Q1 2022 PayPal Holdings Inc Earnings Call
Good morning afternoon evening, My name is Chris and I will be your conference operator today.
At this time I would like to welcome everyone to Paypal Holdings earnings Conference call for the first quarter 2022 .
All lines have been placed in meat to prevent any background noise. After the speaker's. Your March is there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Bryce to Pat Thank.
Thank you I would now like to introduce your host for today's call Ms. Cabello weapon to bench senior Vice President corporate Finance and Investor Relations. Please go ahead.
Thank you Chris Good afternoon, and thank you for joining US welcome to Paypal earnings Conference call for the first quarter of 2022 joining.
Joining me today on the call are Dan Schulman, our president and CEO and John Rainey, Our Chief Financial Officer, and EVP Global customer operations, we're providing a slide presentation to accompany our commentary.
This conference call is also being webcast and both the presentation and call are available on our Investor Relations website.
In discussing our company's performance, we will refer to some non-GAAP measures you can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call.
Management will make forward looking statements that are based on our current expectations forecasts and assumptions and involve risks and uncertainties. These statements include our guidance for the second quarter and full year 2022, and our medium term outlook.
Our actual results may differ materially from these statements you can find more information about risks uncertainties and other factors that could affect our results and our most recent annual report on Form 10-K , and quarterly reports on Form 10-Q filed with the SEC and available on our Investor Relations website.
Should not place undue reliance on any forward looking statements all information in this presentation is as of today's date April 27, 2022, we expressly disclaim any obligation to update this information with that let me turn the call over to Dan.
Thanks, Kevin and thanks, everyone for joining us.
We obviously have a lot to cover today, but before I begin my formal remarks, I want to start by saying how dismayed we are at the atrocities happening in Ukraine.
Early on we suspended our transactional services in Ukraine.
Russia and worked quickly to enable Paypal send and receive services in Ukraine.
Since then our platform has enabled approximately $100 million to be sent to Ukrainian citizens and refugees.
In addition, thanks to the generosity of our community.
Nearly half a billion dollars has been sent over our platform to leading nonprofit organizations supporting Ukraine.
It is in times like these that we are most reminded of the essential role our platform and services provided to those most in need.
This afternoon in the interest of time I'm going to briefly cover our first quarter results.
<unk> I provide a strategic update and discuss our outlook for the quarter and year ahead.
We have provided additional coverage of our Q1 results and our investor update presentation.
As all of you know after almost seven years at Paypal.
John Rainey will be leaving the company to join the leadership team at Walmart.
I'm happy for John and I am not surprised since a fortune. One company is recognized all that John has done to help build paypal into what it is today.
John I am going to Miss you and I wish you the very best of success and happiness in your next chapter.
I also wanted to say that I'm thrilled that the board has appointed Gabrielle Rabinovich as interim CFO .
The three of US are here together and we will be handling Q&A as a team.
I want to begin my prepared remarks by acknowledging that our shareholders expect more from us than our track record over the past several quarters is delivered.
Take full accountability for that.
Navigating through the pandemic and an uncertain macroeconomic environment with.
With the resulting shifts in consumer behavior has made visibility more challenging.
But we need to do better and you'll hear more from us today about delivering on our commitments.
Before we talk more about our go forward focus let me touch on our Q1 results.
I'm pleased to report we delivered solid results that exceeded our guidance on revenue and earnings.
The first quarter of 2021 was the strongest in our history with 31% spot revenue growth and 84% non-GAAP EPS growth.
Despite lapping this growth revenues increased 7% to 648 billion and increased 15% excluding ebay.
U S revenues grew 20% and international revenue decreased 5%.
Ex ebay International revenue grew 5%, which was on top of 47% growth in Q1 last year.
Volume based expenses increased 25% and represent 49% of revenue versus 42% of revenue last year.
This uptick of approximately 700 basis points resulted from increased funding costs, driven primarily by volume mix and lapping the release of $84 million of credit reserves.
Non transaction related expenses grew 8% in the quarter.
Presented 30% of revenue, which was flat to last year.
Investments in technology and development were offset by leverage in our other non transaction operating expenses.
We delivered non-GAAP EPS of <unk> 88 in the quarter absorbing incremental three cents of earnings pressure due to our suspension of transactional services in Russia.
We also generated more than $1 billion and free cash flow and returned $1 $5 billion in capital to stockholders through share repurchases.
