PayPal at Bernstein Conference: Strategic Innovations and Growth

On Wednesday, 28 May 2025, PayPal Holdings Inc. (NASDAQ:PYPL) participated in the Bernstein 41st Annual Strategic Decisions Conference 2025. The event highlighted PayPal’s strategic innovations and growth prospects, with an emphasis on new leadership, technological advancements, and strategic shifts. While PayPal showcased positive momentum in transaction margins and customer growth, challenges remain in differentiating its brand in a competitive market.

Key Takeaways

• PayPal reset its leadership team and emphasized innovation over the past 18 months.
• Transaction margin growth is positive, with Venmo experiencing over 20% growth last quarter.
• The company is focusing on Agentic Commerce and omnichannel expansion.
• PayPal aims for 10%+ transaction margin growth and 20%+ EPS growth long-term.
• New initiatives include NFC wallets in Germany and strategic partnerships with tech firms.

Financial Results

• Processed $1.7 trillion in volumes last year.
• Achieved mid-single-digit growth in branded checkouts and high-single-digit growth in branded experiences.
• Venmo revenue grew over 20% last quarter, with a target of over $2 billion by 2027.
• Long-term goals include 10%+ transaction margin dollar growth and 20%+ EPS growth.

Operational Updates

• Leadership team reset and reorganization to foster innovation.
• Successful Venmo monetization strategy and offline product launch.
• 4 million debit card customers since September, with offline users transacting six times more than online.
• Launched NFC wallet in Germany, integrating with 80% of e-commerce transactions.
• 80 million consumers using personalized commerce API.

Future Outlook

• Focus on Agentic Commerce, leveraging a two-sided ecosystem.
• Expanding beyond e-commerce to include omnichannel and offline commerce.
• Partnerships with Perplexity, Anthropic, and OpenAI for enhanced checkout experiences.
• Development of vertical solutions and expanding the buy now, pay later product.

Q&A Highlights

• PayPal is innovating beyond being perceived as a legacy brand.
• Focus on profitable growth for Braintree with value-added pricing.
• Small businesses benefit from service consolidation under PayPal One.
• Confidence in achieving long-term growth ambitions with key milestones.

For a detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Harshita Rabat, Senior Analyst, Bernstein: Hi. I’m Harshita Rabat, Bernstein senior analyst covering payments processors and IT services, and I’m delighted to be joined today by Alex Chris, PayPal’s president and CEO at Bernstein’s forty first annual strategic decisions conference. Alex, thanks for joining us today.

Alex Chris, President and CEO, PayPal: Oh, it’s great to be here. Thank you.

Harshita Rabat, Senior Analyst, Bernstein: So, Alex, PayPal processed $1,700,000,000,000 in volumes last year. And at this scale, PayPal has very unique insights into how ecommerce is doing. So to kick off our conversation, can you talk about the current spending trends you’re seeing across PayPal?

Alex Chris, President and CEO, PayPal: Yeah. Well, again, thank you for for having me here. Obviously, it’s a very dynamic time in the in the market. Feels like every every day, every week, we are tracking new decisions and new shifts that are happening. But what I’d say is, broadly, we are seeing very consistent trends from what we’ve reported on over the last couple of quarters.

On a macro scale, there have been clearly based on different tariffs or different adjustments, some movement across different borders. So what we’ve actually seen is you could imagine merchants from China actually moving their advertising spend from The U. S. To Europe. Because PayPal is so broad and because we have such merchant coverage on a global scale, we’ve just seen things move up, move down and pick up on sort of a week to week basis.

But overall, very stable trends, and that includes sort of what we expected from our outlook from Q1 and then what we saw into Q2. So mid single digit branded checkout. What we’re really focused on is our branded experiences, which sort of continues to be in that high single digit or nearing high single digit range. So very, very consistent trends even with all the uncertainty in the market.

Harshita Rabat, Senior Analyst, Bernstein: Fantastic. So, Alex, it’s been one and a half years since you were appointed CEO of PayPal. Tell us about how PayPal has changed in terms of organizations, product velocity, and execution.

Alex Chris, President and CEO, PayPal: Yeah. It’s been a crazy eighteen months. Very, very exciting. We’ve done a lot, and I’m really, really proud of the team. So just to to set the stage, I came in just about eighteen months ago.

We reset the entire leadership team. So everyone on my leadership team is is new and and came in to the organization really with an energy and an enthusiasm to transform the company. We’ve reset the way we’ve organized, and so we’ve organized customer back and really focused on driving innovation. And I’m sure we’ll talk more about this, but one of the things I’m very, very proud of is I feel like for, you know, maybe a good period of time, you know, maybe even three to five years prior, the innovation had really stalled. And what we’ve done in the last eighteen months is remake the entire technology organization, remake our platform, and the innovation that we’re now driving, I think, is leading the industry.

