus U.S. for the year?
Answer :
The big impact on the year really is just the lapping of the reserve release in 2021. Full year 2021 we released about $312 million in reserves. It’s about a 125 basis point headwind to op margin in the year. It really is predominantly kind of front half loaded. Q1, we’re lapping an $84 million release. In Q2, and part of what affects EPS growth in Q2 is we’re actually lapping $156 million reserve release, which is about an $0.11 impact. Then we’ll expect we’re growing the book now, but honestly, the way we’re growing the book, it is more weighted in the direction of shorter duration credit products, and so I’d say the big impact on the year is kind of just the lapping of last year and then we are seeing some normalization. I think in quarter credit losses as a percent of the TPV was about 1 basis point 0.01%, and we did see that kind of grow maybe a basis point or two, but the big driver really being the release from last year.
For international business, It’s a great question. The full year guidance update, that full year growth rate of 11% to 13% does contemplate what we expect to see. Based upon what we’re seeing in Q1, which is sort of some of the unbranded processing volumes growing much more rapidly, that is much more weighted towards the U.S., and so that divergence where you see stronger U.S. growth on a relative basis and slightly more pressured international growth, I think as a trajectory we expect to see—where we sit right now, I think it’s hard to know when international inflects and part of it is based upon the macro. Q1 was worse than Q4, and I don’t think right now we have a view as to whether we’ll start to see improvement until the back part of the year. So, obviously, we’ll keep updating you, but we did call out some of those international pressures on the main call and they’re quite real and they’re macro related. We still have a lot of the year to see in terms of how things clear up in Europe and in China.
Question :
You called out in the prepared remarks—or maybe in reference to a question in the earlier call—that you’re going to be focused on fewer things and doing those things really well, as opposed to maybe a broader array of services and kind of doing those, I guess just okay, or maybe not to the level of standards that you’re expecting. The question I have around that is, one, are those services that you might look to de-emphasize, are those being embedded in this kind of revenue guide? Is there an implication for that, or is that just a broader statement about how you want to steer the organization towards checkout, and as you said, doubling down on digital wallets?
Answer :
No, that’s just kind of—I mean everything is included, including where we’re de-emphasizing other initiatives, to be sure that we advance our position in checkout and continue to drive incremental engagement opportunities in the digital wallet and really focus on cross-selling and moving people into the digital wallet. As you saw from kind of the stats, that’s an opportunity to move the business significantly, the more people that can move into the wallet and the better our checkout flows are. Our initiatives have certain assumptions in them; those are included in our guidance, and those that we’ve deprioritized, we’ve taken that out of our guidance.
Question :
Clearly Braintree is a success story and it’s clearly growing much faster than everything else. I guess the question is, what’s the message that you want to leave with us around unbranded transactions growing just that much faster than branded transactions? Structurally, I know it’s maybe a part of what’s happening in terms of maybe the post-pandemic consumer mix shift, but it would seem to suggest that there’s parts of the business that you really need to, I guess focus on paring or maybe even shifting materially. Thank you.
Answer :
I’d say first off, you called out Braintree; I’d also call out Venmo. I know people are a little focused on the Venmo TPV growth, but Venmo revenue growth was 60% too. Braintree and Venmo clearly are growing very rapidly. Our core business accelerated at an unprecedented rate in 2020 to 2021 period and now we’re seeing more normalized, in-line with ecommerce growth. Some of this I think is likely transitory, and so we’d expect that as ecommerce begins to accelerate again, we’re doing all the things that we’re going to enjoy that acceleration as well. On the Braintree side, we are adding new merchants, new customers, and that helps sort of give us bump ups in different quarters based upon the cadence of when they ramp, but I don’t think we’d call a structural change in our business overall. This is sort of in a reaction—we’re thinking about this over the three-year period from ’19 to ’22 in terms of the things that have happened in our business and what that means for the trends right now.
I would just add that we like that we’re not a one-trick pony, that we have a diversified portfolio of products, and that if some of those products are lower growth and higher margin, others are higher growth and lower margin, and it’s as if we’re almost incubating some small businesses within the PayPal portfolio. We’ve historically done a pretty good job of managing that portfolio and the margin performance overall with what we’ve done. So, we certainly don’t want to shy away from outsized growth in one aspect of our business because we think that bodes well for PayPal longer term. We’re going to continue to focus on this portfolio of products and manage the margin over time.
I’ll just add to it. If you look at the merchants that we’re partnering with, these are the most sophisticated apps, really around, and when you do all of unbranded that relationship gets very tight between us and those merchants. And our ability to cross-sell a number of our other services, whether it be payouts, whether it be working capital loans to their gig workers, whatever it may be there’s that relationship. The more we have with a customer, the stronger that relationship gets. I’ll work hand-in-hand with all of those apps any day. To John’s point, we have a whole portfolio of services that we provide to them, some higher margin, some lower margin, but being tight with those guys is really important.
Great. Any shot we can get a framework about how big Braintree is, in any context?
Answer :
We haven’t provided Braintree volumes to date. We are, of course, aware that others recently have provided more insights in the size of their unbranded processing business. We’ve talked a little bit about increasing some of the disclosures through the year and providing a little more clarity, and so we’re absolutely taking a look at that and we’ll continue to update you, but we’re not going to give Braintree volumes
緊抓PYPL Q2 ~ Q3 earnings call , 公司可能發佈 Braintree 市占數據, 一公佈出來可能市場大量回買PYPL
Yes. Braintree volumes last year, what contributed to TPV grew about 79% year-over-year, and then in Q1 it was 61%.
Yes, so already a sizable business growing at a much higher growth rate. If you compare that to our large peers, you’ll see we’re really holding our own on that.
Question :
I guess first question from me, if we could just talk a little bit about sort of take rate cadence throughout the year, of transaction take rates. Did that hold somewhat steady relative to what we saw in the first quarter given Venmo monetization maybe a little bit less, sort of volume growth coming from Venmo?
Venmo generates revenue through a 2.9 percent transaction fee for businesses. Over two million merchants accept Venmo in the United States. Venmo also charges a 1% fee for users who want to withdraw money instantly to their linked card, usual withdrawals take one to two days
Answer :
We’ve been pretty pleased with the performance of take rate over the last couple of quarters. I know we tend to focus a lot on year-over-year, but sequentially you can see that it was down a few basis points quarter-over-quarter and it was I think flat the period before that. If you did look year-over-year, of the 11 basis point decline, basically about 7 points of that was related to eBay. That, again, as we’ve talked about, effectively washes out of the system after the first half of the year, and so to your point we should see pretty consistent performance in take rate throughout the year. Particularly when you’re thinking about things like the monetization of Venmo continuing to perform, we’ve talked about the revenue growth this year, so enough puts and takes there that we believe that we’ll see pretty consistent performance for the year.
Yes, I might expect the take rate performance, the decline at least, to get a little better as we move through the year. eBay having the biggest impact on our business in the first half means that as we move to the back half you should see less pressure from that eBay component. Probably somewhere in the neighborhood of high single digit decline in take rate on the year is where I think we’re thinking we’ll shake out
Question :
Dan, maybe just a point of clarification? In your prepared comments I think you talked about not looking to do something transformational from an M&A perspective. Should we interpret that as applying to doing something, obviously getting into potentially a new area or anything like that? But does it also apply to not wanting to do anything sizeable on the M&A front, even though it might be sort of tangential to your current business?
Answer :
We look at all of the different startups as well as larger companies all the time. I think really we’ve got our work pretty well cut out for us. We know exactly what we want to get done. There are acquisitions, like Paidy would be a great example of an acquisition that is straight down the middle of the fairway for us, enables us to move into the Japanese market—that’s a huge market—with not only buy now pay later capabilities but infrastructure into convenience stores that really drive the payment structure in Japan. That would be a good example of something that would be middle of the fairway. Previous ones like a Hyperwallet or something, again, payouts, right in the middle of the fairway for us. But, obviously, the bigger the size of an acquisition the more due diligence we would do on it and we really have to be quite careful about any integration risks with that, kind of lack of focus. We know exactly what we want to get done this year. We’re quite focused on it. There is a lot of dislocation in the market right now and there’s some assets that are a lot less expensive. We’re looking at everything right now
We’re still a really strong free cash flow generator, very different than a lot of companies out there, but we’re going to maintain the strong disciplines we’ve had around this and we really don’t want to get distracted from the things that we need to get done this year to make sure that we position ourselves the right way coming out of the year.
Question :
I wanted to dig in a little bit on the eBay impact. Obviously it’s been a challenge to forecast. I’m just curious if you guys feel like you might have underestimated anything as it relates to the longer term impacts to the business outside of simply the volume loss. I’m just curious there. Then secondly, just on the investments that haven’t panned out, that you’re just going to move away from, could you just talk about some of those? Thanks.