As I shared last quarter, we are increasing our emphasis on incremental engagement across our existing customer base, while continuing to add higher value accounts.
In Q1, we added $2 4 million net new active accounts in the quarter, bringing our total active base to $429 million or.
Our transactions per active account grew 11% to 47.
We continue to be pleased with our buy now pay later franchise, which is seeing persistent market share gains.
$3 6 billion in volume in Q1 up 256% with over 18 million consumer accounts choosing this funding option since launch.
And we are seeing increased merchant penetration and upstream presentment.
This will allow us to continue to deliver strong results.
In Q1, Braintree outperformed again with volumes growing 61%.
This growth comes with the success of key customers like Airbnb, Uber door Dash live nation vineyard vines and tick tock.
Importantly for many of these merchants, we are their exclusive or primary provider of <unk>.
Unbranded processing.
In addition, venmo delivered strong revenue performance in Q1 with growth of approximately 60%.
Volume grew 12% to $58 billion on top of 63% growth a year ago.
Venmo now has more than 85 million accounts in the U S and our goal in the coming years to drive more commerce transactions on venmo, while continuing to be a leading peer to peer platform.
We are making progress and driving more pay with venmo transactions business profiles and offline purchases with venmo debit and credit cards and.
And our integration plans with Amazon are progressing with the back half of the year as our current launch timeframe.
Across both Paypal and Venmo, we are working hard to have our digital wallets at the center of our consumers' daily financial lives.
Our redesigned Paypal digital wallet App is now installed by over 50% of our base and our App users are engaging with more features and driving incremental average revenue per account as a result.
Customers, who use our digital wallet transact, 25% more at checkout and users that are not using the app.
Over 70% of our buy now pay later users engaged through our digital wallet.
We have nearly completed the rollout of our savings product and we will be introducing additional financial services and commerce functionality in the coming quarters.
Our digital wallet ARPA is two times that of a customer who only uses checkout.
And the churn rate for digital wallet users is 25% less than the rest of our base.
We are focused on increasing adoption of our digital wallet and believe it is one of our most meaningful opportunities to drive growth.
In addition, working with partners has been and continues to be an important ingredient to our success.
We recently renewed and expanded our strategic partnerships with American Express and Citibank.
Our strong and growing relationships with these important partners and others highlight our commitment to offering our customers choice in how they pay by enabling seamless Fi integrations into our products and services.
I'd like to now discuss our outlook for Q2 and the year.
Well, we are pleased that we delivered Q1 with a beat on revenue and EPS 2022 remains another challenging year to forecast.
In laying out our 2022 outlook several months ago, we noted that if macro pressures persisted, we would trend towards the lower end of our range and if we saw structural improvement it would push us upwards towards the upper bound.
It is clear that relative to early February the macro environment has deteriorated Russia.
Russia, Ukraine, and China are contributing to increased global uncertainty and incremental inflationary and supply chain pressures.
And more specific to Paypal.
Forecasting normalized consumer e-commerce spending as we come out of the pandemic is exceedingly complex.
As a result, we believe it is prudent to lower our 2022 guidance and reevaluate our medium term outlook.
For the second quarter, we expect revenue growth of approximately 9% and non-GAAP EPS to be approximately 86 cents.
We expect a bit more than $200 million of impact from ebay in Q2.
And we have tough comps as ebay revenue grew.
Ebay.
Ex ebay revenue excuse me through.
32% in the second quarter last year.
We also had reserve releases of $156 million in Q2, 2021, which creates an approximate 11 cents headwind to earnings growth.
For the year, we now expect 11% to 13% revenue growth and non-GAAP EPS to be in the range of $3 81.
To $3 93.
Ex ebay this represents revenue growth of approximately 15% to 17%.
In addition at the midpoint of our range. This equates to back half revenue growth of 15, 5%.
Our revised EPS guidance reflects the flow through implications of our revenue expectations and volume mix.
We are now forecasting 10 million net new active accounts for the year, we expect to add positive and then as to our platform every quarter. This year with Q2, representing the low point.
I want to share additional context about the work we're doing to increase our operating leverage.
Pre pandemic, we were in the process of simplifying our operating model and enhancing our operating efficiency.
The pandemic forced us to put many of those initiatives on hold just simply scale the business and support the unprecedented growth on our platform.
We are now coming back to this work with renewed focus energy and purpose.