And I’m sure we’ll talk about agent to commerce and all sorts of things where we’re we’re really out in front. So I’m very, very proud there. The other thing that that has changed is we’ve really tried to tackle the most challenging questions that were facing PayPal when I got here. You know, when I arrived, I went on a listening tour, talked to many of you, and asked, you know, what are the things that are sort of the existential questions about PayPal? And, you know, this was a company that really had seen, you know, flat to to negative transaction margin growth for a couple of years.

Customers had been declining. Venmo, which is an incredible asset, really was under monetized and not growing. And so there were a lot of these questions of, you know, what what is going on? I think in eighteen months, looking back now and being where we are with the team that we have in place, with the trajectory that we have in place, we really changed the story, and it’s very, very exciting. So transaction margin, you know, is now in positive and and has been for the last four quarters and growing.

Customer growth is continuing to grow both on the PayPal and Venmo side, so we’re starting to see great acceleration there. We’ve turned our unbranded business positive. We had had to make some difficult decisions in terms of having conversations with our customers and making sure that we are repricing to to be able to price our value added services and price to value, and that’s been well received. Venmo is now growing. We have a monetization strategy that is well received and actually driving growth.

We grew 20% in Venmo last quarter, over 20%. And so just if you just go through the list, our innovation is accelerating. And what what I’m really excited about is, you know, our story, you know, it takes time for people to to recognize. What I focus on is our customers. And our customers, whether it’s our consumers, which we’re now seeing growth in, or whether it’s our merchants that are continuing to vote with us even as we’re repricing, they’re continuing to keep even more of their processing with us than than we even expected.

We have developers that are now coming and working with us. We just held a developer day a month or so ago where we had the largest companies in the world and the the the best startups in AgenTic all working and coding off of our off of our platform. And and, you know, our customers just continue it to move towards us. So eighteen months in, really good start. Our team is getting stronger every day, and it’s a lot of fun.

Harshita Rabat, Senior Analyst, Bernstein: It’s a lot for eighteen months.

Alex Chris, President and CEO, PayPal: Yeah.

Harshita Rabat, Senior Analyst, Bernstein: So, Alex, you talked about innovation and accelerating the pace there. You talked about AgenTek commerce. So at your dev days a few weeks ago, you unveiled PayPal’s toolkit for the AgenTek era in commerce. Tell us more about it. What evolving role does PayPal play in a world where agents are shopping on our behalf?

Alex Chris, President and CEO, PayPal: Yeah. So this is really important. So let’s let’s take a minute and and unpack sort of the future of what commerce can look like. So this to me feels very much like probably the move to e commerce fell fifteen years ago. And obviously, PayPal was at the forefront then and really pioneered the shift from just traditional in store commerce to e commerce.

I think we’re about to go through that next wave, and I think PayPal is incredibly well positioned. So let’s just unpack what this looks like. So, yeah, there will be a day very soon where you are talking to an agent and having the agent start to build it could be an itinerary for you. I wanna go on a trip. I wanna go to Barcelona.

What should I what what is where should I stay? What should I bring? What do I need to pack? What kind of luggage do I need? What kind of clothes do I need?

And your agent is going to be incredibly intelligent and is going to be able to know you from a personalized standpoint and help you put together a full itinerary, what you need to buy, what you need to get there. That we are not that far away. The next obvious step is great. Buy the luggage, buy the tickets, buy the buy the travel, buy the hotel, like book this entire itinerary for me, end to end. That transition from where we are today, which is agents can actually tell you what to go do to actually making that purchase is a huge leap, and it’s the thing that we are really focused on prioritizing and pioneering right now.

So what does that look like? Well, in order to actually, as a consumer or a merchant, be confident that that transaction can happen, there’s a lot of things that need to happen underneath the covers. Right? You need to understand that that customer is a real customer. So you need to KYC hundreds of millions of consumers to make sure that you know who that customer is.

And, ideally, they have a wallet with multiple because you may want to buy now pay later the plane tickets because they’re expensive, but you may want to actually put your hotel on your American Express card because you get certain points. So you need to have a smart wallet that understands who you are as a consumer, understands all of your personalized experiences, has your full wallet, and is KYC’d you. On the merchant side, you need to make sure that everyone’s KYC’d and that the merchants are real. So that from a consumer standpoint, you’re not booking a, you know, Airbnb or something and have no idea where your money is going. And so when we take a step back and look at the assets that we have at PayPal, we have the largest two sided ecosystem in the world.

We have the most KYC ed consumers, hundreds of millions of consumers, where we already have billions of instruments already in their wallets. They’re authenticated. We have a smart wallet that enables us to understand personalized preferences. We have over 80,000,000 consumers that have opted in to our personalized commerce API so that we can actually provide that to agents and give the agents updated personal information so they don’t even have to ask. They just know what the preferences are of the customer.

And we have the largest ecosystem of merchants. We have over 80% of ecommerce as a catalog already. If you really think about it, for twenty five years, we’ve been building the largest commerce LLM in the world. And we have thirty, forty million merchants already KYB’d and able to be able to transact with. So you take those two elements together, including then just the ability to make the commerce transaction happen safely, securely, and personalized, and then we have all the follow-up.

