PayPal Holdings, Inc. (PYPL) Earnings Call Transcript & Summary

All right. Let's get started. So I'm happy to introduce our next speaker from PayPal, Darrell Esch. He's the SVP of Credit. This is his first time at our conference, so we welcome here and thank him for being here today. He has a lot of experience in payments and the credit space, and we'll get to hear a whole lot about it. And I'd like to jump right into questions.

So maybe, Darrell, we start with an overview of your background in the credit space, beginning in Bank of America. You spent almost 15 years there, I believe, in the cards business and then development of your role at PayPal where you've been there for almost a decade now, so pretty long history.

Yes. So less decade at PayPal. And to your point, back -- before that, 20 -- 15 years at Bank of America and another 5 years at a little bank up in -- regional bank up in Michigan before that, all payments and credit related. So started in debit cards, and then at Bank of America started -- got my first lending opportunity back. And I think about 2001 when I took on product and marketing responsibilities for the business credit card and then ultimately came to run all of the small business lending at Bank of America. And as well as then after that, the nonaffinity, so the nonpartner part of the credit card business, so the Bank of America-branded credit card program on the consumer side. And then joined PayPal a decade ago, where I spent the first 3 years running our consumer payment products, so like the checkout experiences that you know PayPal to be and person-to-person send money. And then 7 years ago now, I moved over into the credit business back -- which, for me, was a nice -- felt like a nice comfortable move home. And I took on a role where we launched a new line of business called PayPal Working Capital. So it's a merchant-lending program into our seller base. So we did that as a start-up back in 2013. And then a few years ago, I added on to that responsibility and took on the international consumer lending programs; and then a couple of years ago, the U.S. consumer business; and then all of the related functions, maybe a year or so ago. So it's all of the credit operations across the globe at PayPal.

So yes, you're pretty deep in the credit. And I'm just curious, at a high level, why you think PayPal chooses to be in credit.

Well, it's -- we, at the heart of it, our business, of course, is to facilitate commerce within our closed loop of hundreds of millions of consumers and tens of millions of merchants around the world. And one of the traditional, historic, ongoing barriers to commerce is affordability. And so our job is really to help facilitate commerce between buyers and sellers and make the things that consumers are looking for affordable to them and make the inventory that sellers need affordable to them through Working Capital kind of programs to facilitate borrowing by sellers, who need to run their businesses; and then likewise, to create promotional financing opportunities for the sellers on their websites and to create a digital and plastic credit card solutions for our buyers around the world.

And when you think about like the size of credit today and where it could be in the future, do you think there's a decent amount of growth potential embedded inside the business?

You mean at PayPal specifically?

At PayPal.

Yes, for sure. So -- and we've been at this for a while. We threw Bill Me Later, which was an acquisition. So my primary office is down in Baltimore, which is where Bill Me Later had been headquartered. Bill Me Later really invented this category of online financing back in about 2003. They were the first ones out, creating real-time decisions, credit decisions online, and we've come a long way. Since then, we've done an eBay/PayPal before the split, acquired them back in 2008, and we really integrated them into the PayPal platform at about 2010. And since that time, we've provided about $60 billion worth of this promotional financing and -- but there's a long way to go. The one -- I think our areas, our biggest area of growth opportunity on the consumer side is, back to the history, Bill Me Later started as an on-website kind of promotional finance. So you'd go on to -- you'd shop at a merchant site, and you'd see an offer, same as cash if you repay within 3 months, that kind of offer. And after PayPal acquired Bill Me Later and integrated it into the wallet, in 2010, we started to really focus on getting the credit product into the wallet. And as -- so as consumers can load PayPal credit into their wallet, now they can shop everywhere where PayPal's accepted. They don't need to look for a Bill Me Later button. They can now -- everywhere PayPal is accepted, they can use credit. And I'll be blunt and a little self-critical on it. We found that to be a path of least resistance, a very easy way to grow the business at double digits normally with a 2-handle or 3-handle. It was an easy way to keep growing the business by focusing more and more on that wallet channel, the consumer channel. And in so doing, again, blunt about it, we kind of created a lot of vacuum where other competitors could come in and start getting on merchant sites with alternative financing capabilities. And so about 90% -- a little more than 90% of our volume today comes from that wallet, where a PayPal shopper goes on to a merchant site and they click the PayPal button, and it's already in their wallet. So the beautiful thing about that is it's completely frictionless. There is no underwriting application. It's already there. I can, as simple as one click, buy with credit. But we -- back in about October and November, we sort of reentered -- we're coming back into that sector where it's more transaction -- or promotional finance on merchant's site, and we introduced a dynamic banner, a single line of code that a merchant can drop on to their site and an, easy pay kind of solution that works like a quasi-installment. We can -- inside of a revolving account, we can separate purchase into 3, 6, 9, 12 installment payments.