While we are focused on incorporating more discipline into our operating model and driving operating leverage in our business. We are simultaneously investing to grow.
We see opportunities to accelerate our growth and customer engagement.
We believe our portfolio of digital payment assets is unmatched in breadth and depth, which creates a powerful competitive advantage for us too.
To extend this advantage and advance our leadership position our focus on streamlining and improving the way. We work is critical and will allow us to achieve more efficient growth.
Overall, these efforts will yield significant savings, allowing us to continue to reinvest in the business and drive profitable growth.
For the year, we now expect to generate more than 5 billion and free cash flow.
In addition, we still plan to balance capital allocation between investing organically in our business share repurchase and inorganic growth.
That said to be clear transformative acquisitions are not on our growth agenda at this time.
We currently expect that any activity for the foreseeable future will be focused on straightforward deals that have clear an unassailable alignment with our skills and capabilities.
Finally, I'd like to discuss our medium term outlook that we provided at our Investor day in February 2021.
We have reassessed the feasibility of achieving our revenue and earnings targets. These targets relied on several baseline assumptions relating to both e-commerce penetration and macro economic factors that are no longer on the trajectory that we forecasted.
As a result, we are withdrawing our medium term outlook, we will continue to guide revenue and earnings on both a quarter and full year basis and continue to update you on how we're thinking about our business over the long term.
Make no mistake, we have strong conviction in the growth potential of our business and our ability to sustainably create value for our shareholders. However.
However, we recognize the need to level set expectations in what remains a dynamic environment.
We know the scale of our two sided platform is truly differentiated and gives us strong competitive advantage.
We believe the secular tailwind from the Digitization of payments and e-commerce growth are persistent.
And we believe that we are uniquely positioned to bring more merchants and consumers together globally than any other company and help them connect and transact safely.
We continue to have many opportunities in front of us given the scale of our two sided network and the ongoing growth and digitize payments.
We will advance our leadership in checkout.
<unk>, our work to become the preeminent digital wallet and bring Paypal tools to more in person contexts.
All the while investing in our foundational technologies.
Hundreds of millions of consumers.
Tens of millions of merchants value, our comprehensive set of products and services.
We are investing resources to both improve our existing products.
And innovate for the future with capabilities, including enhanced loyalty programs package tracking and returns management.
With branded checkout and full stack processing as the foundational elements of our platform and competitive advantage. The opportunities ahead are significant and we believe Paypal is well positioned to play a leading role in driving the future of digital payments and commerce.
<unk>.
We believe we will continue to grow revenue faster than the rate of e-commerce growth and increase our market share in digital payments.
At the same time, we will continue to focus on improving operating leverage to support sustained value creation accelerating the velocity of getting product into the hands of our customers and driving greater organizational effectiveness by simple.
Refining processes and increasing accountability.
We look forward to sharing our progress with you as the year unfolds and with that let me turn the call back to the operator for your questions.
At this time I would like to remind everyone in order to ask a question press star.
Star then the number one on your policy.
Ellen.
The request is that each one.
One question and then good. Thank you. Thank you.
We'll pause for just a moment to compile the Kenny rocker.
Your first question comes from the line of Lisa Ellis of Moffett Nathanson.
Your line is open.
Thank you Linda.
John .
Of course.
Dan This one's for you maybe just building on how you could close.
One of my remark.
Question back on the challenges that would be perhaps six to eight months.
In your view are the top three or four things that Paypal really neat.
Going forward to turnaround the trajectory.
Yeah.
It's good to hear your voice.
Well, Lisa I feel the same way about John Thank.
Thank you Lisa.
So.
It's Ben.
A difficult <unk>.
Several quarters for us in.
Accurately forecasting.
What are what our business would look like.
I will say that.
Yeah.
Over the past five years, we very consistently gained market share last two also in Q1, if you look across the.
The different products and.
And capabilities we offer.
And so you know.
I think we need to one kind of.
Rethink and we've tried to start to do this year, our philosophy and methodology around forecasting and we'll talk probably about that later I'm sure there will be.
Conversations about that second I think there are less things, we need to do extremely well.
And so we are really going to be focusing on checkout.
And we can talk about that in more detail.
Later in the call, but we have a number of initiatives on advancing our position in checkout and also thinking about next generation checkout as well and we also need to double down on the digital wallet, we clear I believe that's where the future.
The industry is going for the future of Paypal is the heart of what we are trying to do from an engagement.