So once you make that purchase, once that agent makes that purchase on your behalf, you’re probably gonna wanna check that it actually worked. You may actually wanna know when your goods are going to arrive. You want shipping tracking. You wanna know, well, if it wasn’t the right thing, how do I return it? How do I cancel it?

All of those things, the agent isn’t prepared to do, but we have a PayPal or a Venmo wallet that is able to follow-up for you. And so we are really excited about this transformation because we feel like we have the assets on both sides of the ecosystem to be able to make that happen. And what’s happening is merchants and agents are coming to us because they realize we have those assets as well. So I mentioned our developer days at the May. We had Microsoft, Google, Amazon, OpenAI, Perplexity, all of the largest players coding on our MCP server.

We launched the first remote MCP server for commerce anywhere in the world. They came to our developer days and were coding against our server. We have since launched a partnership with Perplexity where they will be using our server to be actually drive branded PayPal and Venmo checkout. We have Anthropic and OpenAI are also using our MCP server to be able to connect. And I think we’re just scratching the surface of the conversations that we’re having and what you’ll see going forward.

So for me, this is you know, it will likely take time for consumer behavior to shift to agentic purchasing, but it’s inevitable. Right? At some point, this will just be the wave of how it just removes friction from the ecosystem, but you need all the underlying elements that PayPal has. And so we’re really, really excited about this as the future, and we think we’re in an incredibly strong position for now the next wave of the next five, ten, fifteen years of commerce as it becomes agentic.

Harshita Rabat, Senior Analyst, Bernstein: And it’s so fascinating, Alex, because traditional commerce is designed for humans. And as agents kind of do shopping in our behalf, it’s it’s really unique to have a two sided network to kind of drive that additional security and the value of the services. I want to switch gears a little bit and talk about the branded business, a key focus area for investors. There’s a lot going on here. Right?

Like, as you’re modernizing checkout experiences, introducing rewards, buy not pay later, offline, but I think at the same time, competition is also intensifying with many different checkout options. Taking a step back, what do you think is misunderstood amongst investors as they think about PayPal’s branded business?

Alex Chris, President and CEO, PayPal: Yeah. It’s a really that’s a really good question. It’s very complex. But but if I were to just simplify it, I think I I I think people still think about PayPal, especially in The US, as this single branded button that revolutionized ecommerce fifteen years ago and really hasn’t changed much much since then. And in some ways, that’s true.

Right? In some ways, what what PayPal did was removed friction from the ecosystem, made it very simple and secure for a consumer to make an online purchase without having to type in their credit card information again. If we just sat there, which in all transparency for far too long, the company did just sit there, then competition says that’s a great business. Like, we can do a me too product, and now you have lots of different buttons on a checkout page. I think what’s misunderstood is, a, even with the competition, we are still the largest branded product in the world.

PayPal in The US is still number one, and outside of The US is by far number one. You can aggregate everybody else. We are still number one. But we are not sitting still. The innovation that we’ve talked about when it comes to the two sided network, we are now innovating a far above and beyond just removing friction from the ecosystem.

So we are now starting to build in advantages for consumers to want to choose PayPal. We’ve never done that before. The the value proposition for PayPal in the past was it’s just frictionless. Well, there’s lots of things that are frictionless now. So we are now starting to work with merchants to leverage that personalized API that I talked about that that we know information about this customer to allow merchants to connect directly with the customers that matter the most and actually give them incentives to make the purchase.

So you’re starting to see that. We did a partnership with Amazon where Buy With Prime will now be shown as a PayPal, if you’re a Buy With Prime member, on a PayPal checkout button. We’re working with merchants where they can start to give rewards and cash back offers and incentives to choose PayPal at checkout because they’re targeting a specific consumer even upstream of the purchase. So they can do a buy now offer on the actual checkout page. So we’re leveraging the data that we have and the access to the merchants that we have at scale to now create differentiated value propositions for the consumers.

And this is something PayPal has never done before, but we’re now starting to roll this out. And and the merchant reception has been incredibly exciting, and consumers are now realizing we are the most rewarding way to pay. We started to do that with our our rewards cards. We’re starting to put more cash back into our consumers’ pockets. You’ve seen us on TV.

Hopefully, you’ve seen some of our Will Ferrell campaigns, and we’re starting to change the mindset of consumers that PayPal is the most rewarding way to pay, not just the most frictionless, safe, and simple way. In addition, we’re playing a bigger game. PayPal had before only ever worked through an ecommerce channel. We’re now omnichannel. We are now working on ensuring that that we can actually be use PayPal anywhere you want to shop, which includes offline.

So we launched our offline product inside of inside of stores where we’re now working with merchants to give, again, consumers incentives to be able to purchase. So what does that look like? We’re actually giving cash back for debit card purchases. In the last since we launched in September, we’ve had 4,000,000 debit card customers come in, 2,000,000 in q one, coming in using our debit card to now make offline purchases. Well, what’s the advantage of that?

