How PayPal is Doing Well by Doing Good

In a time when technology has transformed people’s lives in so many ways, financial services is one area where the full potential of the Internet era has yet to be realized. We’ve been hearing for decades about how the decline of cash and the rise of the digital economy will revolutionize financial services and usher in more convenient, accessible and affordable transactions. But so far, the traditional financial order remains firmly in place. While change is underway, the way most people move and manage their money hasn’t changed much since credit cards appeared on the scene 50 years ago. And there’s still plenty of friction in the system. 

Around the world, two billion people lack access to even the most basic banking services. In the United States, nearly half of families have less than $400 in savings and those among the working poor spend more than $170 billion a year on fees and interest charges to use their own hard-earned money.

The good news is that we now have the tools and capabilities necessary to address all of this at scale. Mobile devices, big data, and artificial intelligence are opening the door to a new generation of universally accessible digital financial services. The potential to transform people’s lives is immense. So are the opportunities for PayPal. It is my pleasure to update you on the progress PayPal is making to fulfill the promise and potential of this transformation.

Succeeding by Making a Difference in People’s Lives

In 2015, we shared a new mission for PayPal—to foster inclusive economic opportunity and strengthen financial health for people, businesses, and communities around the world by democratizing financial services for consumers and commerce capabilities for merchants. We believe access to affordable and convenient financial services should be a right for all rather than a privilege for the few.

To achieve this, we are aligned across the company around one central vision: to make the movement and management of money as simple, secure, and affordable as possible. As we democratize financial services for consumers, we can empower people around the globe to take control of their financial lives. And as we democratize commerce capabilities for merchants, we can help every business—no matter how large or small, no matter where it is located—take advantage of the opportunities of the digital age and the global economy.

These two tenets of our mission and vision are united by the fundamental truth that improving the financial life of just one person or one small business can create ripples of progress across communities and economies. Financially healthy individuals and families spend their money at local businesses and start companies of their own. They invest in education for themselves and their children. They support each other and give back to their communities. Financially healthy businesses of every size create good jobs, offer solid benefits, and support the economic and cultural life of their communities. Financially healthy communities invest in transportation, education, health care, and public safety.

As a leader in digital financial technology, we believe that driving the cycle of opportunity and economic expansion that begins with financial health for individuals and families is both our greatest obligation and our greatest opportunity. This mission inspires our employees, strengthens our partnerships, reinforces our relationship with customers, and creates new markets. Democratizing financial services is the key to unlocking long-term growth and profitability at PayPal. In other words, making a positive difference in people’s financial lives is PayPal’s best strategy not just for serving our customers but for serving our stockholders.

Translating Our Vision into Strong Results

It’s safe to say that our financial results for 2017 are a strong indication that our strategy for change is the right one for PayPal at this moment in our history and in the development of our industry.

PayPal had a transformative year in 2017, delivering consistently strong, and in many cases record-breaking results.

We added 29 million net new active accounts to our Payments Platform, with the number of actives joining PayPal accelerating each quarter throughout 2017. We ended the year with 229 million active accounts and we anticipate this growth in net new actives to continue in 2018, as we experience increasing network effects from our scale.

Importantly, even at this greater scale, our customers are more active than ever before as they increasingly engage in the range of services we offer and benefit from the improvements we have made to our customer experiences through the many initiatives I will detail later in this letter. In 2017, PayPal processed more than 7.7 billion payment transactions valued at more than $456 billion in total payment volume, an increase of 27% both on a spot and FX-neutral basis.

Revenue for 2017 exceeded $13 billion dollars, growing 21%, or 22% on an FX-neutral basis. For the year, earnings per share grew 28% to $1.47 and non-GAAP earnings per share grew 27% to $1.90. Finally, during the year, we returned more than $1 billion dollars to stockholders in the form of stock repurchases, buying back our stock at an average price of $51.

We continued to build on our leadership in mobile transactions and to take a mobile-first approach in our innovation efforts. For the full year, mobile represented approximately 34% of overall payment volume on our platform with total mobile payment volume growing 52% to approximately $155 billion for the year. Venmo’s volume increased 97% in 2017, with almost $35 billion in payment volume processed. And we ended the year with 80 million consumers opted in to our One Touch service, up from 40 million a year ago, and the number of merchants offering One Touch now totals more than 8 million, compared with 5 million a year ago.

The Foundation for Growth: Customer Choice and Industry Partnerships

When we embarked on this journey in 2015, we recognized that to achieve our vision we needed to rethink some central aspects of our business. Back then, we were still mostly a web-based company with a strong checkout experience. To get where we needed to be, we made significant investments in our technology infrastructure to create a service-oriented architecture capable of delivering a comprehensive range of capabilities and products to consumers and merchants, to provide an open and neutral third-party platform for our partners. We undertook this transformative journey of moving from a button on a website to a full service digital payments platform.

This approach has enabled us to become a Customer Champion and to partner broadly with companies across our industry—two things that are the foundation of our strong results in 2017 and essential to our long-term success.