Venom basic profile
Venom Versus Zelle
Answer:
Yes. Maybe we’ll start on eBay. The revenue pressure from eBay this year is slightly greater than what we had expected going into the year. It is still predominantly front half loaded and so we move through the back half it really does abate衝擊減少 and sequentially, sort of, the compares get easier. So, we do expect to be sort of past this as we move into next year. That incremental pressure that we’ve called out really just relates to the fact that we’re seeing eBay get a little more aggressive in some of the markets where they have done their migration, and so we are seeing some lower share of checkout overall in some of those markets. That said, clearly our future is not tied to eBay. 所以未來幾年再遇到股價下滑, 市場說跟ebay有關係, 就別再去理它, CEO Schulman都說未來越來越少依賴 ebay
Answer:
Yes. Maybe we’ll start on eBay. The revenue pressure from eBay this year is slightly greater than what we had expected going into the year. It is still predominantly front half loaded and so we move through the back half it really does abate衝擊減少 and sequentially, sort of, the compares get easier. So, we do expect to be sort of past this as we move into next year. That incremental pressure that we’ve called out really just relates to the fact that we’re seeing eBay get a little more aggressive in some of the markets where they have done their migration, and so we are seeing some lower share of checkout overall in some of those markets. That said, clearly our future is not tied to eBay. 所以未來幾年再遇到股價下滑, 市場說跟ebay有關係, 就別再去理它, CEO Schulman都說未來越來越少依賴 ebay
eBay will probably wind up being somewhere in the neighborhood of 2% to 3% of revenue this year, 2% to 3% of volume, and everything else is continuing to grow much more rapidly. When you think about the revenue growth that we guided to this year ex- eBay at the midpoint at about 16% revenue growth ex- eBay, and on top of 29% last year. So, we’re really focused on growing all those other important relationships, and I don’t think we view this as being something sort of structurally impacting the business in a greater way, but there is, call it another $125 million of revenue pressure in year that we did call out today.
Maybe I’ll take the next part of the question. I think one of the places that we are de-emphasizing now are some of the international markets that we were looking at before. We are trying to focus on customer engagement. For customer engagement really to maximize, 與客戶建立關係
Maybe I’ll take the next part of the question. I think one of the places that we are de-emphasizing now are some of the international markets that we were looking at before. We are trying to focus on customer engagement. For customer engagement really to maximize, 與客戶建立關係
we need multiplicity of services and capabilities. You can’t just have one thing and hope to be able to have increased engagement, and doing that in some market is just going to take a real long time and a lot of money for us to go and do that. And just the juice does not seem worth the squeeze to go and do that.
It also ties in to kind of our NNAs as well. Those are typically lower ARPA [average revenue per active] markets, higher churn markets. Our view is let’s concentrate on our engagement in basically our core markets where we have a multiplicity of services, where we have our digital wallet, and not spend a ton of money on higher beta opportunities internationally.
Question :
Dan, I think you mentioned investing back into the business. I just wanted to ask where are you prioritizing that investment and can you provide us more detail on how you plan to drive that engagement, and across which users do you see the lowest hanging fruit? Thank you.
Answer :
Sure. Investment are going to go at checkout. We’ve talked about that. They’re going to go at the digital wallet. They’ll come into marketing around engagement, and also we continue to upgrade our core infrastructure as well. That’s going to be a constant investment there. Obviously you’ve got not just more and more scale and therefore, you know, more complexity in it, but we want to unify all of the things that we’ve bought as well into one common platform, one set of common reports, one set of common servicing as well, and then obviously cyber never rests, never rests. We have to constantly invest in that. We are spending a lot of time kind of assuring that we have all the right accountability in place on an endto-end basis, that people own these initiatives and they own them across the company, like full P&L ownership for that so that we are driving both accountability and clear ownership of what we expect the impact will be on our key metrics
Question :
I was just curious about the TPV that would not be counted in retail sales. I think in previous calls, right when COVID hit you talked about travel and events being roughly 9% to 10% of TPV. Can you just discuss that number and any volumes that could be captured in service spend versus retail trade? Thanks so much.
Answer :
I’ll start and welcome comments from the others. But you are right. The travel and event vertical has generally been around 10% for us and that declined dramatically, certainly at the peak of the pandemic, and then of course all you need to do is go into an airport today to recognize that that has returned in full force. So, we do benefit from that. But generally, we also—our TPV composition is much more goods versus services as well. That’s having some impact on our numbers as well, but aside from events, concerts, travel—I’m struggling to think of anything else that really falls out of what we normally think of as retail sales. I guess the exception being we do a lot of person-to-person transactions that sometimes are quite difficult to determine what that was actually for when it’s just one person exchanging a payment with someone else. But we also monetize that in many cases as well, depending upon the funding instrument or the market or currency that it’s used in. But generally, if you just look at our commerce volumes—and correct me if I’m wrong here, Gabrielle, but last year’s [commerce TPV] was $800 billion?
We do obviously work with Uber and Airbnb and DoorDash and so those ride share food delivery verticals are important for Braintree. Then I’d also probably call out payment just on the Braintree side with bill payments which is an entirely different vertical from a goods and services vertical.
Question :
Great. Just maybe quickly if you don’t mind, I guess if you just think about the year-over-year change in the margin expectation, you called out roughly that 125 [basis points] from just the credit normalization just from the releases last year. Then you said scale and then investment. I know we’ve talked about the various pieces somewhat, but there’s roughly another 3% there that is split between those two, and I’m just trying to think about as the business scales back what kind of scaled benefits the company could see over the long term. Thanks so much.
Answer :
Maybe I’ll start and others can jump in, but just to put a finer point on some of that investment, which is incremental to our last guidance, some of this is really just continuing to manage the business appropriately for the long term. An example of that, we see that the war for talent is challenging as it has ever been, so there are additional retention measures that we’ve taken from our last guidance update to retain employees. We also have expectations around some actions we may take in terms of managing the balance sheet. All of these things that are what normal, healthy businesses do to manage over the long term, which we include into this investment bucket, that is more typically thought about as product and technology and things like that that we’re doing to make sure that we continue to grow the business.
I’ll just say that as we look forward, clearly our scale dramatically increased during the pandemic. We did $1.25 trillion of volume. It gives us a lot of leverage as we look at our suppliers and partners. We’re clearly in the middle of looking at how do we improve unit cost economics across the business with a number of our different suppliers, and that’s just what happens when you get much bigger, and we will appropriately leverage that. We also are looking obviously at driving the right operating leverage inside the Company. We’re investing in technology and in our engineering, but we’re streamlining in other places as well. And so we feel like we’re going to continue over the long run to have operating leverage.
Question :
Thanks guys. Just shifting back to the financials for a minute. We're getting a lot of questions from investors on transaction margins as obviously credit and debit mix and losses normalized. If you could just give us a sense of transaction expense, it was for the quarter, it was 87 basis points. Is that the right number to think about for the year? And what in your view would stop transaction expense from returning to pre-pandemic levels?
Answer :
I think 87 basis points is a fair way to think about the year. A fair way to think about it longer term. I think Dan pointed out the benefits we have from scale and that's really critical and it helps in our most important cost buckets. 提到scale 這個字
Question :
Okay guys, can I shift for a minute while we're on the topic of transaction expense and take rates, just transaction loan losses for a minute? I know pre-pandemic was around 20 basis points. I think it's average around 10 basis points or five to 10 basis points of volume, the last few quarters. How do we think about that from a modeling standpoint? Is that sustainable given the macro backdrop and the build and credit reserves? Is that the right amount that we have now? Or should we think about that differently?
未來經濟下滑狀態, 貸款信用損失仍能維持在 5~ 10 basis point 低檔區 !?
Answer :
It may be helpful to think about transaction loss and then credit loss, the sort of separate components on the transaction loss side. Historically we were seeing around 17 to 19 basis points as a percentage of total payment volume as a range for transaction loss. We brought that down pretty successfully over the years. In the past 18 to 24 months, it has been closer to 10 or 11 to 12 basis points. We think that's relatively sustainable, the 10 basis point rate we saw in Q1. On the loan loss or credit loss side, it was one basis point as a percentage of TPV in Q1. Obviously, last year we did have a fair amount of reserve release, about $312 million during the year. Structurally, the credit loss was very low. We are building more originations but remember, a lot of what we're building is shorter duration and I would expect loan loss that to potentially be low single digits, call it something like three to five basis points, though obviously it is a little early to call because the book is just starting to originate more loans. But with the shorter duration, we think that's pretty manageable in the kind of low single digit range. 這段提到信用損失準備, 預計2022Q2會升高, 因為經濟下滑
Question :
All right. That's helpful. Just shifting to Venmo now, I know we touch on it before, but while the Venmo growth rates accelerated a bit, you seem to still be accelerating revenue growth. If you could just talk about the drivers of that increased monetization, what do you see as being the main drivers of Venmo revenue going forward?