Okay. And that's PayPal funded, that's not Synchrony funded?

That is actually Synchrony. So that's part of the revolving, that's part of the Synchrony account, yes.

And it seems to me like, pre-Synchrony, it seemed like the PayPal Credit product had -- it was a very uniquely sort of created product that had a lot more insights and different ways of underwriting. I mean would you -- do you believe there's sort of a proprietary benefit you guys have sitting in the digital wallet and seeing how the consumers' online journey occurs?

We do. We do, for sure. And that Synchrony relationship is incredibly important, but we kind of -- we divide and conquer, not completely. There's overlap in just about everything we do. But PayPal really drives most of the front-end activity, including the underwriting engine is a PayPal underwriting engine. Synchrony ultimately owns the asset and the credit policy, but it's underwritten on a PayPal platform using PayPal data and insights. And of course, outside of the U.S., we're holding receivables on the books still. So in the U.K., for example, we have a PayPal Credit product there, works very much like the one here, but we take it on balance sheet in the U.K. And that program we -- in some cases, we have preapproval capabilities where we underwrite exclusively based on PayPal data, even to a consumer. We've been doing that on the business side since the launch of Working Capital in 2013 where it's our own data and insights exclusively on that program used to underwrite the merchant.

And maybe you can -- actually, as you're talking about different products across geographies, maybe just give us sort of a window into all the different products that you have across the geographies because sometimes I get confused by that.

Yes. Sure. So I think of it -- we split it between global consumer and global business finance. Global business finance really means 2 primary products. We have PayPal Working Capital, which is basically underwritten by the relationship. It's a members only. You have to be a member selling on the PayPal network. That's how the underwriting happens. Funds are distributed into the merchants' PayPal account. They repay it from a fraction of their daily sales coming across the network, and so that is fully integrated with the PayPal merchant account. We have another product line called PayPal Business Loan, which is a little more traditional installment loan. We have human underwriters. There's a lot of automated -- automation in the underwriting, but then we have humans involved as well, generally bigger tickets. You don't have to be selling on the PayPal network to utilize that product, though many are. And so the business financing is in U.S., U.K., Australia and Germany. And then on the consumer side, we have -- in the U.S., we have a credit card with Synchrony, so we have a PayPal credit card. We have this PayPal Credit, our core account, which is effectively a digital line of credit that you can use into your wallet, the one I've been talking about and use it anywhere PayPal is accepted. That also has a feature now, this -- what we refer to as easy payments. It's the same account, but it's a feature within the account that you can use to effectively make an installment-like purchase, and it just goes into your min pay. The installment amount gets added to your minimum payment so you can effectively use it as an installment. And then we have -- outside of the U.S., we have that -- basically that same product in the U.K., and then we have a closed and installment product in Germany. We have a program we call Pay After Delivery, which is a 14- to 21-day deferral from market to market. That's in the U.K., Germany, Australia, France, Spain, Netherlands. I think I got most of them there.

Wow. That's quite expansive. And I mean in those markets, it's PayPal funded.

Outside of the U.S., correct. And the business product, even in the U.S., is on the balance sheet.

Okay. That's right. And when we think about -- I would think like the U.K. market is probably similar to the U.S. market in terms of the consumer behavior. Do you think that region can grow further and you guys can penetrate that?