Perspective, and so those are the two things that we really need to.
To double down on I'd say the third thing is we need to go back.
Where we were before we came into the pandemic with a real focus on our operating model.
Making sure we simplify and streamline.
Putting more and more accountability into the hands of our product managers and driving really end to end accountability and ownership.
Cros.
The whole business and so there are clearly a lot of things we need to do.
Feel like we are beginning.
To make good progress on some of the execution in Q1 was a piece of that and some of the metrics.
We're seeing green shoots on that but we've just got to stay focused and keep driving.
Simplification and operating leverage in our model.
Thank you.
Your next question comes from the line of all that Ken.
<unk> of J P. Morgan.
Your line is open.
Hey, great. Thanks for taking my question, let me also start by saying Thank you to John .
Absolutely wish you nothing but the best.
I'll ask on the outlook.
At least that's a good question on what's going to change, but I'm just trying to.
But I understand the full year revision to revenue.
And EPS and where you're landing now versus 90 days ago. So it looks like the ebay assumption is the same so so how much of the change is due to macro factors versus maybe known a little bit more about the impacts of your strategy shift in and of course, how much did conservatism play a role recognizing as you said visibility is tough and you have.
Our CFO seat to fill et cetera.
Sure Tien Tsin, I'll start and let me first of all thank you for your comments and I think Gabriel will probably jump in on this as well, but I'll get a little bit of color to the way that we're thinking about guidance and so youll recall and Dan also referred to this in his prepared remarks that at the.
Last quarter, when we gave our revenue range of 15% to 17%, we very clearly said.
Things did not improve we would be at the low end of that range.
It's a different approach to the guidance that we have today.
And so far as we are actually assuming that things get a little worse from here.
Been challenging forecasting.
Sort of the return of the normalization of E Commerce trends post pandemic and we've been chasing this for a little bit and we don't want to continue to find ourselves in that situation. So.
If you sort of contrast, where we are today.
When we gave that guidance not only have things not improved I think very clearly they've gotten worse. We've got our award that's broken out in Ukraine, we've seen more supply chain issues that are acute in places like China, you've got even higher inflation now, which is I think disproportionately affecting our customer base.
Skews more towards discretionary spend versus non discretionary spend all of these things affect the way that we're approaching the outlook for the year Gabrielle you want to add anything yeah sure. Thanks, John So Tien tsin in terms of sort of lowering the revenue outlook. In addition to what John mentioned around just the macro worsening and what that means for our overall.
Growth expectations in our core markets. We also to John's point sort of took a look at what we're seeing on our own platform and that really relates to sort of ecommerce and consumer behavior. It does have that sort of macro intersection but for us because we have more of a discretionary platform. We do see a greater impact on the spend and so relative to how we started the year.
E Commerce globally is slower than what we thought and we're seeing that come through on our platform and so we're reflecting that and that's both in terms of just the spending patterns as well as offline online mix and so that's sort of how we're thinking about starting the year and it's really not about our overall conviction and the secular tailwind that support the business, but we want to be real.
It's about what we're seeing in year and adjust that outlook for that and the final contributor to it on the revenue side is really that we've recalibrated our expectations on some of our initiatives at Paypal based upon those lower global growth expectations and so we wanted to have a consistency in that conservatism around what we think are sort of newer initiatives can deliver in <unk>.
Year, given some of those macro impacts on the EPS side, it's really a flow through of some of these things that may be something I'd call out is from a volume standpoint, we are seeing outsized performance from Braintree, So that unbranded processing mix does play a role in the overall profitability of the business and so we're taking down EPS in part for that.
In addition to that we're continuing to invest heavily in the areas that we think are important.
To drive that long term profitable growth and so that's what you're seeing sort of in terms of the overall impact to EPS. One other call that would just be the spending transaction services in Russia, you guys have an EPS impact as well and so we've adjusted our outlook for that.
Perfect No that's clear guys. Thank you so much.
Your next question comes from the line of bargain pillar of four walls.
Your line is open.
Hey, guys great. Thanks, John I also want to wish you the best.
Hey, guys when we look at.
When we look at the guidance that you guys gave and I know you you went through the medium term, which I think a lot of investors expected at this point.
But the exit year, if you could just help us understand the cadence of the year and then the exit growth rate implied by the New guide range.
And maybe a little more on the assumptions behind that exit rate.