Answer :
You're right that Venmo’s volume growth was 12% in Q1 - but remember that is on top of 63% growth a year ago. I think that's important to put into a perspective. I think the other thing though, is that 1099 tax confusion, that impacted us and we've done lot of customer education around that. We've seen a lot of the MAAs [monthly active accounts] come back from that. I think we've done a pretty good job on explaining that, but it did impact us for sure. Look and also just even core functionality of Venmo, we're revamping P2P [peer-to-peer payments], we can make things better there, searchability needs to improve and we've got focus on that, need to have a persistent send, receive capability on the app as we expand the app and you go into different sections if you want to send, receive, which is what people most do there. We want people to be able to do that simply and easily straight from the app. With Venmo, we've also got a big emphasis on the debit card refresh like we do on the PayPal side. We're woefully underpenetrated versus where we should be on the Venmo side with debit cards. We've got a lot of initiatives underway there that I think will make a real difference. The business profiles has been quite successful in moving that even more to storefronts.
We think there's a way for Venmo to open up its aperture, even more with teen accounts. And we're looking at that, and then obviously Pay with Venmo continues to expand. Right now we're on track to launch with Amazon in the back half of the year. There are a lot of initiatives happening on the Venmo side and I'm encouraged by how well the team is performing there.
Question :
there's one quick follow up on take rate. I think you talked about modest pressure flattish take rate in second half. Someone's just asking you if that's year over year or sequential.
Answer:
For the year, I expect take rate relative to last year to be sort of a basis point decline of mid to high single digits.
Question :
Okay. Thank you. Let's shift gears to the competitive dynamics, which is obviously still one of the most common questions we get around the industry and PayPal, no exception. There's clearly questions on whether it's browser or mobile and the checkout is getting more and more competitive. If you could just touch on your view on PayPal's share of checkout trends recently and through the remainder of the year. I think that would help a lot of investors.
Answer :
Sure. Let me just start off, we've got a lot of very positive assets. In the market, we're clearly one of the most trusted brands with consumers. There was a recent survey done by one analyst that looked at consumers, what's their favorite choice of a digital wallet to do online? 60% of consumers chose PayPal. The next most popular option was 8%. 這是Paypal 跟第2名市占差距
It also ties in to kind of our NNAs as well. Those are typically lower ARPA [average revenue per active] markets, higher churn markets. Our view is let’s concentrate on our engagement in basically our core markets where we have a multiplicity of services, where we have our digital wallet, and not spend a ton of money on higher beta opportunities internationally.
Question :
Dan, I think you mentioned investing back into the business. I just wanted to ask where are you prioritizing that investment and can you provide us more detail on how you plan to drive that engagement, and across which users do you see the lowest hanging fruit? Thank you.
Answer :
Sure. Investment are going to go at checkout. We’ve talked about that. They’re going to go at the digital wallet. They’ll come into marketing around engagement, and also we continue to upgrade our core infrastructure as well. That’s going to be a constant investment there. Obviously you’ve got not just more and more scale and therefore, you know, more complexity in it, but we want to unify all of the things that we’ve bought as well into one common platform, one set of common reports, one set of common servicing as well, and then obviously cyber never rests, never rests. We have to constantly invest in that. We are spending a lot of time kind of assuring that we have all the right accountability in place on an endto-end basis, that people own these initiatives and they own them across the company, like full P&L ownership for that so that we are driving both accountability and clear ownership of what we expect the impact will be on our key metrics
Question :
I was just curious about the TPV that would not be counted in retail sales. I think in previous calls, right when COVID hit you talked about travel and events being roughly 9% to 10% of TPV. Can you just discuss that number and any volumes that could be captured in service spend versus retail trade? Thanks so much.
Answer :
I’ll start and welcome comments from the others. But you are right. The travel and event vertical has generally been around 10% for us and that declined dramatically, certainly at the peak of the pandemic, and then of course all you need to do is go into an airport today to recognize that that has returned in full force. So, we do benefit from that. But generally, we also—our TPV composition is much more goods versus services as well. That’s having some impact on our numbers as well, but aside from events, concerts, travel—I’m struggling to think of anything else that really falls out of what we normally think of as retail sales. I guess the exception being we do a lot of person-to-person transactions that sometimes are quite difficult to determine what that was actually for when it’s just one person exchanging a payment with someone else. But we also monetize that in many cases as well, depending upon the funding instrument or the market or currency that it’s used in. But generally, if you just look at our commerce volumes—and correct me if I’m wrong here, Gabrielle, but last year’s [commerce TPV] was $800 billion?
We do obviously work with Uber and Airbnb and DoorDash and so those ride share food delivery verticals are important for Braintree. Then I’d also probably call out payment just on the Braintree side with bill payments which is an entirely different vertical from a goods and services vertical.
Question :
Great. Just maybe quickly if you don’t mind, I guess if you just think about the year-over-year change in the margin expectation, you called out roughly that 125 [basis points] from just the credit normalization just from the releases last year. Then you said scale and then investment. I know we’ve talked about the various pieces somewhat, but there’s roughly another 3% there that is split between those two, and I’m just trying to think about as the business scales back what kind of scaled benefits the company could see over the long term. Thanks so much.
Answer :
Maybe I’ll start and others can jump in, but just to put a finer point on some of that investment, which is incremental to our last guidance, some of this is really just continuing to manage the business appropriately for the long term. An example of that, we see that the war for talent is challenging as it has ever been, so there are additional retention measures that we’ve taken from our last guidance update to retain employees. We also have expectations around some actions we may take in terms of managing the balance sheet. All of these things that are what normal, healthy businesses do to manage over the long term, which we include into this investment bucket, that is more typically thought about as product and technology and things like that that we’re doing to make sure that we continue to grow the business.
I’ll just say that as we look forward, clearly our scale dramatically increased during the pandemic. We did $1.25 trillion of volume. It gives us a lot of leverage as we look at our suppliers and partners. We’re clearly in the middle of looking at how do we improve unit cost economics across the business with a number of our different suppliers, and that’s just what happens when you get much bigger, and we will appropriately leverage that. We also are looking obviously at driving the right operating leverage inside the Company. We’re investing in technology and in our engineering, but we’re streamlining in other places as well. And so we feel like we’re going to continue over the long run to have operating leverage.
2022 Q1 buyside earnings call
Question :
Okay. Just following up on engagement and just the ARPA comments that you were making before Dan. For the digital wallet, could you talk a little more about the roadmap there, since I know that's a key part of the story obviously, and what are some of the things that could be improved on? What's the next gen checkout experience and digital wallet experience? And maybe just, if you can give us a little glimpse on what are some of the product releases you're most excited about?
Answer :
Oh, I talked a little bit about some of those when I talked about the ARPA increases, I'm excited about what we're doing in the shopping hub right now. There's going to be a lot of focus. We have a lot of merchants who are very interested in working with us so there'll be a pretty complete revamp there. I do think all the things we're going to do on credit and debit is going to be meaningful. That’s a big opportunity for us. It's a big opportunity in and of itself because the halo effects when somebody uses credit and debit with us are quite large, but it really enables us to tap into offline in a very seamless way. Clearly over time, people will move to using the mobile phone more and more at point of sale that's going to happen,這個地方是Payapl弱項 but it's a long, tough slog over time to get people to change user behavior. Apple Pay has been at it for a long time and QR codes still have very low share. We're making slow, steady progress on that, but people find it easy to use their credit cards and debit cards. We’ve put out our 3/2 rewards credit card that has a lot of enhancements and better integration. We think it's a fantastic value proposition and eventually you'll be able to tap that 3/2 card at the store, get 2% off in store, 3% off using PayPal. But then when you come back into the app, you’ll then be able to figure out how you want to fund that transaction. Do you want to pay for that immediately? Do you want to buy now pay later? Do you want to use some of your rewards points in there? It's a really beautiful way to seamlessly tie in online and offline.
Question :
Okay. Just following up on engagement and just the ARPA comments that you were making before Dan. For the digital wallet, could you talk a little more about the roadmap there, since I know that's a key part of the story obviously, and what are some of the things that could be improved on? What's the next gen checkout experience and digital wallet experience? And maybe just, if you can give us a little glimpse on what are some of the product releases you're most excited about?