Well, first, offline debit card purchases are the same economics as online branded, so we get great economics. Two, it creates a flywheel of habituation. Consumers that are now using us offline transact six times more than users that are just using us online, and their ARPA is two x. So we’re starting to get this flywheel of people saying, I’m going to use PayPal every time, every purchase, everywhere. That for us is incredibly exciting because before we were just taking a fraction of their share of wallet in their purchases.

Now we’re able to actually penetrate our user base, which is massive, to now take more and more of their share of wallet. And our customer base is continuing to grow, so we’re speaking to new users as well. And this is happening on the PayPal ecosystem, and it’s happening on the Venmo ecosystem as well. So we’re playing a bigger game. We’re playing in an omnichannel world.

We’re now moving beyond what the competition did. I’ll I’ll give it to them. They caught up to us when it came to just the consumer experience. We’ve now leapfrogged them in creating a value proposition that’s better, and we’ve gotta continue to innovate. But it’s it’s a it’s a very exciting opportunity for us.

Harshita Rabat, Senior Analyst, Bernstein: And, Alex, I wanna follow-up on your offline comments. So so you talked about the users, the ARPA, which is very attractive. You’re rolling out the NFC wallet in Germany. You talked about the Will Ferrell campaign. Over the last several years, PayPal has had many attempts at gaining share of offline.

Why do you think this time could be different?

Alex Chris, President and CEO, PayPal: Yeah. You know, it my background is is a product leader. I I have built products my whole career, and one of the tenants of building great products is really understanding your customer, really diving deep and working customer back. It’s one of the things I’ve tried to bring to PayPal, some of the new leaders that I brought in, and just the way that I look at products. And in order to do that really well, you have to meet your customers where they are.

Changing their behavior is very, very difficult to do. Meeting them where they are and creating delightful products is what starts to drive growth. So in the past, we had thought about offline. I mean, it’s sort of an obvious idea. You have, you know, half a billion users, you know, at any given time that are coming in.

You know, why not take more of their share of wallet? But we tried to force them to change behavior into different areas. Now we have launched with PayPal everywhere. We’ve launched leveraging NFC. We’re launching on the devices using the technology that they know and love and expect.

We also are starting to leverage some of the advantages that we have. So we just launched in Germany. Well, Germany is a unique market. It’s a very exciting one for us because we have incredible penetration. 80% of ecommerce runs through PayPal.

We have we’re the number one brand in Germany. Of all brands, we’re the number one brand in Germany. And we have bank connected because it’s not a credit market. So we have banks connected to all of these consumers across Germany. We have now launched a wallet that is just as easy as any NFC wallet that you have here in The US on any device that you have, any mobile device that you have in Germany, where you are one click able to take your bank account, say, this the account that you wanna now use for offline purchases?

We also are accelerating our buy now, pay later product. So we now have a buy now, pay later card connected to your offline purchases. So you can walk into a store, and the previous version was you either paid with, you know, having to fill out a form for bank, or if you were buying a TV and you wanted some sort of credit, you were manually filling out a form to be able to get credit. Now you can walk in with an always on buy now, pay later credit available on your PayPal app, and you can tap to pay to either buy connected to your bank or buy with buy now, pay later. That is meeting the customer where they are.

It’s actually making it a delightful experience for them, and we are very, very excited about starting to see that accelerate. So we’ve done that in The US. That’s why we’re starting to see the debit card penetration that we’ve seen in The US. Again, meeting them where they are. We’re doing that in Germany.

We’ll start to launch that throughout the rest of Europe. But, you know, in general, this is just a mindset that we’ve shifted across the entire company, which is we’re going to innovate, we’re gonna innovate with velocity, and we’re going to delight customers by really obsessing about their needs and how we can differentiate.

Harshita Rabat, Senior Analyst, Bernstein: And, Alex, you also talked about the ability to personalize as also a differentiated aspect of what PayPal could do. How big do you think adjacent opportunities, for example, ads and offers and personalization could be for the branded business?

Alex Chris, President and CEO, PayPal: Yeah. So so, look, at our scale, we have a couple of big advantages. We have data that merchants really, really want. Right? We have your purchased data across the ecosystem.

And this is, you know, the consumer’s data, but we’ve actually asked consumers, and they’ve opted in. Over 80,000,000 have opted in to be part of our commerce API, which means they’re allowing us to now create an anonymized personalized fingerprint of them and be able to share that with merchants so that merchants can actually create a personalized experience. So what does that look like? So if you go to a website now, there is a dance that happens between the merchant and the consumer. The consumers there trying to shop and find something, and the merchant is trying desperately to figure out who this consumer is and get them to the right product as fast as possible before they lose the attention span or they just give up.

And the bounce rate on merchant sites is incredibly high, and people give up all the time. We’re now providing an API that merchants can use up front to personalize the experience. So instead of going to a generic website, they’re able to ping the PayPal commerce API up front and understand a few things. Where have you shopped before? What journey might you be on?