Yeah sure turn.
Start off there and then.
Gaps or John want to add to it.
So as I said in my remarks.
What.
The back half.
Implies with our 11% to 13% is a 15, 5% revenue growth in the back half so mid teens.
In general with that and then.
We think about.
EPS.
A number of onetime events on our EPS.
Growth rates, but when we think about kind of like what is the exit as we go into next year, just kind of on a normalized basis, it's probably in the mid teens.
As well.
And as we think about the medium term.
The thing that.
That I talked about in my script is that yes, we've had a long track record of.
Taking share and growing faster than e-commerce .
And so as you're thinking about kind of what does that medium term look like.
It really depends on your on your view of kind of where E. Commerce is going to come out we'll take a look but there are a lot of shifting.
Estimates right now as John mentioned.
Coming out of the pandemic now coming into <unk>.
High inflation kind of a macroeconomic environment, that's uncertain and the magnitude of that uncertainty is wider.
We felt it was best to characterize kind of what the company expects to do over the medium term.
As opposed to put out any specific numbers I would just add to Darren.
Look.
No company wants to be in the position of pulling their medium term guidance, but when you step back and you look at the set of assumptions on which we base that medium term guidance, they're very very different today.
That said and perhaps I'm in a unique position to say this that doesn't take away our conviction in the long term value and the prospects for this business at all.
There are few companies of our size and scale and digital payments that have some of the unique attributes that we have around the cash flow generation, our revenue growth and the margin profile that we do and so we're not immune to some of these economic vagaries that we're going through right now but.
We've got to respond to that and but that should not take away from how you think about our business longer term and again we are.
Perhaps the purest play in digital payments and we're going to continue to invest appropriately to make sure that we stay that way and stay a leader in digital payments going forward.
And if I can just jump on top of John's points at some point these trends.
Tend to turn as well, but.
When that happens is unclear and so we know as long as we continue to invest.
To seize those growth opportunities.
To assure that our growth.
<unk> in excess of that of e-commerce . When these things do change we'll be beneficiaries.
Of that as well so I just want to be heads down focused on the things, we control and execute really well against them.
That's really helpful. Thanks, guys.
Yeah.
Your next question comes from the line of Ramsey El <unk>.
Great.
Your line is open.
Hi, Thanks, so much for taking my questions. This evening.
I Wonder if you could give us an update on the kind of pivot to focusing more on customer engagement versus versus acquisition.
And I guess, specifically do you have all the tools that you need now to sort of execute on this shift is there more development or M&A or incremental technology resources that youre going to need to two.
To that.
To dedicate to the new strategy or are you kind of set where you are now to make it happen.
Yes.
Tom.
That's such a fast moving.
Environment that we operate in with constant.
Innovation.
That were never.
In a place where we're not going to need to continue to innovate and invest.
In the business.
I think we've made some really important strides.
In the past year or so with the advent of our digital wallet.
We clearly think that the world is continuing to digitize, yes. There is some normalization between online and offline right now, but going forward the world continues to digitize and.
And.
And disparate.
Parts of the economy are coming together.
B shopping payments basic financial services and so the wallet is going to be one of the key elements of how we drive customer engagement and we're going to continue to evolve.
The wallet.
It is.
Z one data right now and theres going to be <unk>, and the three dato and we've got.
A number of things on our roadmap.
That we really want to execute against.
This year, but we're already beginning to see.
Uptick.
Sure.
And our engagement.
For the second quarter in a row, we had 11% tpa ex ebay actually engagement went up 19%.
In the quarter.
It's a pretty big move in terms of engagement and you heard the stats that I talked about.
In my script in terms of the increases in ARPA decreases in churn.
And as you think about kind of our growth going forward.
30% of our customers generate 80% of the volume on our platform, we're clearing not a subscription business, where a transaction based business and growing those transactions is a huge opportunity for us we probably today.
It was like 25% of the online financial transactions that consumer does.
And so there's a ton of room for us to grow.
In that area I would also say the surest way.
For us to grow net new actives going forward is to increase engagement.
When you're at 429 million active accounts, even with a consistent churn rate year over year and by the way. We know this year, our churn rate will be somewhat higher.
Letting these low engaged consumers churn off.
The platform because the ROI to keep them isn't worth it.
But the more we can keep people on the platform engaged the more we'll grow our <unk>.
Going forward and so the two big things, we're focused on improving checkout improving digital wallet.