Oh, yes. We're at the beginning there. So we're -- the program in the U.K. launched, I think, about 4 to 5 years ago now, but we've really only -- only in the last 2 years have we really started kind of hitting the -- hitting throttle, getting everything in place. It was a start-up business, so we come in -- and all of our credit businesses are credit-like businesses. Even they're not all -- like that deferral product isn't technically credit, but it's -- we come in with a prudent approach and we don't -- we're not just rushing right in. So we took a couple of years to make sure everything was the way we want it. We are going to get regulator attention in a way that many of the other brands, I won't name any of them, but the alternative lenders who can kind of often fly under the radar. PayPal is a big company that gets lots of regulator attention. We're not going to rush our way in with products that we think might not have long-term viability. But the U.K. is growing. U.K. business is growing like 80%, 90% still. It's a great market, and the customers there actually use more. So in the U.S., our PayPal Credit product, our average user makes about 22 purchases per year with that. That's more than a lifetime of purchases at a lot of the other fintechs, and it's even more in the U.K. The adoption is higher, and there's more passion around it in the U.K.

I want to talk about some of these credit card launches, especially the Venmo launch. But maybe we can start with sort of the relationship with Synchrony and how that's evolved over time, and sort of some of the stuff you're doing with Venmo seems it's evolving even more in these installment products. So maybe you can just talk about how that relationship started and the evolution of that relationship.

Yes, and it's a great one. So Synchrony and PayPal go way back -- all the way back to, I think, about 2004, so 3 quarters of the life of PayPal as an entity. Synchrony has been -- had a relationship and it started with a credit card. It was just a simple co-branded credit card, not really linked to any of the technology. It was a branding exercise, and you could then load it in, but there wasn't really a lot of data intelligence sharing at the time. In the last few years, when we did the big transaction, the asset-light transaction where Synchrony bought the PayPal credit book, which roughly $7 billion at the time of assets, this is what had been Bill Me Later before we rebranded it PayPal Credit. As Synchrony bought that and took it on beta and took over all the back-end support for the program, PayPal continued to do all the front end for the most part. And then since, we've expanded and we had done this -- just this past year, we started that easy pay installment-like feature inside of the program. And then, of course, last year, we announced that we've selected them as the issuer of the Venmo card.

And as you like -- you sort of mentioned the unique aspects of you guys doing some of the front-end work and then doing the back end. So how unique is that? I mean it seems like pretty unique in the market where...

Perfectly unique, I think. And there is -- again, there's overlap end to end. We're -- they're involved in everything. They're at the table with us on the front-end experiences. And of course, again, it is their credit policy, ultimately, because it's their book. And -- but likewise, we have a bunch of seasoned -- I'm not the most seasoned person in our credit business. And so we've got a lot of people who have been around the lap several times, and we're kind of in their space on making sure all the back-end things are working to our liking as well. So it's a great -- and it's a great partnership. We end up really strong together, but I don't know of another one like it.

And if you were -- have done it yourself, do you think it would be -- what would be the constraining factors of doing it yourself?

Well, of course, there's always -- you start with the money, like the balance sheet ultimately. The Street liked it, of course. They like that we liked it. We all like that we can provide this service and still provide growth, and we can monetize it and to -- and not have that burden on the balance sheet, keep the cash available for other transactions and stock buybacks and all those good things that people like using cash for. And we're -- even the book now, the book where it is now, we're still -- we're a little more than half but not a lot more than half of the size of that balance sheet than where it was before we sold the book. And PayPal, obviously, is a lot bigger company a couple of years later.

Absolutely. So maybe we could zero in on the Venmo card. Synchrony was here before. They were pretty excited about the launch. They obviously talked about how unique it's going to be. Maybe you could just talk a little bit more about it and how you see it as an opportunity for PayPal.

I'm going to see Brian and Brian a little later. I can't wait to hear what they said. But...

Really pumped it up.

