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

Good morning, everyone. I hope everyone is safe and healthy. Thank you for joining us today for our 36th Annual Strategic Decisions Conference. I'm Harshita Rawat, the senior analyst covering payments at Bernstein. I'm delighted to be joined today by Dan Schulman, the CEO of PayPal. Two quick housekeeping items before we begin. Investors are able to submit questions through the pigeonhole link available on the left-hand side of your computer screen. Also, please complete the Procensus poll at the end of the fireside chat, and you will have immediate access to the results. The link to the Procensus poll is also available on the left-hand side of your screen. And with that, let's begin.

Dan, thank you for joining us today.

Thank you, Harshita. It's such a pleasure to be with you.

And Dan, you shared a lot of great color on the earnings call around e-commerce trends you're seeing in your core markets. Things are rapidly changing, of course, almost like every week. Any updates and incremental thoughts you have with the e-commerce growth trends?

Yes. I think I can give you a little bit of an update. And again, thank you for your reports that you put out all the time. They're really insightful, I think, not just for the folks who follow you but for us as well as we read through them very carefully. So in terms of your question, I think the pandemic was 3 things or is 3 things. It started off as a health crisis. It's still that, but then it moved rapidly to an economic crisis. And we'll talk, I'm sure, more about that. And both of those have morphed in kind of into a psychological crisis as well. People are redefining how they think about things they used to do every day or thinking about what the new normal is going to look like, and there's clearly been this immense shift from physical to digital. And we track this really, really carefully country-by-country, state-by-state here in the United States to take a look at like what do the trends look like when countries start to open and ease some restrictions and states start to open and ease some of their restrictions. And there is no discernible difference between those countries that have opened and those states that have opened and those who haven't. We see very strong trend lines around e-commerce, and I think a lot of that is around that psychological piece of this. There may be no longer strict shelter-in-place requirements. But people are worried about their health. And people have also seen just how easy it is to do things through e-commerce, to do things through digital payments, to order ahead and either pick up at a store or have it delivered straight to your house. And this isn't just about the checkout button, which, obviously, we've seen quite a bit of demand for, but this is across many of our products and services, whether it be Xoom in international remittances, whether it be Honey in terms of just kind of what is the best way to shop, what is the best way to get the best price point out there because people are very sensitive to pricing in this economic environment. Venmo is exploding with all sorts of usage cases. I'm sure we'll talk about that later. And then, of course, PayPal as well. And so I think you've seen an acceleration maybe by 3 to 5 years of secular trends around digital payments and e-commerce that has happened in a very condensed period. And I believe personally, although it's still early, that we're going to see these elevated trends continue into the future.

And I guess, Dan, on the sustainability point, can you give a little bit more color in terms of what gives you confidence that some of these trends could be sustainable? What changes are you seeing on the consumer side, on the merchant side, specifically?

Yes. So we do a couple of things. One, as I mentioned, we track everything very closely. I mean every single day, I look at every single metric literally country by country, state by state to see, is there any discernible difference between when a state has opened or when a country is open. And I look at Germany and Austria and there like Georgia and other states, and you pretty much see an elevated line of e-commerce that there's really no perceptible difference between where they were and where they are now. And then what I look at is a lot of market research and a lot of market research we do directly with consumers and with merchants. We have 25 million merchants on our platform. We have 300 million consumers on our platform. We have a pretty good sense of what people are doing and what people are thinking. We talk to them all of the time. And there's a fundamental shift. Like when we talk to merchants right now, a year ago, it used to be like how do we start to think about digital and how do we start to think about omni because obviously, they're quite important as we look forward. Today, when we talk to merchants, whether they be large or small, across the world, they're starting with digital first. Like how do we become a digital-first retailer and rethink the way our physical locations, what they're really meant for? Are they really distribution points and delivery points? How do we think about checkout in a store? And I think we're moving from kind of the old adage location, location, location trumps everything to really we're now in a full omni digital world in which location is much less important except almost as a delivery mechanism and a pickup. Not that there won't be retail sales or obviously be retail sales, but people are quite cautious about it, and I think they're beginning to understand like why go back to what was when it's so easy to do what we've been doing over the course of the last 3 months or so. And that's what our surveys are showing, and that's what our data is showing as well. Again, to your point, it's early, so I don't want to extrapolate out years and years yet. But it's encouraging what we're seeing so far.