Did you just come from buying a tent? And we sell shoes, so now you’re likely maybe going camping. So maybe instead of showing tennis rackets up front, we should show you hiking boots. We know your shoe size because you’ve made shoe purchases before. We know your favorite colors.

And we know that you’re a PayPal or a Venmo user, so we can put a buy now button up front. And if they’re a new user to this merchant, we can even have that button say, hey. You know, you get 5% off by making a purchase today. So we’re giving merchants tremendous insight and information to be able to personalize that experience far upstream of what they’re able to do today. And so we see that as a tremendous opportunity to start to narrow in the focus and allow merchants to create a much, much more seamless, frictionless, personalized journey for consumers.

And, obviously, it’s better for consumers as well. They get to the product they want. It’s a personalized experience for them. And then if you then take that to the next the next iteration, which is what we talked about before in agentic commerce, that is a huge advantage because you’re not going to wanna be telling your agent every time, hey, you know, this is my shoe size. This is what I’m doing.

This is why you know, this q and a back and forth back and forth back and forth. When they can ping our API and the agent is suddenly incredibly intelligent and personalized based on you, they can get you right to the right product at the right time. So we think we’re playing the future game here, and we’re leveraging the data to be able to make it happen.

Harshita Rabat, Senior Analyst, Bernstein: So let’s bring it all to together to what you said at the investor day, where you guided to branded experiences acceleration from 6% to eight to 10% in the medium term. So maybe zoom in on what drives that acceleration in terms of the new checkout, US versus international enterprise SMBs and different products.

Alex Chris, President and CEO, PayPal: Yeah. So let me let me let me simplify it. Our PayPal base is an incredibly loyal base. They have used us for years. They continue to use us.

And I would argue they use us even with, you know, an experience, especially on mobile, that in the past was not ideal. But, you know, we’ve been in that mid single digits branded experience pretty consistently. What is changing? First, we are dramatically improving that core branded experience. This goes back to innovation.

We have remade the core branded checkout experience for the consumer. We’re using the best of breed technology to now seamlessly get you through login. No more injure your username and password and figure all that. There’s much better technology now. There’s face ID.

There’s biometrics. There’s the ability to just know who you are. We are now implementing all of that. We have built those experiences. We know that those experiences are now driving, you know, a hundred basis points of uplift when they’re rolled out.

So we are in a huge acceleration mode to get those experiences rolled out to as many merchants as possible. We started a couple of quarters ago. We now have over 45 of US volume on the new experiences. We just this month started rolling this out to Europe and beyond. Just to give you a sense as to the the scale of that, because our business is so international, even at the 45% of of US volume, we’re still low double digits in terms of our overall volume on the new experiences.

But our Europe expansion should accelerate even faster than we did in The US. So over the next few quarters, we’re gonna really be looking to take that low double digits on the new experiences and start to really ramp that up. So we think right there, that’s, call it, a hundred basis points of improvement. Second, we’re really leaning into buy now, pay later. We think this is a tremendous opportunity for us.

We have best in class risk models. Even in uncertain times, we’re really able to make sure that we understand our consumers in a very nuanced way and be able to provide a very exciting seamless buy now pay later experience. And it’s built into the core elements of PayPal. So you don’t have it’s it’s a brand that you trust. It’s a brand that you know and love.

And, actually, we’re hearing from merchants more and more that they are asking for PayPal buy now, pay later to be part of their experience. So we think that’s, you know, a point or two of growth as well. And then lastly, something that I’m really excited about is Venmo. So we we have an incredible and growing consumer base with Venmo. We have $18,000,000,000 of money that moves into the Venmo ecosystem every month.

And what is the Venmo ecosystem? It is teams. We have a team product through to, call it, 29, early thirties, affluent, incredibly valuable demographic that merchants want. In the past, we had these $18,000,000,000 of money flowing in from mostly peer to peer transactions or, you know, think of your college student that’s off to school and, you know, their parents sending the money through Venmo. We had failed as an organization to give those users the ability to spend that money.

So the money would hit the accounts, and then it would leave. We’ve now changed that. First, pay with Venmo is an easy and obvious way for us to create a buy with Venmo button on the merchants that we already have penetration with with PayPal. We are now going to market as a single organization. We are now taking our our go to market teams to be able to put a pay with Venmo button on our merchant sites that are relevant for this demographic, and we’re starting to see tremendous growth in pay with Venmo.

We grew over 50% last quarter in pay with Venmo volume. So we are just scratching the surface of of pay with Venmo volume. That is another point of growth right there with pay with Venmo. And for me, the whole Venmo ecosystem feels like we are just at the start of this flywheel that probably is what PayPal felt like fifteen years ago. Very loyal, dramatically popular base with a lot of money flowing in.

We have to just create incredible experiences, whether it’s pay with Venmo or our our debit card to be able to allow our customers to be able to use that money within the ecosystem.