Good. We are, too. We are, too. It's -- here's the thing with this program, and I think it is a -- I do think it has game-changing potential. Credit cards, of course, have been around since the '50s, and there have always been 3 -- well, they really started with 2, and then it became 3 primary value propositions beyond convenience, just -- they're easy to use. But beyond that, the product itself, it's the line, it's the price, it's the reward. Like those are probably -- for most of us in the room here, those are kind of the 3 things you decide whether you like your credit card or not. How big is my line? How much does it cost me? And what kind of reward/spiff am I getting? There have, through time, been identity or self-identity, personal brand has kind of come to play like it was gold cards and black cards and my team logo and my alma mater, things like that so -- as a part of the value proposition. I think the new value proposition that is rising, which is why we're excited about this, is it's the user interface. It's the how do you interact with it? How do you interact with your card, day in and day out? And most of us, again, I would wager, have whatever you think of as your primary bank, you probably have that bank's mobile app. Like if you're -- unless you're -- I don't know. I don't know who gets -- doesn't fit that mode anymore. Like you've got it on your phone. You probably -- if you've got 3 or 4 credit cards in your wallet, I bet you don't have 3 -- all of their apps on your phone. And if you do, I bet you don't interact with it every day. If you have Venmo on your phone, you interact with it pretty much every day. And it is a digital user experience, and it is a social thing, unlike any other. So there have been some to kind of pop up, the new -- I was [ put here ] on stage, I don't mind saying it. Apple's experience is really good. The user experience on the Apple Card is really good. But Venmo is different in that it is an engaged user, but it's also -- there's a social thing with it. And there's a social community with Venmo that's even different than social networks because these are people who are really close to you because you're passing money back and forth. You're not just saying like, "Isn't my dog cute?" It's like, "Hey, here's some money or give me my money," right? This is -- these are close-knit circles and communities. But I think the user experience is the new next value prop that has to come into play in credit cards. And Venmo, it's a digital -- it's just a digital phenomenon, and so it is definitely in the sweet spot of where you'd want to go if you were putting a card program out.

And I guess when we think about the average Venmo user, do they already have a credit card elsewhere? Or do they take credit?

They do. So they're -- you're going to be -- the average user, give or take, is about 30 and well educated who's using Venmo. So -- and I'm probably out of date now. The -- it was like 45 million when we started this arrangement with Synchrony. We were talking about 45 million customers. I know the number has to be 52 million? 52 million. So you've got 52 million people. There are -- 52 million people, by definition, are not all college students, right? These are older people who have graduated and moved on into life. They might not be sitting on 4 or 5 credit cards, but credit cards are part of their life.

And we kind of talked about this coming up but like value proposition outside of the user experience. It seems like consumers still -- if they have a card, they're going to want some kind of value prop. So can you maybe talk about that as well?

Yes. So -- and so their cards are a plural thing for most of us. And so back to my earlier experience back at Bank of America and MBNA with all the different groups, who thought there was like, "I don't care if a person has 5 or 6 cards in their wallet as long as they're all ours," was kind of what it's like for a long time in my career. People might not have 5 or 6 cards, but they still have 2 or 3 or 4 cards. And so the idea of adding 1 that's better or different is not a stretch at all, and so this idea of somebody going from 1 card to 2 cards or 2 cards to 3 cards. You use different cards, so we compartmentalize our cards for various reasons. This might be my reward card. This might be my big balance card. And what we think, again, why you would want this, even if you already have 2 or 3 cards in your pocket, is this is going to be your experience card. And we, of course, will play on all of those, price line, reward tenets that are necessary parts of the core value proposition. But our job is just going to be to make it better for you in terms of putting you in more control with the card that's kind of attached to your hand as that phone is in your hand all the time. We're not going to get into specifics on it yet, but we're no doubt going to recognize the community nature of Venmo with some unique value propositions there.

And I guess when we think about the PayPal card, like are there intention to sort of evolve that as well as a result of this?

For sure. So the PayPal cards today, we have -- the card we have today is a 2% card, 2% cash-back. We've got another one that has a different reward scheme on it, like kind of the 1, 2, 3 points based on where you shop. And -- but the card -- the PayPal card is going to sort of leapfrog after the Venmo card. So with the Venmo card, we're using -- we're going to be using Synchrony's best set of technical services. It's going to be more of an API-based product versus file transfers and the like. And so we're today -- today, if you're in the app, if you're in the PayPal app and you want to go make a payment on your PayPal credit card, we're actually sending you off to Synchrony for another session and then you're coming back to PayPal at the end. The Venmo experience is all going to be housed and contained inside of -- live in the Venmo app with calls back and forth. So on the PayPal credit card, again, I'm just -- I'm relatively self-aware on these things and transparent about them. You know that you've left PayPal when you leave PayPal to go pay your credit card bill and come back. Now on your PayPal Credit product, the digital product, it's not as obvious. It still happens, but it's not as obvious. The schema looks a lot more similar. But Venmo card, that's going to be a big step forward. And we will, of course, once Venmo is done, we'll look to bring the best capabilities back home to the existing product as well.