The first required a fundamental shift in our business model. Instead of encouraging consumers to use funding sources that were the lowest cost for PayPal, we’ve now offered them the freedom to use PayPal in stores, in apps, and on websites and pay with the funding source they prefer. This is at the heart of our Customer Champion philosophy—to provide complete choice, flexibility, and transparency for people when it comes to how they manage and move their money.

This, in turn, has enabled us to enter into a series of strategic relationships with companies that once viewed PayPal more as a competitor than a partner. As a result, we have announced more than 20 strategic agreements with leading financial institutions, technology companies, and wireless carriers from around the world.

These partnerships have extended our reach and value proposition, broadened our audience, and connected us with millions of new customers. More importantly, they are driving the digitization of money around the world, helping consumers take advantage of digital payments and a host of innovative new financial services, and connecting businesses of all sizes in every part of the world to customers, markets, and capital. And we believe they will play an important role in fostering long-term economic health for communities and success for businesses around the world, including PayPal.

Technology and Services to Improve People’s Lives and Strengthen Our Business

Our efforts to democratize financial services are already having a measurable, positive impact on people’s lives. Use a traditional remittance service to send money from the United States to relatives in Mexico, for example, and it will take several days for the transaction to clear. Once that process is complete, your relatives will spend an average of more than 40 minutes traveling and standing in line to access the funds. With PayPal on a mobile device, that can all be accomplished in less than a minute. Similarly, it takes the owner of a small business an average of 26 hours to apply for credit and secure a loan at a local bank. We can complete the entire process in about five minutes.

Because small businesses are so important to the health of local communities and the strength of the global economy, we acquired Swift Financial, a leading provider of working capital solutions to small businesses in the United States. Through PayPal Working Capital, we have been at the forefront of helping small businesses gain access to capital since 2013, providing more than $4.5 billion in funding to more than 140,000 small businesses, many in communities where physical bank branches are no longer easily accessible. The acquisition of Swift Financial will improve our ability to support even more small business owners by offering access to the financial services and solutions they need to grow and thrive.

The ability to provide affordable credit to consumers and businesses is essential to our efforts to democratize financial services. To accelerate our progress in this area, we announced an expansion of our existing relationship with Synchrony Financial, which has been our partner in offering PayPal-branded credit cards since 2004. Under our new agreement, Synchrony Bank is acquiring PayPal’s U.S. consumer credit receivables portfolio. Through this expanded partnership, PayPal and Synchrony Financial are committed to working together to build innovative, personalized credit options and payment experiences for consumers and merchants. The agreement accomplishes every goal we set out for our asset light strategy, freeing up approximately $1 billion in cash flow each year and $6 billion in cash proceeds at closing. This will provide increased flexibility to invest in organic and inorganic growth opportunities as we strive to achieve our mission.

Living our Values Through Diversity and Inclusion

PayPal is values-driven company. We believe that to achieve our commitment to make a positive difference in the world ultimately depends on our ability to build an inclusive workforce, one that reflects the full diversity of the customers we serve and the communities in which we live and work. We recognize that the best way to do this is to create a culture at PayPal that respects individual differences in life experience, knowledge, and self-expression.

In 2017, we enhanced the diversity of our board of directors, which now benefits from being made up of 45% women and underrepresented ethnic groups. We reported a strong gender balance in our workforce, with women making up 43% of our overall workforce. The number of women at the vice president level or above grew by 20% and the overall gender balance in leadership roles improved with a three percent increase in the number of women in leadership positions. We also reported that around the world, for the second year in a row, for comparable employees we have pay equity for men and women working in similar roles; and, in the United States, pay equity in salaries across ethnicities.

As a global company with employees representing 122 nationalities working in 55 offices in 31 countries, we are, in many ways, already a fundamentally diverse company. And yet, we know we have more work to do to achieve the kind of inclusion and diversity to which we aspire. We will continue to work to improve our ability to attract and retain diverse talent at every level of the company.

A Global Community Committed to Creating a Better World

Democratizing financial services is a huge undertaking—so big that it can be hard sometimes to measure our progress and assess our impact. However, there is one area where it’s easy to see how the work we are doing is making a difference. As a platform for charitable giving, PayPal is already achieving remarkable things. During the 2017 holiday season, the global PayPal community contributed over $1 billion to charities and nonprofits, the first time that we’ve crossed the billion-dollar threshold as donations came from people in 175 different countries.

Another example was the outpouring of support for relief efforts in the aftermath of a series of natural disasters that struck communities in the United States, the Caribbean, and Mexico in 2017. In response to Hurricane Irma, Hurricane Harvey, and Hurricane Maria, the Mexico City earthquake, and the fires that have swept California, the PayPal community donated more than $55 million to support families and communities devastated by these terrible events.

Overall in 2017, people used PayPal to donate more than $8.5 billion to support the causes they care about and to help those in need.

This incredible generosity characterizes the global PayPal community and is just one of the many reasons why it is such an honor and privilege to be part of this great company—a company that is driven by a powerful mission and united by a common set of values. It’s rare to have the chance to work for an organization where the opportunity to thrive and grow and the opportunity to make a positive difference in the world are so closely aligned.

We are grateful for your support and we look forward to the hard work that lies ahead as we build on the success of the past year and continue to strive to achieve our mission.

This note was originally published in PayPal's 2017 Annual Report, which can be found here.