Answer :
Oh, I talked a little bit about some of those when I talked about the ARPA increases, I'm excited about what we're doing in the shopping hub right now. There's going to be a lot of focus. We have a lot of merchants who are very interested in working with us so there'll be a pretty complete revamp there. I do think all the things we're going to do on credit and debit is going to be meaningful. That’s a big opportunity for us. It's a big opportunity in and of itself because the halo effects when somebody uses credit and debit with us are quite large, but it really enables us to tap into offline in a very seamless way. Clearly over time, people will move to using the mobile phone more and more at point of sale that's going to happen,這個地方是Payapl弱項 but it's a long, tough slog over time to get people to change user behavior. Apple Pay has been at it for a long time and QR codes still have very low share. We're making slow, steady progress on that, but people find it easy to use their credit cards and debit cards. We’ve put out our 3/2 rewards credit card that has a lot of enhancements and better integration. We think it's a fantastic value proposition and eventually you'll be able to tap that 3/2 card at the store, get 2% off in store, 3% off using PayPal. But then when you come back into the app, you’ll then be able to figure out how you want to fund that transaction. Do you want to pay for that immediately? Do you want to buy now pay later? Do you want to use some of your rewards points in there? It's a really beautiful way to seamlessly tie in online and offline.
Question :
Dan you talked a lot about areas you're focused on, but you mentioned yesterday also potentially deemphasizing some areas so that you can really focus and lean into more of the key opportunities. What are some of those areas? Just, if you could revisit some of the areas that you may want to deemphasize versus the key opportunities, what are you most focused on??Answer:
Checkout, digital wallet and investments in our core technology base, right? Those are the three things that we're leaning into. We've got to have basic hygiene that is second to none, that's “five nines” availability, that's latency, single digit in terms of seconds, constant cybersecurity enhancements.
Five-nines availability -- or 99.999% -- is the percentage of time a network component or service is accessible to a user in a given periodAnd that is where we are clearly focused. We also are de-emphasizing a lot of the international stuff that we did. You look at kind of our penetration in our core markets, you look at whether that’s our user base, penetration of engagement on how much people use online services and how much they use us. It's 25% of the time they use us for online services. We still have a lot of room to grow.
There's such a huge addressable market and so many opportunities in our space that it's very easy to get distracted. And fundamentally what Dan is saying is, we just need to focus on the basics. We need to nail checkout. We need to make sure that we have the very best digital wallet that's out there. We need to be the number one digital wallet in our core markets versus trying to be all things to all people. If we get the basics right, the opportunity for us is tremendous.
There's such a huge addressable market and so many opportunities in our space that it's very easy to get distracted. And fundamentally what Dan is saying is, we just need to focus on the basics. We need to nail checkout. We need to make sure that we have the very best digital wallet that's out there. We need to be the number one digital wallet in our core markets versus trying to be all things to all people. If we get the basics right, the opportunity for us is tremendous.
專注於Digital payment 本業, 策略是對的
Dan mentioned less than half the time that a PayPal customer has the opportunity to use us ( 是否因為客戶都跑去用 Square, Stripe #$% ...... ?? ) 👼
they actually take advantage of that. We can double the size of our business with our current user base if people just use us when they can. 有點在說夢想畫大餅 We need to have the very best product and experiences for our customers, so that they'll want to do that. There’s a very sharp focus on these things that are most important, that are the things that we believe that are in the space that we should win
Question :
Thanks guys. Just shifting back to the financials for a minute. We're getting a lot of questions from investors on transaction margins as obviously credit and debit mix and losses normalized. If you could just give us a sense of transaction expense, it was for the quarter, it was 87 basis points. Is that the right number to think about for the year? And what in your view would stop transaction expense from returning to pre-pandemic levels?
Answer :
I think 87 basis points is a fair way to think about the year. A fair way to think about it longer term. I think Dan pointed out the benefits we have from scale and that's really critical and it helps in our most important cost buckets. 提到scale 這個字
規模經濟效應, 降低成本
of course the transaction expenses are our single largest line item. We expect over time, our scale will continue to benefit us in terms of containing the inflation of transaction expense. It's also important to recognize parts of our business like Venmo, the commerce volume is continuing to grow at a really healthy rate and over time will help from a mix standpoint because funding costs on Venmo on the commerce side are structurally lower today. We will continue to manage this with discipline.
Question :
Okay. And then if we take that a step further and just looking at transaction expense and gross profit take rates, obviously another big one we get, if you could just touch on how we should think about the take rate for this year embedded in your guidance? What the individual drivers will be, both headwinds and tailwinds, maybe deconstruct a little bit more detailed granularly, the 11 basis point drop off by whether it's Braintree or eBay or other factors. Thanks guys.
Answer :
Sure. I'll start. And you jump in if that's okay. The 11 basis point decline in take rate in the quarter, seven basis points of that was related to eBay and the balance really is mostly attributable to FX fees. Everything else is kind of there's some puts and takes that are one or two basis points higher or lower. Notably though - Venmo was again a contributor - it was a two basis point favorable contributor to take rate as we continue to monetize Venmo. We’ve been talking about this for a long time, Darrin and talking about, there's been a lot of noise in the numbers. The last couple of quarters, last three quarters, I think it's a better reflection of what's happening in the core business from a take rate perspective. And as we get past this first half of the year and we lap some of the eBay pressure, you're really going to see some pretty modest pressure, if not kind of a flattish take rate. And importantly, you see some of the benefits of the pricing change that we made last year, and we always have pricing initiatives that help influence that.
Question :
Okay, that makes a lot of sense. I imagine Braintree though, just one kind of quick follow up on that, had some impact, even the growth rate there and the yields there now?
Answer:
The Braintree has a bigger impact on transaction experience versus take rate because the Braintree's sweet spot is a lot of that, those middle market merchants that we're actually able to price more in line with what our sort of core PayPal take rate is.
Question :
That's really helpful. And I guess the funding mix on the Braintree side's going to be card based, right? Versus the pre-funded or ACH in some cases?
PRE-FUNDING means that the Company's deposit account will be debited at the time the ACH transactions or files are sent to Financial Institution for processing. Adequate funds must be available at that time or processing will suspend. Only ACH Credit originations are subject to Pre- Funding.
Answer : Precisely.
Question :
Listen, while we're on the topic of Braintree, I know there's some questions coming in. Braintree obviously had phenomenal growth, if you could just remind us what the value proposition is to SMBs of using Braintree versus platform partners out there? Whether it's Adyen or Stripe or someone else? How does Braintree stack up and what's the value prop you pitch to clients?
Answer :
Sure, obviously Braintree growth was strong the last quarter, but stronger last year, I think we grew somewhere around 79% in terms of Braintree [volume] growth last year. It’s very much holding its own against any of the larger peers out there. And some of the largest, most sophisticated apps use us. We talked about some of them it's Airbnb, Uber, Live Nation, DoorDash, it's TikTok, Spotify, etc. These are some of the most demanding and sophisticated merchants, and we've got a couple of really big wins that will be coming on board over the next few quarters as well. It spans a host of verticals as Gabrielle talked about yesterday. Why do people choose Braintree? It's a fully native integration across our tech stack. It drives, enhanced conversion, higher authorization rates, and it's a seamless customer experience. You seamlessly integrate in PayPal and Venmo into that very high reliability and uptime, ease of use, a ton of trust between those partners and us, and importantly and actually that leads into some of the things on checkout. Our vault of financial instruments in PayPal, we vault billions of instruments, that amount of data and information, being able to look at that across partners
Question :
Okay. And then if we take that a step further and just looking at transaction expense and gross profit take rates, obviously another big one we get, if you could just touch on how we should think about the take rate for this year embedded in your guidance? What the individual drivers will be, both headwinds and tailwinds, maybe deconstruct a little bit more detailed granularly, the 11 basis point drop off by whether it's Braintree or eBay or other factors. Thanks guys.
Answer :
Sure. I'll start. And you jump in if that's okay. The 11 basis point decline in take rate in the quarter, seven basis points of that was related to eBay and the balance really is mostly attributable to FX fees. Everything else is kind of there's some puts and takes that are one or two basis points higher or lower. Notably though - Venmo was again a contributor - it was a two basis point favorable contributor to take rate as we continue to monetize Venmo. We’ve been talking about this for a long time, Darrin and talking about, there's been a lot of noise in the numbers. The last couple of quarters, last three quarters, I think it's a better reflection of what's happening in the core business from a take rate perspective. And as we get past this first half of the year and we lap some of the eBay pressure, you're really going to see some pretty modest pressure, if not kind of a flattish take rate. And importantly, you see some of the benefits of the pricing change that we made last year, and we always have pricing initiatives that help influence that.