Great. I guess this asset-light journey, could you just talk about sort of the next steps in this evolution? Because I know Synchrony's been a big partner. You mentioned all these other different products. I know John has spoken to -- be starting to work on other transactions, so if you can speak to it.

So again, we're sitting at, round numbers, about $4 billion on the balance sheet right now of credit assets. And again, we sold $7 billion to Synchrony. So -- and just to put it in perspective, and as I mentioned, the company is a couple of years larger with a 2-digit growth rate, right? So it's relatively smaller to the enterprise at this point. That said, we do like the model. We don't feel a pressure to rush off to it because, again, the base is -- asset base pool is smaller, the company is much bigger. So there's no forcing function that says we need to go do this. We do like the model, and we will do it. We will progress on opportunities as we found with Synchrony that really -- you get that opportunity for a great partnership, and we're not going to rush in. So for example, with a macro headwind, I would suggest now is not the time to go out and try to shop a deal because like you're going to be on the wrong side of the negotiation if you're staring into a potential macro event. And so -- but it's not that scary, again, because it's a smaller, smaller base. But I wish I had a whiteboard because I like the way I draw this with the team. Here's kind of the metaphor you'll visualize, I guess, is the -- is I think of our asset-light program kind of like the sunflower with a couple of leaves on it so far, and each of those petals are a part of the portfolio that has been externalized. So we have the credit card with Synchrony. We have the PayPal Credit product as a leaf with Synchrony. We have a couple of partnerships in our merchant lending where we're providing some front-end capability, but the program's all back end. And we have one of those in Mexico, one in Brazil, where we have partners who actually issue, do the loan issuance, and we provide marketing and data support. And then we have -- like in the center of the sunflower, we have those things that are on balance sheet, the business financing around the world, the U.K. consumer. And then the root system sends up things that we're working on that I won't talk about yet that -- the sort of the innovation in the sweet spot. So you bring them up into the flower. You let them nurture to a place where you feel like you can externalize them with the maximum optimal terms. And once you feel like something big is coming up, that I need to push something out because the base is getting too big or something in the middle that have grown like the U.K. business. As I mentioned, we've really only been throttling it for the last couple of years. Once we get all the metrics where we want them, where we feel like it's as attractive as the PPC program was to Synchrony, that's a reasonable next place to go.

And when you think about the U.K. market because some of our companies, the card issuers have been in that market, having grown a whole lot in the market. It's been -- there's a huge regulatory push there as well. I mean you guys feel like it's very profitable to be in that market and growing it.

The U.K., so the yields tend to be lower in the U.K. on credit products. But in our program, at least, so do the losses because auto debit is kind of a basic feature that comes with. So as people are getting the U.K. credit product, they're generally enrolling in an auto debit, so structured payments are happening. They're prescheduling their payments as they're opening accounts, which kind of takes a good bit of the risk out. You're not waiting for a push from the consumer. It's a preestablished pull transaction.

And have you guys ever thought of like other types of models than offloading the loans like straight sale or pulling gain on sale type stuff?

So we have -- we did that once in the U.S. consumer business, where we sold about $1 billion of assets before doing the Synchrony transaction in just a straight asset sale, and we kept doing all the servicing. Swift Financial, who we bought in 2018, is part of our business lending portfolio. That was their model. We've decided since we took it to take it all on balance sheet, but we have people who are experts in executing those kind of transactions so wouldn't be shocking if we do one here or there along the way. But again, we feel no time pressure on that.

I guess I want to squeeze in a question on CECL, even though it's not as significant of an impact. But I'm just curious sort of what your thoughts are on CECL and sort of how it's impacted you guys and how you're thinking about it as you're planning future for growth?