Are the things that we'll probably be talking about for years to come actually.
Anything you would add anything.
Yep.
Your next question comes from the line of Jason Kupferberg.
Bank of America. Your line is open.
Thanks, guys. Good afternoon, I wanted to shift over to venmo for a minute if I could I know volume growth started the year.
12% clearly there was a tough comp there I'm, just wondering whether or not any of the new IRS rules around reporting of these transactions is having any impact there.
How do you expect venmo volume growth to evolve during the course of the year I know you started really strong on the revenue side with venmo at 60% in Q1, so far.
Fair to assume you still expect 50% plus revenue growth from Venmo this year.
Yes.
Yeah, Jason I think we continue to expect the 50% revenue growth for Venmo. This year to your question and answer the IRS change I'd say very early in the year. We did see some impact from that we've worked a ton on customer comprehension in education. So we think that that's basically behind us just in terms of what the impact could be.
But we also are up against really tough comps and so last year's Q1 was 63% growth for Venmo. This year 12, the business has scaled to the point that its actually meaningfully larger than what our U S business was coming out of separation and so at this point, we continue to expect strong growth, but it's going to be a mix of commerce volume.
Revenue as well as the P to P pes.
Okay.
I'd, just say they've got a strong roadmap ahead of them.
Putting in.
Business profiles.
<unk> that almost into store fronts.
Enabling charities to be apart listed on on Venmo.
Debit card refresh the revamping PDP, even improving search ability and other things around that so they've got and they have.
Of course, launching Amazon in the back half of the year, So they've got a pretty full road map and.
I think GAAP summarizes all of the other points perfectly.
Yes, okay. Thanks, I appreciate it you bet.
<unk>.
Your next question comes from Bryan Keane.
So with Keybanc Your line is open.
Hi, guys. Thanks for taking the question.
Wanted to ask about T. P V. When I when I look at total payment volume in the quarter I see the dichotomy between the U S growth up 21% and international only up five so clearly international is growing slower than the U S. So wondering when.
When I look at the international market what are some of the factors there that are influencing the growth rates is it inflation is the Ukraine situation bleeding into other parts of Europe is there any share loss any color on that would be great. Thanks.
Sure. Thanks for the question, Brian I think the two main drivers really are in first instance, actually very challenging comps were up against very very tough comps from last year. So Q1 of last year.
International revenue grew 38% in the quarter and it was 47% ex ebay. So that alone is sort of one of the drivers. This year. The other big piece really is the ebay component and so that too is playing a role so on the revenue side International revenue growth ex ebay was up 5% relative to the negative side that you see probably.
Also worth highlighting that China, and UK continued to be tough markets for us and that is both the ebay migration, but it really is also the macro and so that's one where we're watching it really closely and we did see sort of China revenue down more than it was in Q4, our U K revenue down again, why that was in Q4 and so we'll continue to watch it closely but that definitely.
How about having macro layer to it.
Got it thanks, and good luck Joe.
Thanks, Brian .
Your next question comes from Mike <unk> of Goldman Sachs. Your line is now open.
Hey, good afternoon, and thanks for the question I'd like to ask about competition, specifically there've been.
Some high profile challenges reported for startups and the one click checkout space.
Could you talk a little bit about some of the benefits of Paypal scale that may create barriers to entry among new entrants.
And where you're most focused as it relates to competition.
If not necessarily new competitors. Thank you.
Yeah.
Well as you pointed out.
Check out.
It's a hard business I mean, you've got to.
Yeah, well to scale it.
And it's got to be perfect.
As you noted.
Retailers depend completely.
On a checkout provider and if it doesn't go right.
You can lose a tremendous amount of sales and so.
The brand Trust we have.
And our track record over time, our availability.
Our fraud and risk capabilities and honed over the last 10 or 15 years as an average retailer does.
Hundred transactions with Paypal, we approve six more than somebody else.
Another checkout methodologies make huge differences I'd say the other thing of course is that it is.
A network effects business the larger the scale more attractive the network is and.
When you do.
Consumer surveys sick.
60% of consumers pick Paypal as their number one choice to do an online transaction. The next closest digital wallet is 8%. So it's not even close Paypal customers are two times more likely to shop.
When they see a paypal button and for smaller merchants, having the Paypal brand is essential because in today's age you are seeing much more E. Commerce sales that are outside of local territories. It's cross state.
