Specialist
Former Senior Director at PayPal Holdings Inc
Agenda
- Recent PayPal (NASDAQ: PYPL) developments, including the launch of its super app, growth through buy now, pay later and penetration with SMBs
- Ability to further engage and monetise Venmo users and impact of new Amazon (NASDAQ: AMZN) partnership
- Company's buy now, pay later strategy and positioning amid CFPB (Consumer Financial Protection Bureau) probe
- Outlook as the business faces increased competition, including potential M&A activity
Questions
1.
What do you think PayPal needs to do to execute and achieve its super app ambition? What’s a flaw in the company’s strategy and what is it doing correctly?
2.
Do the PayPal super app and Venmo app make sense as two separate apps? I find the reason behind having two separate apps quite interesting, and I’m sure investors do too. What is the challenge of combining them, technical or otherwise? What is the justification behind the difference?
3.
How long might it take for PayPal to roll out a unified app, if the company was working on it now?
4.
What might be a feature within the super app that needs the most investment? How do you think about investment more broadly? How much investment does the super app need to be successful? Super apps haven’t really been successful in the US compared to China.
5.
What is the key challenge for Venmo driving greater monetisation? What might be the main monetisation drivers from its users in the next 12 months?
6.
What have been the historical friction points in bringing the Venmo experience to e-commerce and combining it with the PayPal checkout button? It impacts Amazon’s deal with Venmo, but more broadly, why haven’t these two experiences been combined for e-commerce?
7.
How does Square's gross profit of roughly USD 50 per user compare to Venmo? How might Venmo and Square’s Cash App compare longer term, given their relative positioning?
8.
What might be the ceiling for Venmo user monetisation? Is there a number you don’t think the service could ever pass, no matter what features are added?
9.
What are your thoughts on the take-rate trajectory from a Venmo consumer-to-merchant transaction? You mentioned the commercial use case. What do you think about the longer-term take rate? What is a normalised take rate as it starts focusing on commercial?
10.
What do you think is a key threat to pay with Venmo take rates? In our previous Interview [see PayPal – Zettle POS System Roll-out & Super App Ambitions – 17 September 2021] we discussed PayPal’s funding mix and its advantage in charging a flat blended rate and then taking the benefit if the mix is more favourable. When might merchants challenge or negatively pressure that pricing as ACH [automated clearing house] becomes more prevalent?
11.
How should we think about the negative impact of the debit-to-credit shift for PayPal? Historically there was a shift away from credit and towards debit, but this is the start of a debit-to-credit shift which has some increased cost on the company’s funding mix. What can PayPal do with Venmo to improve margin if that funding mix is less favourable in the near or mid-term?
12.
How much of a priority is it for PayPal to further develop and invest in payment platforms that don’t rely on Visa and Mastercard rails? What might you observe if this was executed?
13.
How do you think about the longer-term dynamics of PayPal’s relationships with networks? I know a term of PayPal’s partnership with Visa is that PayPal can’t encourage Visa cardholders to link a bank account via ACH, which would essentially cut Visa out. PayPal is one of the largest network customers with USD 1.2tn in payment volume. To what extent might they work together to try and get PayPal better terms and stronger payment economics to keep it from pursuing ACH?
14.
How important is it for Venmo to have a strong, robust loyalty programme? How might the company build this? What services are missing from Venmo and PayPal that are likely to be launched over the next 2-3 years?
15.
How is PayPal positioned compared to pure-play buy now, pay later players and card networks and issuers that are offering instalment programmes?
16.
Do you think industry players wanting to ease credit standards is now off the table after the CFPB [Consumer Financial Protection Bureau] probe, given the underwriting process is stricter? How do you think about the impact to net charge-offs if credit standards could be eased? Alternatively, do many of these players, including PayPal, have adequate underwriting standards? So there wouldn’t be such a significant uptick in net charge-offs and these won’t eventually hit the levels of PLCCs [private-label credit cards] in the 5% range?
17.
How much of a competitive advantage is PayPal’s rich data on consumers? This enables the company to offer higher approval rates, which is obviously much more attractive to merchants. What might threaten that advantage in the longer term?
18.
How would you compare PayPal’s Braintree technology to Stripe, Square and Adyen? What is Braintree’s value proposition compared to those players, which might win or lose business?
19.
How important is it for Braintree to develop adjacent software offerings such as marketing, loyalty, payroll, e-mail connections and so on? Modern merchant acquirers are developing these software-like offerings in adjacent markets. What has been the challenge historically of adding this full functionality?
20.
Has PayPal migrated to a modern technology stack or is it still stuck on legacy technology? As you highlighted, the company has multiple great assets but hasn’t really combined them cohesively, at least for consumers. Has it integrated platforms properly or is there still lots of work to do to combine them on the back end?
21.
What is your M&A outlook for PayPal? Is there a strong target, given the company’s reputed acquisition of Pinterest is off the table?