Definitely. That's -- thanks for the couple of comments, Dan. And I guess one of the most encouraging things from your first quarter earnings was a sizable uptick in net new user growth for PayPal in recent weeks and months. And can you share some more details on that? Where are these new users coming from in terms of geography, demographics? And are they similar or sticky or different versus your existing users?

Yes. That definitely was one of the highlights of April and really at the end of March and continuing to see good, strong growth in our net new actives. We put on something like 7.4 million net new actives in April. It's a pretty amazing number. I was looking at some of my to-do notes from a number of years ago. And on one of them, it was like assure that we get to 4 million net new actives for the quarter, like what does that take, what things do we need to go do. And it wasn't that long ago that our guidance for net new actives was 3 million to 5 million a quarter. We did 7.4 million in April. We're going to do between 15 million and 20 million for sure in Q2. And so we're seeing that widespread across all countries. In fact, this has been one of the most interesting things. When I look at our data every single day, we're seeing great growth in not just net new actives but usage pretty much across every major country, every major region of the world. There are very few outliers of that and very strong. But what's most encouraging to make, because I think we're going to continue to see good, strong net new actives, is what's happening on the usage side. What's happening with engagement? And there, it's not just the new cohorts that are coming in across our entire base, which is a pretty big base right now. Our daily active usage is soaring from where it was pre-COVID. That's across our entire base. And then the new cohorts coming in are well more active than previous cohorts. As I mentioned on the earnings call, we look at adoption rate. We have a strict definition of what real adoption is when somebody signs up. And that's do they use PayPal or Venmo 3 or more times in the first 10 days? Because if they do that, they're pretty much a customer for life, and high LTV is a very good customer for us. That's up by at least 30% versus other cohorts. And so people are not just signing up, but they're using it. And they're using it not just for checkout, but they're using it in other use cases: to pay family members, to pay for their online classes, to tip musicians, to give to their places of worship. These digital platforms now, especially with when you have scale like we do, are essential in this digital economy. And it's encouraging to see these other use forms happen as well.

And then, Dan, speaking of use forms, could let's zoom in sort of the strategic growth opportunity for PayPal coming out of this crisis. And off-line, obviously, features quite prominently in that [ with the rest ]. So as I went and reread your earnings call transcript, it did appear to me that off-line has taken even bigger strategic importance for PayPal in the wake of this crisis. Now historically, off-line has been harder to address by PayPal. So can you talk about why was off-line challenging historically and why this paradigm could be different? And also, how does the off-line strategy manifest itself for PayPal?