Cross the country.
Cros.
Cross countries and seeing that Paypal brand enables the consumer to feel confidence that they've got protection and for a business to feel comfortable because we give them seller.
<unk> as well and so.
We have.
A ton of scale advantages in a ton of experience in high off the rates and low loss rates, which typically don't work and in hand, but they do work that way with us.
And look we are not.
Resting on any of those laurels by any stretch of imagination.
We are driving to improve basic hygiene increased.
Uptime and availability at five nines level, taking latency down to low single digit second.
Simplifying our UX right now too often you theres a pop up that occurs and it takes you out of the web or the native App.
And you don't want to go out and then back into that App. So we want to drive in context are inline checkout.
We know we can even make our integrations easier and simpler by moving more and more towards industry standard integrations.
We're going to optimize log on through new identity techniques and by the way. We are also thinking about the next generation of checkout.
Real issue for retailers.
Is not so much can you make conversion better when a.
Consumer gets to the product pages at checkout page, which by the way is important because every little bit actually matters to merchants and we clearly lead.
In that in that area, but the real issue is less than five out of 100 people who go to a merchant's website actually checkout. So there's that kind of drop off before.
A consumer gets to the product pages to the checkout.
And basically.
Nobody has the amount of data and information we have on customers, we've bought over a billion financial.
Instruments on a platform well more than that and being able to.
We work with retailers and consumers to surface, who that consumer is obviously with consent and all of that so that a retailer can customize kind of every customer coming on kind of offers or deals or towards the homepage. They come to is a huge.
Huge potential next generation of checkout with a lot of interest from from merchants.
And nobody can really do that better than we can because of our scale and the data we have and so I think we got a lot of good advantages right now, but we are really thinking about how do we take it to the next level and how do we even re imaging checkout.
Great. Thanks for the very comprehensive answer.
Yeah, you bet my pleasure.
Okay.
We have time for one last question from David <unk> of Evercore. Your line is open.
All the best to you John .
Okay.
At the beginning of the pandemic, Dan you clearly articulated a focus on unified Commerce. In particular are you know me.
Major rollout of QR codes at some of the biggest retailers in the country and more recently, we've seen consumers returned to the physical point of sale with increase vaccination rates can you update us on how Paypal is positioned in unified commerce.
In particular, where do you stand.
With a QR code rollout.
Yep.
Well I think we said from the very beginning that's proving to be very true.
In person.
Payments is going to be it's going to be a long slog for us.
Going forward.
No magic bullet to that we are continuing to increase ever.
Every quarter the number of retailers that offer our QR codes, but changing consumer behavior to move to mobile and mobile checkout, it's going to take time. It clearly will happen over time, but it's going to take time and so our view.
You on this is that we really feel like.
Putting a cui.
A large emphasis on revamping our debit.
In credit card.
To tie in fully with our app, but enabling the consumer to shop seamlessly.
In store they want to use a form factor they are familiar with they can do that but it ties completely into the fully integrated a little like the venmo credit card is into the.
We just launched this three two part three.
3% cashback on.
Any purchase on Paypal, 2% everywhere else, but it is a fully integrated experience and so for instance, what might you be able to do with that.
Be able to go into a store pay with your three to cart and then come into the App and do a buy now pay later type of thing so flexibility on on choice of how you pay not just doing it instantaneously you may want to split that wave.
Paying for that through rewards points, and Fiat currency and this tying in of both using the mobile phone at point of sale, but also enabling people to use cards and tie that directly into our App I think is probably a good one two punch as we think about moving.
Into in store clearly buy now pay later.
It is exploding everywhere.
And we are really gaining good.
Traction there good traction on upstream presentment and more and more people want to use that and that plays by the way ready to our advantages as well because we have 10 years of credit experience. We think we have the lowest loss rates.
The buy now pay later.
Industry, probably the highest approval rates because we know so many of the customers in a really powerful value proposition to merchants and now we can tie that both online and offline and that that can be a pretty powerful combination.
Understood. Thanks, so much.
Alright, well, thank you everybody for joining us.
John .
<unk>.
You heard it from everybody.
You'll hear it from us how much we will Miss you as well.
Thank you and I will Miss you all as well as do we.
We look forward to working with you I'm sure projection as well.
Okay, everybody. Thanks, very much for your time, and we look forward to talking to you soon take care Bye bye.
This concludes today's conference call you may now disconnect.
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