Harshita Rabat, Senior Analyst, Bernstein: And, Alex, I I know we have chatted about this, but Venmo is quite under monetized, especially compared to your peers. So it’s kinda nice to hear about the kind of leadership at Venmo and and bringing Venmo more into the PayPal ecosystem. Let’s talk about Graintree.

Alex Chris, President and CEO, PayPal: We can can I finish on Venmo before you move on? Because I talked about pay with Venmo, which is which is the button. Right? So imagine great. We now have a and you’ll you’ll see it now, and you’ll start to see it more.

And as I said, 50% growth in in in just volume coming through this pay with Venmo button. The other side of monetization is is the debit card, like giving our consumers the ability to have an omnichannel experience and actually use their offline purchases as well. So the classic use case is, you know, when my my son does this at at college, you know, he takes his volleyball team out for pizza. They all Venmo him $5 for the pizza. In the past, he couldn’t use Venmo to actually buy the pizza.

Like, it makes no sense. It’s insane. Now he’s got his Venmo debit card embedded in his NFC chip. He double clicks, taps to pay, and he’s now bought the pizza. And it’s all seamless.

So we’re innovating like crazy on on Venmo, especially on experiences and group buying opportunities, which is where Venmo really shines. We have offline experiences, our debit card experiences, and pay with Venmo. Just to give you a a just a little bit of an understanding of how fast we’re moving on the innovation on Venmo, Venmo has been around for over a decade. In that decade, we had 4% penetration of our debit card into our base. That is too low.

That is way too low. We have remade the experience over the last couple of quarters. We’ve now built it into the onboarding experience, And the new cohorts of customers coming in, in the first thirty days of them joining Venmo, we have a 10% attach of the debit card, and that’s the first thirty days. As we continue to see that those cohorts mature over sixty days, ninety days, into six months, I expect that 10% to start to really scale up. We’ve already brought our 4% penetration up to 6%, and we expect to see that continue to grow.

So now, you know, this this sort of theory of, you know, well, Venmo is this incredible base continuing to grow, tons of money moving through the ecosystem but not monetized, we are changing that narrative. Our debit card penetration, our pay with Venmo are both huge monetization levers, and we’re not gonna stop there. There’s a lot of innovation coming down the pipe with Venmo. Super, super exciting product.

Harshita Rabat, Senior Analyst, Bernstein: And and that’s what’s driving your optimism around more than $2,000,000,000 in Venmo revenue.

Alex Chris, President and CEO, PayPal: Absolutely. And so, again, just to to by by 2027. And and, again, just to give you that just to to finish on your first question. So this is our you know, how do we go from mid single digit branded checkout growth to eight to 10 over the next few years? We do have a very clear stepping stone of where we need to get to.

And that doesn’t include new innovations. You know, we we just from a from a perspective on the company standpoint, we’re not going to put out, you know, any outlook that we don’t have real confidence and line of sight to get to. We feel very confident in those levers of three different levers to drive growth to get to that eight to 10%.

Harshita Rabat, Senior Analyst, Bernstein: Alex, I wanna switch gears now and want to ask about Braintree. Mhmm. So a year ago, you led a strategic focus shift for Braintree towards profitable growth away from volume growth or market share. As we sit here today beyond now positively contributing to transaction margin dollars, how is Braintree positioned relative to, say, its peers in terms of capabilities?

Alex Chris, President and CEO, PayPal: Yeah. So unbranded processing, which is which is really the the Braintree business, is a is a very important part of the business. But the in the past, just to to level set, we had been really thinking about how do we just drive volume growth. And I think a few years ago, that made a lot of sense as Braintree was small and really trying to establish a beachhead. But, you know, as I came in and was able to really take a a fresh look from a strategic standpoint, we were we were just undervaluing our own products.

One, our core processing is actually best in class. Our auth rates, our conversion rates is really best in class, and and our merchants would tell us that. And we hadn’t invested and weren’t monetizing our value added services. We brought in an entire new leadership team there. We are moving incredibly fast with our value added services, whether it’s risk as a service, FX as a service, some of the tokenization that we’re now putting out that’s really unique.

We’ve launched new partnerships with with Verifone to be able to to now move into omnichannel from a processing standpoint. So we’re just playing a bigger game and able to interact with merchants. Now we made a strategic shift to say, okay. We are we’re actually going to price our services to value. And that what does that really mean?

It means we’re gonna start charging for our value added services, and it means we’re going to extract a fair price, which for most people was a higher price for the unbranded processing. We expected volume to go down. What has happened is a couple of things. One, we’ve had very constructive conversations with our existing merchants. We have not lost merchants.

Some volume has gone down, as you would imagine, because we were taking almost an unbelievable share of processing, and so it’s right sized something that’s more reasonable. But we’ve actually lost less share, so we retained more of our processing share than we expected. And that’s because of the value of our services even at a higher price. And so we’re starting to see, obviously, transaction margin. Unbranded processing has now turned profitable and and contributing to transaction margin growth.