Question :
Okay, that makes a lot of sense. I imagine Braintree though, just one kind of quick follow up on that, had some impact, even the growth rate there and the yields there now?
Answer:
The Braintree has a bigger impact on transaction experience versus take rate because the Braintree's sweet spot is a lot of that, those middle market merchants that we're actually able to price more in line with what our sort of core PayPal take rate is.
Question :
That's really helpful. And I guess the funding mix on the Braintree side's going to be card based, right? Versus the pre-funded or ACH in some cases?
PRE-FUNDING means that the Company's deposit account will be debited at the time the ACH transactions or files are sent to Financial Institution for processing. Adequate funds must be available at that time or processing will suspend. Only ACH Credit originations are subject to Pre- Funding.
Answer : Precisely.
Question :
Listen, while we're on the topic of Braintree, I know there's some questions coming in. Braintree obviously had phenomenal growth, if you could just remind us what the value proposition is to SMBs of using Braintree versus platform partners out there? Whether it's Adyen or Stripe or someone else? How does Braintree stack up and what's the value prop you pitch to clients?
Answer :
Sure, obviously Braintree growth was strong the last quarter, but stronger last year, I think we grew somewhere around 79% in terms of Braintree [volume] growth last year. It’s very much holding its own against any of the larger peers out there. And some of the largest, most sophisticated apps use us. We talked about some of them it's Airbnb, Uber, Live Nation, DoorDash, it's TikTok, Spotify, etc. These are some of the most demanding and sophisticated merchants, and we've got a couple of really big wins that will be coming on board over the next few quarters as well. It spans a host of verticals as Gabrielle talked about yesterday. Why do people choose Braintree? It's a fully native integration across our tech stack. It drives, enhanced conversion, higher authorization rates, and it's a seamless customer experience. You seamlessly integrate in PayPal and Venmo into that very high reliability and uptime, ease of use, a ton of trust between those partners and us, and importantly and actually that leads into some of the things on checkout. Our vault of financial instruments in PayPal, we vault billions of instruments, that amount of data and information, being able to look at that across partners
大數據分析 that ability potentially, as we look at next generation checkout going forward is a huge competitive advantage for us and a real reason that our partners trust and choose us.
Question :
Okay guys, can I shift for a minute while we're on the topic of transaction expense and take rates, just transaction loan losses for a minute? I know pre-pandemic was around 20 basis points. I think it's average around 10 basis points or five to 10 basis points of volume, the last few quarters. How do we think about that from a modeling standpoint? Is that sustainable given the macro backdrop and the build and credit reserves? Is that the right amount that we have now? Or should we think about that differently?
未來經濟下滑狀態, 貸款信用損失仍能維持在 5~ 10 basis point 低檔區 !?
Answer :
It may be helpful to think about transaction loss and then credit loss, the sort of separate components on the transaction loss side. Historically we were seeing around 17 to 19 basis points as a percentage of total payment volume as a range for transaction loss. We brought that down pretty successfully over the years. In the past 18 to 24 months, it has been closer to 10 or 11 to 12 basis points. We think that's relatively sustainable, the 10 basis point rate we saw in Q1. On the loan loss or credit loss side, it was one basis point as a percentage of TPV in Q1. Obviously, last year we did have a fair amount of reserve release, about $312 million during the year. Structurally, the credit loss was very low. We are building more originations but remember, a lot of what we're building is shorter duration and I would expect loan loss that to potentially be low single digits, call it something like three to five basis points, though obviously it is a little early to call because the book is just starting to originate more loans. But with the shorter duration, we think that's pretty manageable in the kind of low single digit range. 這段提到信用損失準備, 預計2022Q2會升高, 因為經濟下滑
Question :
All right. That's helpful. Just shifting to Venmo now, I know we touch on it before, but while the Venmo growth rates accelerated a bit, you seem to still be accelerating revenue growth. If you could just talk about the drivers of that increased monetization, what do you see as being the main drivers of Venmo revenue going forward?
Answer :
You're right that Venmo’s volume growth was 12% in Q1 - but remember that is on top of 63% growth a year ago. I think that's important to put into a perspective. I think the other thing though, is that 1099 tax confusion, that impacted us and we've done lot of customer education around that. We've seen a lot of the MAAs [monthly active accounts] come back from that. I think we've done a pretty good job on explaining that, but it did impact us for sure. Look and also just even core functionality of Venmo, we're revamping P2P [peer-to-peer payments], we can make things better there, searchability needs to improve and we've got focus on that, need to have a persistent send, receive capability on the app as we expand the app and you go into different sections if you want to send, receive, which is what people most do there. We want people to be able to do that simply and easily straight from the app. With Venmo, we've also got a big emphasis on the debit card refresh like we do on the PayPal side. We're woefully underpenetrated versus where we should be on the Venmo side with debit cards. We've got a lot of initiatives underway there that I think will make a real difference. The business profiles has been quite successful in moving that even more to storefronts.
We think there's a way for Venmo to open up its aperture, even more with teen accounts. And we're looking at that, and then obviously Pay with Venmo continues to expand. Right now we're on track to launch with Amazon in the back half of the year. There are a lot of initiatives happening on the Venmo side and I'm encouraged by how well the team is performing there.
there's one quick follow up on take rate. I think you talked about modest pressure flattish take rate in second half. Someone's just asking you if that's year over year or sequential.
Answer:
For the year, I expect take rate relative to last year to be sort of a basis point decline of mid to high single digits.
Question :
Okay. Thank you. Let's shift gears to the competitive dynamics, which is obviously still one of the most common questions we get around the industry and PayPal, no exception. There's clearly questions on whether it's browser or mobile and the checkout is getting more and more competitive. If you could just touch on your view on PayPal's share of checkout trends recently and through the remainder of the year. I think that would help a lot of investors.
Answer :
Sure. Let me just start off, we've got a lot of very positive assets. In the market, we're clearly one of the most trusted brands with consumers. There was a recent survey done by one analyst that looked at consumers, what's their favorite choice of a digital wallet to do online? 60% of consumers chose PayPal. The next most popular option was 8%. 這是Paypal 跟第2名市占差距
There’s a clear preference for consumers to use PayPal. They trust it, merchants trust it, small businesses when they put PayPal on their site, consumers tend to shop, even if they don't know that merchant because they know we give them protections and they trust us. People are two times more likely to shop when a PayPal button is present. With huge network effects, we are something like eight times larger than the next wallet button out in the market. When I look at our risk and fraud capabilities most of the time people are making a tradeoff between either high authorization rates or loss rates. We have the lowest loss rates in the industry and the highest authorization rate. For every hundred checkouts, we process six more than the industry average. This is a huge advantage for merchants and obviously the breadth and depth of the products that we offer make a difference.
I think as a lot of people have recently seen checkout is really hard, it is essential, you do it extraordinarily well with every merchant because if you don't, they lose tens of million, if not hundreds of millions of dollars, this is 99.999% uptime. This is low latency. It has to work all the time. And we are very focused on building on these advantages by improving checkout, by the way, there's been a ton of competition all the time and that intensity remains, so. But I would say, from the beginning that I've been here, we've had competition against all the wireless carriers coming together, all the merchants coming together, Visa, MasterCard, startups with new tech. We pay attention to every single one of those things. But we think that our checkout right now is holding or gaining share. We just did a study just a couple weeks ago of the top 55 publicly traded merchants because we have a closely view of their full checkout and there were 5 of them that we were losing a little bit of share, 17 that we were gaining share and the rest we were the same. It gives you a sense of kind of where we are. We can talk more and more about checkout by the way, if you're interested in Darrin on all the things we're doing there, but we know we need to continue to advance our position in checkout. We are far from perfect in checkout. We've got a lot of things to go and do to improve it. We’re also thinking about the next generation of checkout as well, but we're more than holding our own right now. We’ve got a lot of things to just get better at both the basics and some really important things going forward.
Question :
When we think about your focus on mobile versus in-browser checkout experience, I imagine you really are focused on both, but is there some sort of areas that you think are really in the most need of revamp 改造 or change?