How honest should I be? CECL, yes. And I think kind of if you listen to the earnings calls, from anybody, like all the big banks and so forth, they were kind of all over the board. They're all over the board on CECL. And like everybody has a different perspective because it's mysterious, like until you're actually in it and running it -- running with it. Look, starts with -- I'll say the punchline first, and I want to come back on it a little bit. But punchline for us, again, is it's not a big deal where we are concerned. Because like -- CECL is like a -- it's less than 1 point, maybe starts with 1 point of earning pressure this year, and then it diminishes in out-years. So it's not a big, massive thing. I'm going to speak about it now for -- more from an industry perspective, just that, I think, especially if you look into this stage of the cycle with downturn potential and the sort of a macro amplifier that gets worked on to your -- not only -- it's a double whammy for issuers because not only are they having to reserve for lifetime of losses, but now there's a macro amplifier that goes on it. And what I'm afraid of and what we'll see as it kind of plays out, and I'm afraid about this as an economy, not about PayPal, is that you get tightening in small business. You get tightening in low/moderate income in a sort of -- has a self-fulfilling prophecy nature to it, anyway.

Well, it's interesting because American Express is here before. And he mentioned, one of the by-products of coronavirus and sort of all the stuff that we're talking about could be that you have to think about your CECL as you go around.

Correct. Yes. And again, I'd come back to where PayPal is concerned, given that -- how the composition of the book is an asset-light now and it's $4 billion on book, it's not a -- doesn't -- it's not -- that CECL isn't going to be what drives our strategy. Like we're back into this for -- we're in this for fueling commerce, again, between our buyers and sellers, and so much of the value to our company is in the synergies and not the direct credit economics in any event.

I want to take audience questions right after this one, but when we -- not specific to the coronavirus because I know it's a pretty fluid situation, and it's still evolving. But when we think about the state of the consumer and the state of businesses within your portfolio, do you guys feel like things are pretty strong and robust?

We do, and -- we do. Things are stable. You have to be, you should be a natural skeptic to be in this business in the first place. Like if you're not kind of -- I want some nervous people around me and -- as a trait. And so we're very, very watchful. We have our -- the recession playbook is ready to go. Hands are on levers and -- but we're not at a place where we're pulling levers, very watchful. But it's weird, there's this tight rope going on at this very minute around -- on the one hand, you have the consumer stronger than she and he has ever been. You have the strongest consumer we've ever known, so high level of savings, low level of unemployment, actually pretty good wage growth -- best wage growth, by the way, in the lower quartile of the wealth bands. So the people who need it most have actually prospered the most, at least the data set I've seen. And so you've got high payment rates. And so on the one -- you've got record high payment rates kind of going on. You've got a really strong consumer. And then on the other hand, you've got this pandemic risk that like has just -- we've all felt and seen what it's doing. So it is an interesting tight rope to be on right now. It's weird. It's really weird to see how strong the consumer is and how volatile everything still is.

Great. So let me open it up...

I do want to -- just one thing on that, though, is like what I would not want to be right now is a monoline fintech who only does credit. It is -- it feels very, very good to be part of a big holding company where credit is a small part of it right now.

That's fair. A question right there, and there's one in the back after.

For the point-of-sale, short-term installment, which there's obviously a lot of, and it's been real popular and growing. How much room does that have to run? And is it -- are we in the first inning or the third or the fifth? And depending on the answer, what are the implications of that?

Yes. I think it's not only the first inning but the top of the first inning, and I think it has a long way to run and -- certainly, in the U.S., has a long way to run. And the only market you'd really call out where it's run really far is Australia. It's run really far in Australia. But the rest of the world, it's got -- it has legs, but I would also say it's not yet been tested. It's not really been regulator tested, I think, because the phenomenon is so young. And you can pick up a paper in the U.K., and you start to read things about like is this -- are we creating for younger people, in particular, debt challenges? And when are we hitting bureaus? When are we not hitting bureaus? I mean I don't want to be in a position where we're having a product that hit somebody's bureau every time they buy something for $70 as a separate trade line, right? And so -- but I do think the consumers demand -- the demand is high. Therefore, we and the industry will find a way to the other side, but I think it's very early outside of Australia.

Got it. And just a follow-up to that. So obviously, Klarna has like 7 million users in the U.S. Afterpay has 4 million users in the U.S. They're sort of growing really fast, sort of on track to build sort of a two-sided network. When you sort of talk to the merchants, great value prop, but it's very competitive, right? Like merchants are getting sub-MDR deals, 7-figure subsidy checks. So just like, obviously, you guys are very well positioned. But sort of what's the appetite to sort of compete in such a competitive market? Do you think it's worth it to sort of go hard after this market, so maybe there's rewards later on? Or is it just too competitive and something you guys don't want to be part of?