Our processing are that’s reduced. We think we’re sort of pretty close to being at the end of that, and so we’ll start to see overall volume start to inflect and start to grow again. And we have healthy relationships as we start to now have our our value added services really start to come to bear. And so we think we’ve we’ve set up a really strong position for our merchant relationships. The last thing I’d say is we also wanna create differentiated products in the market.

And the biggest differentiator that we have versus anybody else that’s doing unbranded processing is we have the largest consumer ecosystem in the world. And so all the things we just talked about about personalization, commerce APIs, those are the conversations we’re now having with these merchants. When I go and sit down with a CEO of a merchant and I ask him, hey. What is the biggest challenge you’re facing? Not a single one has said to me, basis points on processing volume.

They all say, I need more customers. I need to convert more. I need loyalty. I need returning customers. And I say, great.

We have hundreds of millions. Tell us exactly where you want. Do you want the Venmo population? Do you want PayPal? Do you want global?

Do you want to personalize it? Do you wanna create offers? Like, what do you wanna do? And so now the relationships that we’re building across the PayPal ecosystem is incredibly end to end. And that is also, again, the way we’ve changed our go to market, where we’re now having conversations that are holistic with our merchants instead of siloed conversations about, you know, do you want Venmo or do you want unbranded, or do you want PayPal, or do you want buy now, pay later?

Eighteen months ago, those were four different teams having those conversations. Today, it’s one go to market team having a holistic customer back conversation that fits the merchant’s needs, and we’re just starting to see that momentum start to grow.

Harshita Rabat, Senior Analyst, Bernstein: So, Alex, we talked about the branded business, Venmo, enterprise business. Let’s talk about SMBs, which in a way is PayPal’s bread and butter and something, I guess, very special for you because of your background. As you discussed at the Investor Day, it’s been of a it’s been a struggling business for PayPal over the last several years, and I know you stabilized it. Tell us more about the dynamics within the SMB business. You’re bringing more product here unified under the PayPal One offering and overhauling the go to market, but at the same time, you have market forces such as consolidation, example you know, for example, with Shopify.

So let’s talk more about the dynamics here.

Alex Chris, President and CEO, PayPal: Yeah. So you are right. Small business is is a passion of mine and a very, very exciting business for us. So let’s let me just level set on on just the small business market in general and where I think we’ve got tremendous advantage. So over the last, you know, five or ten years or so, you know, I I will be transparent.

I think PayPal took its eye off the ball of small business, which was, as you said, our bread and butter at where we started. We really focused on enterprise, which was good and and had some tailwinds in enterprise growth, but but really created a little bit of a vacuum in small business. As you said, we’ve stabilized that now. We’re turning small business back into growth, and it really is, you know, I think, our birthright to be able to own the small business market. So a couple of things to think about.

First, small business is a vast market. It is one that is very hard to penetrate. These are businesses that are spread and and very disaggregated. And so being able to have a brand that can aggregate small businesses is very difficult. When we talk about having 30,000,000 plus merchants, that is incredible.

We are the first place that small businesses turn to when they are looking for a partner. So that’s first important thing. Second, small businesses are split between services and product based businesses, and we serve both. If you look at the overall small business market, it’s actually about seventy thirty service based businesses to product based businesses. We have competitors, as you mentioned, that really focus on product based businesses, which we are strong in.

Retail is a great example of that. But small businesses that are service based businesses still need to send invoices. They still need to get paid. They still need to make payments, and they turn to PayPal. And we, again, I think, are creating vertical solutions to be able to serve them.

So now if you look at what are the needs of small businesses, there’s two things to really understand about them. One, they struggle every day with using too many different services. Most small businesses are using 17 different applications to be able to run their business. These are businesses with just a handful of employees at best. And so being able to manage the data infrastructure and the data that moves between 17 different solutions to be able to run their business is a nightmare.

They are looking for consolidation. That’s why we’ve moved everything under one platform. We’ve rearchitected our infrastructure under PayPal Open. So now they can have one place to get their unbranded processing, every branded mark that they want, their PayPal and Venmo marks, buy now, pay later, all of the different global services, and this is the same platform that they can start with and scale all the way through to an enterprise. Same platform, custom fit for them.

So consolidation of services into one platform is a huge advantage. The second thing to know about small businesses is they are very simple, but they are always at risk of going out of business. So what do they think about every day? It’s all about cash flow. Money in, money out, and access to capital.

We are best in class at money in. Right? We help you get paid. Whether it’s your store, whether it’s invoicing, we help you get paid. What we’ve not been great at is money out, which is the ability to do things like bill pay, which we we foreshadowed at our Investor Day.

So we will now be able to allow you to do money in and money out. What we are great at is access to capital, and we’ve continued to scale our merchant lending, our working capital loans. And, again, with our unique dataset, we’re able to see a 360 degree view of the of of the merchant of of the small business and are able to actually give them access to capital when they need it the most. And especially in times like now where times are difficult and many of them are looking to grow or looking to just stay afloat, we’re able to be a very, very safe place for them where we have enough data to be thoughtful about how we want to to manage our lending business, but do it in a very intelligent way. So I have a a a clear passion for small businesses, and I think we are turning the ship around there.