Answer :
In terms of checkout - it depends on what tech stack they've integrated onto for us, Braintree's our latest that's predominantly mobile apps that people are using on. That's a seamless integration in checkout, and with high availability, low latency. I think if I just quickly would go through the things I think are most important for us to do with checkout, one is basic hygiene - uptime, availability, latency, we have to be great on all three and we can improve in all of them. We're working hard to go and do that. A lot of that is removing legacy code that we have in there and we have a number of things well underway to address that. Second is, I would just call it sort of UX [user experience] simplification, whether that be on a browser or in mobile, we do not want to force a separate popup window on web or native apps. You want it to be in context - we've got a lot of work on what I would just call UX simplification. I think we can do more in moving towards what I call industry standard integrations so that you don't have to do a complete separate integration for PayPal. If you're doing card integration, you should be able to use many of the same things when integrating PayPal. We also want to optimize login success more, we're moving more and more away from username, password which people can forget. We can do a lot more of identity biometrics and actually improve all the rates and improve signability into those apps. When you incorporate those things, you can more easily use one click checkout, which is really important as well. These are basic hygiene things that we need to do better and better. We’re working on this next gen of checkout, which is about how do we really solve the issues for retailers, which is not do people convert 50% or 80% when they get to checkout - but how do we get people when they come to a retailer's website to go all the way through to checkout, they are less than 5% of the people who go to a merchant website actually check out. If we can use all of that data and information on our vast scale of consumer accounts that we have, and basically surface to the merchant who this customer is, again, not PII [personally identifiable information], but who this customer is so that they can target kind of what webpage do they want to show? What offers do they want to show so that we can help drive conversion on entry into the website, not at product pages or checkout, that's going to be a multiyear process, but we have a lot of merchants quite excited about that. Nobody has the scale of data and information we do to be able to drive that next gen.
Question :
Okay, Maybe just on capital allocation then. If you could touch on how you're thinking about capital allocation from here, the stocks trading, where it is? Would you say it's safe to assume that the company will be more aggressive with buybacks in the near term or any thoughts on higher leverage or dividend or anything else in this environment?
Answer :
You’ve seen us be more aggressive on buybacks the past few quarters, I'd expect that we would be buyers at this price. Clearly, we think the intrinsic value of our business is far in excess of where we trade today, but we also have taken a pretty balanced approach to capital allocation and we've got important organic investments to make in the business. And in addition, we want to have the flexibility to make sort of the prudent types of acquisitions that will continue to help us advocate capabilities and be both sensible inside the company and of strategic importance.
2020 Q3法說會
A:In terms of just thinking of eBay and the 3.5 points of headwind, could you kind of bring that down to what the margin impact is and considering eBay's push in it faster rate of merchant attrition? Does your tactical objective here change in terms of how you service eBay?
A: No, I wouldn't say so. eBay tends to be a higher margin part of our business historically, as they've enjoyed in the range of a 4% average take rate, and there's an outsized earnings impact related to that decline in revenue. the impact will be [relatively] contained to 2021 and hopefully when all is said and done, we believe that we can manage the margin impact of that just fine with what's happening with the rest of our business.
Square offers many of the same solutions as PayPal, but I see Square as more of a business solutions company. It offers payment solutions, but it also has back-end tools for running a business, like scheduling, payroll, marketing, loans, and more. A small business can literally be built on top of Square's platform, and its proprietor would have little to no need to find fintech services outside its ecosystem. I think that makes it a more attractive choice for new businesses and a stickier service provider for the long term. 競爭對手Square 看起來更像一個數位生態體系
Klarna CEO Sebastian Siemiatkowski set his sights on PayPal. n Friday, saying he was specifically targeting the digital payments giant as his fintech looked to grab market share with its Buy Now, Pay Later products.
"It's PayPal we're after," the top exec at Klarna (KLAR) told CNBC. My sincere hope is that maybe some of that market price decline on PayPal over the last few weeks is that more people are starting to wake up to the fact that Klarna is making serious inroads in the U.S. market," he added
For over two decades, PayPal has entrenched itself in the online payments space. With more than 400M operating accounts as of June and $311B in transaction volume during the quarter, it has become a veritable force to reckon with.
In fact, in Australia, PayPal is considered a BNPL leader with 9M accounts and has already eclipsed local listed peers such as Sezzle and Zip Co.
The first time PayPal (Nasdaq: PYPL) went public, back in 2002, the company employed 618 people and was almost exclusively a payment processor. Today, there are more than 13,000 employees, many of whom—an undisclosed number—are part of PayPal’s Working Capital branch, launched in 2013 to support small businesses unable to get capital from banks.
“At some point, many of us have dreamed of taking a shot, of going out there and starting our own thing,” said Darrell Esch, vice president of small business lending at PayPal during a phone call with New York Business Journal last week. “By definition, all of our customers are those people and so they’re all fighting to make a dream bigger or keep it alive sometimes, and easy access to fair capital is sometimes the differentiator.”
As of May the company, with 169 million active customer accounts, had loaned out $500 million to small businesses. A year ago the company was lending at a rate of about $1 million a day, increasing to a rate of $2 million a day since the May announcement, according to Esch. At that rate the company would now have loaned a total of more than $620 million.
From the original maximum loan rate of $20,000 at the time of launch PayPal’s current maximum loan increased to $85,000 earlier this year, with a minimum loan of $1,000. PayPal plans to continue that growth.
“A lot of these businesses are online and that’s a growing number of businesses in the United States, and globally,” said Esch, who works at PayPal’s Timonium, Maryland office, where global credit business has been based since the acquisition of BillMeLater by eBay in 2008 for $1.2 billion. “Those businesses are seen as inherently risky to those banks because there’s very little collateral to back anyone.”
I think as a lot of people have recently seen checkout is really hard, it is essential, you do it extraordinarily well with every merchant because if you don't, they lose tens of million, if not hundreds of millions of dollars, this is 99.999% uptime. This is low latency. It has to work all the time. And we are very focused on building on these advantages by improving checkout, by the way, there's been a ton of competition all the time and that intensity remains, so. But I would say, from the beginning that I've been here, we've had competition against all the wireless carriers coming together, all the merchants coming together, Visa, MasterCard, startups with new tech. We pay attention to every single one of those things. But we think that our checkout right now is holding or gaining share. We just did a study just a couple weeks ago of the top 55 publicly traded merchants because we have a closely view of their full checkout and there were 5 of them that we were losing a little bit of share, 17 that we were gaining share and the rest we were the same. It gives you a sense of kind of where we are. We can talk more and more about checkout by the way, if you're interested in Darrin on all the things we're doing there, but we know we need to continue to advance our position in checkout. We are far from perfect in checkout. We've got a lot of things to go and do to improve it. We’re also thinking about the next generation of checkout as well, but we're more than holding our own right now. We’ve got a lot of things to just get better at both the basics and some really important things going forward.
Question :
When we think about your focus on mobile versus in-browser checkout experience, I imagine you really are focused on both, but is there some sort of areas that you think are really in the most need of revamp 改造 or change?
Answer :
In terms of checkout - it depends on what tech stack they've integrated onto for us, Braintree's our latest that's predominantly mobile apps that people are using on. That's a seamless integration in checkout, and with high availability, low latency. I think if I just quickly would go through the things I think are most important for us to do with checkout, one is basic hygiene - uptime, availability, latency, we have to be great on all three and we can improve in all of them. We're working hard to go and do that. A lot of that is removing legacy code that we have in there and we have a number of things well underway to address that. Second is, I would just call it sort of UX [user experience] simplification, whether that be on a browser or in mobile, we do not want to force a separate popup window on web or native apps. You want it to be in context - we've got a lot of work on what I would just call UX simplification. I think we can do more in moving towards what I call industry standard integrations so that you don't have to do a complete separate integration for PayPal. If you're doing card integration, you should be able to use many of the same things when integrating PayPal. We also want to optimize login success more, we're moving more and more away from username, password which people can forget. We can do a lot more of identity biometrics and actually improve all the rates and improve signability into those apps. When you incorporate those things, you can more easily use one click checkout, which is really important as well. These are basic hygiene things that we need to do better and better. We’re working on this next gen of checkout, which is about how do we really solve the issues for retailers, which is not do people convert 50% or 80% when they get to checkout - but how do we get people when they come to a retailer's website to go all the way through to checkout, they are less than 5% of the people who go to a merchant website actually check out. If we can use all of that data and information on our vast scale of consumer accounts that we have, and basically surface to the merchant who this customer is, again, not PII [personally identifiable information], but who this customer is so that they can target kind of what webpage do they want to show? What offers do they want to show so that we can help drive conversion on entry into the website, not at product pages or checkout, that's going to be a multiyear process, but we have a lot of merchants quite excited about that. Nobody has the scale of data and information we do to be able to drive that next gen.
Question :
Okay, Maybe just on capital allocation then. If you could touch on how you're thinking about capital allocation from here, the stocks trading, where it is? Would you say it's safe to assume that the company will be more aggressive with buybacks in the near term or any thoughts on higher leverage or dividend or anything else in this environment?