So I think our -- and we found already just -- and we just started testing in with our new -- the new banners and easy-to-integrate banners in the fourth quarter. Merchants like the idea of a single source and trusted entity and trusted partners. So our initial tests, we're really satisfied with. And look, just like I said, if you go into a down cycle, if you actually go into recession mode, I don't want to be a monoline credit issuer, and I certainly don't want to be a monoline credit issuer who's already not making money going into it. But it is competitive, and we're going to -- look, we -- I do feel, I started with it that one of the growth opportunities for us is -- and it's not about having to buy our way into merchant sites. It's simply making an integration that's easier that works with all of our flows. So as PayPal has been -- become more complex, and I acknowledged it already, look, we probably got ourselves too comfortable with easy growth in the wallet and let some of these competitors come to be anyway. But just the simple getting the integrations right in all of our flows will go a long way. And the reach that we have with -- especially small businesses, where you don't -- selling them one at a time is hard. And so we -- I think I see the competitors you named, they talk about some thousands of numbers of clients or something. We've got like 1.5 million just in fashion. So...

Any other questions in the room? There's one right here.

Talked about it a few ways, but at the end of the day, when we're thinking about the PayPal user experience in 5 years. Is the bottom line that we would expect PayPal to see the main benefit for the consumer moving away from the convenience of the button to essentially being more about where you're going with the Venmo, Synchrony user interface experience and credit? Or how would you balance interface against credit as where the consumer will see their main value with PayPal in 5 years?

Yes. So I wouldn't necessarily think of them as either/ors, but I would think of the credit capability being more closely and tightly embedded with more choices in all of the buttons, so be that the core PayPal button with new -- those deferred kind of installment, closed-end sort of products. I think with Venmo -- the Venmo card and -- Venmo card actually isn't -- it's not the first way, and the Venmo credit card that we're working on is the first credit product we're working on. But the Venmo, there's already -- the debit card is out there now as a way -- another way to exit funds as funds are circulating through. So I think we'll expand the product set everywhere we offer -- or everywhere we're operating and relative to the brand integrations. Of course, we want as many synergies as we can, but people love Venmo as a thing. And I guess I learned that, I don't know how many years ago now, it was well before separation of PayPal and eBay. And I was down -- I was the corporate speaker at a recruiting session at a university down south, and I was amazed. At the end, everybody in the room; and they were all kids -- I say kids -- graduate students like in their late 20s; every single question I got that night was about Venmo, and it was a -- like it blew my mind standing on stage, just like I saw the world differently. I felt like, "My gosh, everybody under 30 thinks our company is Venmo."

And I guess you've obviously been at PayPal for 10 years, and you've seen quite a big -- bit of an evolution. And to his question, just if you pull up and you think about the evolution that's occurred and where we're headed, how different will PayPal look 5 years from now than it does today or 10 years from now?

Fool's errand for me, too. Yes. I mean I'm just -- I've been surprised so many times, and it's just -- it really has been amazing. I remember being at the bank back when PayPal got its launch. And looking at it and thinking, "What is this thing? Oh, my gosh. This is silly. This is never going to turn into something." And I love being wrong on things like that, yes. Maybe the same thought crossed my mind the first time I saw Venmo, but like it's just amazing. Every time I hear about it and learn more about it, the -- just the love and affinity of how fast this thing grows, it's mind-blowing. And here's the beautiful thing. I did live out in Silicon Valley for the first few years when I joined the company. And somebody was saying -- I don't know. I wish I knew who to give credit to, but it's like, "The future is already here. It's just unevenly distributed." And so I have no idea like 5 or 10 years from now, but what I do know is wider distribution. And as we look -- you look at the company's activities and the acquisitions that have come around China and actions we have going on in India. You look at wrapping the globe more, for sure. You look at that part of everyday usage instead of every-week usage as a goal.

It seems like credit is actually a big customer acquisition tool in these emerging markets where it's pretty nascent.

Yes. And credit comes in all sorts of flavors. It's not always these big credit lines. Again, when in -- we've got -- it's about $4 billion of spend on this deferral product. Like this pad thing, a 14-day deferral, nobody knows. Like it's a silent thing that exists in the wallet, yes.

All right. Well, great. We're out of time. Thank you so much. Appreciate it.

All right. Pleasure.