Very, very excited about the opportunity there.

Harshita Rabat, Senior Analyst, Bernstein: Fantastic. I had not appreciated the diversity of your SMB base in terms of services and product. So, Alex, let’s talk about Fastlane. You rolled it out last year and announced a bunch of partnerships with other acquirers. Guest checkout is still quite friction prone, and you’ve talked about engaging new customers for PayPal and also dormant PayPal users.

Tell us about the merchant piece of it. What are you hearing from merchants also considering the fact that there are other solutions in the market?

Alex Chris, President and CEO, PayPal: So Fastlane, just as a as a refresher, is our guest checkout experience. Just to make it very simple, because we’ve seen so many consumers, if you go into a guest checkout experience and you’ve now bypassed all branded options and you just type in your email address as an example, we can pre fill the checkout form. That has a dramatic increase in conversion rate for merchants. So we we have the best guest checkout experience on the market now. Now we were not first.

Most our competitors in guest checkout had actually been in the market for almost a decade now. What we’re hearing from merchants is you are the best converting one, and the the demand is high. The challenge, our focus has been on moving and and rolling this out to large enterprises first. What they need is because most large enterprises are using multiple processors to be able to manage their their processing. They need to make sure that our Fastlane experience works through not just Braintree, but also other processors.

That’s why when we launched, we had other processors, including competitors. So we had Audient and Chase and Fiserv and others adopt and market our Fastlane product. Those are just now rolling out now. So now that we have multiprocessor adoption of Fastlane, we expect this to continue to to to scale. This is not gonna be an overnight scale.

This is going to take time for adoption. Guest checkout is not something that most merchants even have engineers working on because it just hasn’t changed in a long time. But what I’m excited about is, a, it’s the best product in the market. B, we have a strategy that is multiprocessor, which gives us an advantage as we start to roll it out. And see, if you go back to agentic commerce and you think about what is going to be the checkout experience with agents, it is going like, I do not believe we’re going to be in a world where you’re gonna go through this magical agent to agent or consumer to agent experience, and then a guest checkout form is going to pop up, and you’re gonna type in all of your information.

So the player that has access to the consumer, that has wallets, that has vaulted instruments, and that has removed friction is going to win that game, and that’s what gets me so excited. I think between Fastlane and our branded experience, we’re gonna be the leader today and into the future.

Harshita Rabat, Senior Analyst, Bernstein: Alex, we only have a few minutes left. So my last question for you. At the Investor Day, you talked about your long term ambition of 10 plus percent transaction margin dollar growth and 20% plus EPS growth. And the stock is really mispriced if one has conviction in the long term ambition. So what are the key milestones or areas investors should be monitoring in your view to get greater confidence in the underlying growth outlook for PayPal and that’s improving?

Alex Chris, President and CEO, PayPal: Yeah. So first, again, I’ll go back to just how I think about running the company. We have been very prudent in any time that we’ve given either a short term or a longer term outlook. We have line of sight, and we have a lot of confidence internally on what that outlook looks like. We would not have said 10% plus long term transaction margin or 20% plus EPS if we didn’t have conviction ourselves.

So just wanna start there. Second, I appreciate that it takes time for the stories of what the story of PayPal to evolve. And, you know, I’ve only been in the seat for eighteen months, but what I would encourage you to look at is the momentum that we have and who is voting with their wallets or their business in the innovation that we’ve put out in the last eighteen months. Our consumers are now coming to the platform. Our consumer growth is growing.

I would look at that. We’ve turned around the unbranded business. We have now turned that from unprofitable to profitable, and it continues to grow. Our Venmo business is now growing and growing at a healthy clip, 20% plus in the last quarter. Our branded business, we now have line of sight to what we talked about before, both the branded experiences as well as buy now, pay later, and then pay with Venmo on top of that.

So I would just look at the underlying elements, and then I would look at who are the other partners that are coming in. Developers are now coming to us. Right? So this is not just a today game. This is into the future as well.

We were the first I don’t think people would have guessed eighteen months ago that PayPal would be the first MCP server leading agent to commerce, and we were. We had the largest players coming to us to be able to say, hey. We wanna actually use your two sided ecosystem to lean into what the future of commerce is gonna look like. And so I would look at those input metrics. I would look at the continued execution that our team has.

And I would also recognize that we’re eighteen months in with an entirely new team. I can tell you now we are better this week than we were last week than we were last quarter than we were six months ago. We keep getting stronger as our team starts to really settle in and really start to to execute. So we had a lot of conviction in the numbers that we put out at Investor Day, and I think we’re just getting stronger as we continue to to move forward. So

Harshita Rabat, Senior Analyst, Bernstein: Thanks, Alex. Such a great conversation. Thank you for joining us today.

Alex Chris, President and CEO, PayPal: Thank you.

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