Answer :
You’ve seen us be more aggressive on buybacks the past few quarters, I'd expect that we would be buyers at this price. Clearly, we think the intrinsic value of our business is far in excess of where we trade today, but we also have taken a pretty balanced approach to capital allocation and we've got important organic investments to make in the business. And in addition, we want to have the flexibility to make sort of the prudent types of acquisitions that will continue to help us advocate capabilities and be both sensible inside the company and of strategic importance.
2020 Q3法說會
A:In terms of just thinking of eBay and the 3.5 points of headwind, could you kind of bring that down to what the margin impact is and considering eBay's push in it faster rate of merchant attrition? Does your tactical objective here change in terms of how you service eBay?
A: No, I wouldn't say so. eBay tends to be a higher margin part of our business historically, as they've enjoyed in the range of a 4% average take rate, and there's an outsized earnings impact related to that decline in revenue. the impact will be [relatively] contained to 2021 and hopefully when all is said and done, we believe that we can manage the margin impact of that just fine with what's happening with the rest of our business.
Square offers many of the same solutions as PayPal, but I see Square as more of a business solutions company. It offers payment solutions, but it also has back-end tools for running a business, like scheduling, payroll, marketing, loans, and more. A small business can literally be built on top of Square's platform, and its proprietor would have little to no need to find fintech services outside its ecosystem. I think that makes it a more attractive choice for new businesses and a stickier service provider for the long term. 競爭對手Square 看起來更像一個數位生態體系
Klarna CEO Sebastian Siemiatkowski set his sights on PayPal. n Friday, saying he was specifically targeting the digital payments giant as his fintech looked to grab market share with its Buy Now, Pay Later products.
"It's PayPal we're after," the top exec at Klarna (KLAR) told CNBC. My sincere hope is that maybe some of that market price decline on PayPal over the last few weeks is that more people are starting to wake up to the fact that Klarna is making serious inroads in the U.S. market," he added
For over two decades, PayPal has entrenched itself in the online payments space. With more than 400M operating accounts as of June and $311B in transaction volume during the quarter, it has become a veritable force to reckon with.
In fact, in Australia, PayPal is considered a BNPL leader with 9M accounts and has already eclipsed local listed peers such as Sezzle and Zip Co.
2021 Q3 conference call
Question :
Let's talk about transaction take rate, and how would you encourage us to think about that
for Q4 and for 2022? I know there's a bunch of puts and takes in it.請解釋一下 Take rate 降低 怎麼一回事兒 !?
Answer :
Sure. starting with the bigger picture, when we guided our medium-term guidance, we talked about
revenue growth of 20% and TPV growth of mid-twenties. And so implied that is a somewhat of a
decline in take rate over time.
為了維持營收成長, 鞏固market share, 調降一點take rate.
And that's just the natural result of some of the mix changes in our
business. We've seen more acute pressure in the first half of this year
because of the dynamics from eBay and also a little bit because of the expansion into bill pay, which
carries a lower transaction rate, but also carries a much lower transaction expense as well. We saw that
effect moderate in the third quarter.
And I think it's most represented by us basically being flat quarter over quarter in our take rate. But if
you decompose what actually happened in the third quarter around take rates, over half of that was
related to eBay.把責任全推給ebay. And again, we will get past that, and so you can kind of, from a long-term perspective,
throw that out of the equation.叫分析師不用擔心, 估值可以把這個排除👻 Another factor, probably the second biggest factor this quarter for us
was a decline in foreign currency fees. And for the benefit of everyone on the call, when a customer
does a cross-border cross-currency transaction, we are able to monetize that by taking the difference
between the high and the low on those currency spreads. what it means is that in a more volatile
currency environment, we're able to monetize that more, this quarter or the third quarter that we just reported was comparing to the third quarter last
year, where we had more of that currency volatility. And so, the effect of that year over year was a five
[basis point] decline in our take rate. That is going to swing one way to the other, depending upon what
happens in the currency market over time. But certainly, that's not something that I think is a
permanent drag in any way on our business.
And then the last piece that I would mention, Jason, is our hedge positions as the dollar strengthened
relative to the major currencies that we hedge against in the quarter. We had a $44 million hedge loss
and that was about a $30 million delta year over year, and so that has an impact as well. But if you take
all those aside, you know, what's left in the business is just kind of the normal changes that we see from
a mixed perspective
Question :
John, I really just want to start on the net new actives. As we look out, not just to 2022, but beyond,
obviously your mid-term guide assumes some acceleration beyond the 55 million or 52 million NNAs ex
Paidy this year. Just, maybe what is the assumption at a high level—not looking for specific numbers
here—around gross ads versus the improvement in churn? Obviously, I would assume this year would
have the highest churn, just given all the new ads last year, but maybe just talk a little bit about how
churn plays into that and kind of what we can expect from net new actives going forward, not just in ’22,
but beyond.
Answer:
John, I’ll start at a higher level, and then Erica is more of the expert here, so I’m going to defer to her on
some of this. I think a good assumption is that with each passing year, we should begin to see more and
more of a benefit from churn. Appreciate, as we’re over 400 million users today, or accounts today,
there’s a significant amount of churn each year.
Our focus really, historically, has been much more top of funnel, but bottom of the funnel becomes
much more important as we look forward, which is why we’re so focused on these experiences where
it’s increased engagement opportunities, because that, by definition, is reducing churn. As we add each
incremental product, whether it’s a savings account or the ability to buy, hold and sell crypto in the U.K.,
or buy now, pay later in Europe, whatever it is, all of these things are additional opportunities for people
to engage with us, and hence, see less churn.
No. I think you covered the crux of it, John. I would just say for absolutely each and every year,
particularly as we go to kind of 2023 and beyond, we certainly expect products like the digital wallet and
others to improve that engagement, and so churn rates to start to decline as well.
I think that the top of the funnel is still important to us. We’ve been very pleased with the ongoing
strength in core markets of our top of the funnel acquisition, and it continues to be very, very strong.
We also do expect to get new sources of acquisition from investments, like in Japan and in China and
other places like that. That’s going to be a few years out, so not next year, or even the year after, but I
think that’s out there in our outlook as well
Q4 2021 analysts conference call
Question:
then just on the accounts again. It seems like you've pivoted during the fourth quarter. Why didn't you see this coming sooner? eBay, I think the trends there should have probably been seen a little bit sooner, the total effect and the pivot. The necessary pivot on the accounts. It happened during the quarter. What was the tipping point?
Answer :
With respect to net new actives [NNAs], and you asked why now, I think it's very important to understand
that, as I alluded to on the call, we're constantly learning and assessing the data that we have and when
you undertake some type of initiative to try to influence consumer behavior, it takes sometimes many
months to see if we're getting the desired effect of that. We've had this rather compressed period of time
over the last couple of years where we've had 120 million customer [accounts] come to our platform,
roughly 2x the historical average of what we see in any one year.
So we've been testing and learning and trying different things. Frankly, they [some initiatives] are
successful at reducing churn or keeping them on our platform. But when we step back and we look at the
cost to continue those initiatives, and importantly, the compounding effect that this has year after year to
try to retain lower engaged cohorts on our platform, we determined that's not the best economic model for
our business. It's not practical or really reasonable if any one of us were running a business to try to keep
customers on our platform that are adding very little to revenue growth and to the bottom line.
So when we look at the suite of offerings and initiatives that we have, we think that our long-term goals
are achievable by pivoting towards a higher ROI, or return on investment initiative, which is really around
trying to retain high-quality users that largely come to us through organic channels and want to engage
with us and increasing that engagement for those customers
Question :
J ust some help on modeling questions. As I look at the $312 million of reserve releases in FY21, I
size it up to a $0.25 to $0.30 impact [Note: PYPL management estimated the impact at ~$0.21 as detailed
in the Q4’21 earnings press release]. Is there more left to do from a reserve release perspective? And
then what is your credit assumption as you maybe turn on that spigot in terms of incorporating
the CECL [Current Expected Credit Losses accounting standard] impact and things like that, if you could
size it? I know you qualitatively, but if we could size it?
CREDIT RESERVE. A contra account that is used to fund EXPECTED CREDIT LOSSES.Answer :
Sure. Fair to say, Ashwin, that I think we're largely done with the reversal of the credit reserve. A good
way to look at that is our overall coverage ratio is about 9%, which is pretty close to where it was when
we entered the pandemic. So, I think for all practical purposes, for modeling purposes, assume that
there's no more reserve release there.
As we think about 2022 and what we're doing in the credit business, obviously, the demand for our buy
now, pay later products is—maybe to say it's insatiable is too strong a word, but it's very strong. Certainly,
the risk characteristics around that are something that we're very comfortable with. So, we're going to
grow that portfolio this year, and that's going to add—we're going to have to add reserves for that and
capital for that as well. As you know very well from your coverage in the space, the revenue benefit
associated with credit, broadly, there's a little bit of lag there, particularly as it relates to revolving credit.
So, the impact more near term is going to be more of a capital outlay, more of an increase in reserves,
and then we'll see some of the earnings impact [benefit] of that tail, or lag that just a little bit.
Question :
I think about the other operating lines, one thing you have not necessarily talked about
but is an important factor is the cost of talent going up by a lot that can affect the R&D line. Are you going to spend—I'm not quite sure where you come out on marketing, because on the
one hand you're saying you're to step away obviously from or even optimize marketing. So how should
we think of that? Thank you.
Answer :
Yes. I would just bucket the non transaction related op ex group together for purposes of this, which is
that in 2022 I'd expect you to see pretty good leverage across that set of non transaction related
operating expenses. In John's script he did mention about 23% [non-GAAP] op margin for the year. If you
build in [or exclude impact from] the release of reserves you get basically 50 basis points of pressure on
op margin. That really does come predominantly from growing our credit business and from seeing sort of
provisions build on the originations. So that's kind of the way I would think about it. So, yes, there could
be pressure just on a headcount standpoint, but we'll leverage the other operating expenses pretty nicely
through the year.
This is Erica. Maybe I can jump in here too and just give a little bit more color. Just to remind
everyone, we've invested over the last couple of years pretty significantly both in marketing and in our
engineering ranks and that includes looking at salaries and looking at other things like that. So, we've
been investing heavily in these areas to support growth and I think we're in a position where we're going
to continue to invest, we're going to continue to grow our engineering ranks, some other things, but at a
more moderated rate in 2022.
Ashwin, I'd make one last comment, which you referenced in your question just around the cost of talent.
Look, I don't think there's any executive sitting at a company our size right now that's not worried about
that. And by worried, I mean both in terms of the cost of that going up as well as losing key talent. I think
we've been pretty good and proactive in addressing some of these areas to make sure that we're
retaining our top talent and making them know that we've got a great future here
Question :
—John, I think you mentioned on the prepared remarks a few times that about a
third of your customers are driving the vast majority of your volume. My question is simply what are some
of the characteristics and/or demographics of that cohort? Are the ones that you're trying to let into the
funnel now that you're capturing or even that you brought in thus far, do those characteristics map
something that's similar to the third that's actually utilizing the platform? And then what are the types of solutions that you are finding that are driving the most engagement, both for the legacy cohort and also
the new cohort that kind of gives us some confidence that this growth trajectory can continue going
forward? And then I have a follow-up.
Answer :
Just maybe a couple of details. I'm going to take the last question on engagement characteristics and the
areas we're seeing return on investment. This actually goes back to Bob Napoli's question right at the
beginning around the decisioning around engagement investment versus NNAs. These things are very
interrelated. We've been seeing, particularly over the past, call it six to nine months, very persistent and
as we're starting to see quite predictable yields in terms of halo effect of customers' engagement in
certain products, buy now, pay later is definitely one of them. We have very strong analytics on it and we
continue to see that halo effect, in fact, be double or more of just the baseline value of that product is.
Crypto is another one. Some of the reuse characteristics. Customers who buy a crypto position and then
sell it, their reuse of that balance into a commerce transaction is well above double what we see with a
normal balance holder.
We have a lot of very persistent and convincing trends in terms of the engagement benefits that we get
from a lot of these products. The reality is they're still very nascent in our base and this is one of the
reasons we're really seeing the ROIs shifting our strategies to base engagement. That also in the long
term will enable the bottom of the funnel from an NNA perspective because the more engaged customers
you have in your base the fewer that churn. We've been really successful, certainly in the past couple of
years, but even before that on consistently moving people up from kind of—we have engagement cohorts
within the base, low engagement, medium engaged, high engaged and we've been able to consistently
move those percentages up and see people graduate to the higher engagement and that's by far our
most profitable investment is when we get people to move up the funnel.
So that's a lot of what's going on underneath the covers.
In terms of the demographic question that you asked, certainly, there are demographic characteristics,
and some of these are certain merchants, certain high activation merchants that we see that have an
attractive demographic profile that matches some of the characteristics of our higher engaged base. We
also just have certain channels within our efforts that tend to yield higher quality activations than others
and we're refocusing on those. Quite often those are lower volume [channels for adding NNAs]. Higher
quality [activations] tend to [] [come onto the platform] in lower volume. But one of the things that we do
know, and this is conventional wisdom across the incentive marketing business, generally speaking,
incentive marketing has a lower yield. It still has a yield but has a lower yield than other efforts. So that's
what you're going to see us moving away from.
Answer :
Yes, just to be clear, I mean, when you're at the size and scale of PayPal, right, our demographics are
going to match the demographics of our core markets. We're so big in the U.S. and U.K. and Germany
that by and large, yes, our lower income base is a lot bigger than our middle income and higher income
base, but that's because we match the demographics of the countries where we're highly penetrated.
So, I wouldn't say we're going to move away from necessarily low. We have very, very good high value,
low-income customers. There's no doubt about that. So it's not really a demographic shift in that way.
What we are going to shift away from is—I would call this more a channel characteristic where like I say
we're going to shift away from certain areas in incentive-based marketing that we're finding is lower yield
and it just takes a lot more effort to engage these customers in the base, versus efforts to build
awareness to that customer base, perhaps incent people in the base to engage in our products. Because
we've come—we've had a tremendous number of new products come down the pipeline in the past few
years and there's just a lot of outside potential and working to engage the base.
Question :
. I appreciate you guys making yourselves available tonight, as usual. I
wanted to ask a question about your sort of most updated view on the addressable market and maybe
also competition. I'm sort of asking this question in the context of the pivot in your strategy. Is there any
sign in the market that higher quality customers has become more penetrated or more contested? Are
there any other drivers to the way these customers have been performing and the pivot in your strategy?
Answer :
It's always good to speak with you and appreciate the question. The short answer is no. Certainly it's a
competitive environment. We've always operated in one of those from the []spin-off of eBay, but nothing
to speak to today that is appreciably different than what we saw a year, two, even three years ago that
has influence in our strategy there. We do think that we've got still a tremendous opportunity. So, if you
just take net new actives as an example, we've got some pretty significant efforts internationally over the
next couple of years in markets like Japan, markets like China, where we just renewed our license there,
that have the opportunity to be pretty big dial turners around what we can do around net new actives.
Now, some of that is going to be—we've got to make sure that we've got brand awareness and are
creating a compelling value proposition there. But those are markets that are just as much an opportunity
today as they were before.
Related to that, we also, as we've talked about a little bit in the past, have a focus on a younger
demographic, a cohort of teen accounts and things of that nature, that is an untapped opportunity for us
today So, no real shift related to the competition. In fact, I would argue, and I think third party data supports this,
that in many ways we're actually expanding the gap between us and the competition when you look at all
the various ways that people use us, whether that's buy now, pay later, checkout or other ways.
So, we want to continue to keep our foot on the accelerator there, but nothing really changes in our
strategy related to the competition.
The first time PayPal (Nasdaq: PYPL) went public, back in 2002, the company employed 618 people and was almost exclusively a payment processor. Today, there are more than 13,000 employees, many of whom—an undisclosed number—are part of PayPal’s Working Capital branch, launched in 2013 to support small businesses unable to get capital from banks.
“At some point, many of us have dreamed of taking a shot, of going out there and starting our own thing,” said Darrell Esch, vice president of small business lending at PayPal during a phone call with New York Business Journal last week. “By definition, all of our customers are those people and so they’re all fighting to make a dream bigger or keep it alive sometimes, and easy access to fair capital is sometimes the differentiator.”
As of May the company, with 169 million active customer accounts, had loaned out $500 million to small businesses. A year ago the company was lending at a rate of about $1 million a day, increasing to a rate of $2 million a day since the May announcement, according to Esch. At that rate the company would now have loaned a total of more than $620 million.
From the original maximum loan rate of $20,000 at the time of launch PayPal’s current maximum loan increased to $85,000 earlier this year, with a minimum loan of $1,000. PayPal plans to continue that growth.
“A lot of these businesses are online and that’s a growing number of businesses in the United States, and globally,” said Esch, who works at PayPal’s Timonium, Maryland office, where global credit business has been based since the acquisition of BillMeLater by eBay in 2008 for $1.2 billion. “Those businesses are seen as inherently risky to those banks because there’s very little collateral to back anyone.”
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