Okay. Well, that's a classic 20-part question. Let me just try to break it down a little bit. I think the world has been moving more and more towards omni. Retail has been moving more and more towards full omni. And omni basically means this sort of blurring between online and off-line. If I buy something online and then I go into the store and pick it up, was that an off-line or an online transaction? It was both. It's this full blurring. And the pandemic has accelerated that trend dramatically. And so this blurring of online and off-line is naturally leading towards a single digital wallet to do both online and off-line. And we come from the online space where we have a significant leadership position and we're moving into the in-store space. And I would say really depends on the historical time frame. You look at PayPal in-store. We had some very difficult initial efforts when we were working with Home Depot and Office Depot way back when and putting a bespoke customized software into point-of-sale systems, forcing consumers to change their behavior. The only segmentation I could really understand from that is any retailer that had depot in its name, we went after. So -- and that did not work for us. And by the way, it was high beta, high cost, very customized software. That was not a repeatable solution for us. And off-line, I've said this frequently, it needed a catalyst to catch on because the truth of the matter is you could do things off-line very simply with your credit card, inserting it into a form factor, signing for it, touching a screen. There needed to be more than a form factor change. There needed to be a value proposition change to accelerate off-line. And we would never have really thought about it, but the value proposition change right now is health. I mean people do not want to touch money. They do not want to touch pads. They do not want to pick up pens and sign for credit cards. This needs to be contactless for sure. People are putting up plexiglass in front of cashiers. Cashiers need to be protected in terms of health. Consumers coming in need to be protected. And we are now having a surge of merchants and consumers coming to us asking for contactless payments because people are using us on the online. And when they come in store, they want to pay with that same digital wallet. The great thing about -- and so there's tremendous demand. There's really -- I would say before, we were pushing solutions. Now solutions are being pulled from us. And I think there's also a tremendous amount of value-add you can do with contactless. Like, if you pay with your phone, we can now start to use rewards points inside your phones. You can start to use those at point of sale. You can start to split between rewards and fiat currency. We can look for best pricing for you, coupons that could be available, et cetera, right there from your phone, combining kind of Honey and some of our partnerships that we have with banks around their rewards points, that kind of thing. But health is the number one concern right now. And QR codes is a simple, easy way for us to get substantial scale in a relatively rapid fashion. And if you segment the market, very gross, like, international and U.S., international is all QR codes. That is kind of the way that people pay in-store and contactless. In the U.S., it's a combination of NFC and QR codes. I'd say some merchants that are larger have done NFC capabilities. But really, midsized and smaller are all -- like how do we do this in a simple way. And so we rolled out QR codes to casual and small businesses, around 28 countries last week, seeing tremendous surge in that right away. And that is a very simple, easy thing. In your app, you can basically scan a QR code that a merchant has printed out. They don't have to do any POS integration. You put in the amount of the sale, and you send it right to the merchant. It's like a P2M transaction. We're also rapidly moving into what we would call integrated solutions into point of sale where a cashier can pick up something and scan a QR code on your PayPal or Venmo app to do the transaction. You don't even have to do -- input anything on that. It will automatically open up the app with location-based capabilities. And so that will start rolling out quite rapidly. And then we have the capability, obviously, of using contactless cards, we have a ton of that inside our base, and also moving into NFC eventually. The only place we can't do that right now is on Apple iPhones, who own the access to the NFC antenna and have not opened that up. But we've got a good, solid relationship with Apple. It's growing in the amount of things we do together, and we're looking forward to working more and more closely with Apple on not just digital wallet capabilities but full omni digital wallet capabilities.

No, that's very helpful, Dan. And I -- just zooming in on the QR code point for a second. So would it be a scenario where for small merchants, obviously, QR code is very, very easy to deploy, as we talked about, but then for the larger merchants, NFC and QR codes are likely to coexist. So it's essentially going after some incremental demand even for the larger merchants.

Absolutely. And think about it. For merchants, they want a solution that can access any device, any operating system and a customer base at scale. In the U.S., we have something like, I'll call it, 175 million active users. That's a gigantic base. It's over half the population of the U.S., and it's PayPal or Venmo. And so the ability to immediately tap into that scale from a contactless payment point of view, from a full omni point of view where people are clearly using PayPal more and more on the online space and that online space is merging with the off-line space, it's a way that retailers can rapidly move to contactless. And they have to do that. In order to open up, they need to move to contactless right now that consumers are demanding it and the retailers themselves are demanding it for their own -- safety and health of their employees.

Makes sense. And Dan, just -- let's talk about financial inclusion. I know this is an area that you have focused on over the last several years, and this is important for PayPal. Do you think this crisis accelerates the digital inclusion of the unbanked and underbanked? And what role can PayPal play right here?

Yes. It's been a topic that's been near and dear to my heart for a long time. We talk about the economic crisis that's been a result of the pandemic. But the real truth of the matter is there was a crisis before there was a crisis for so many vulnerable populations across the world. It's not just that there are billions of people across the world that live outside the traditional financial system, but just let's go to the U.S. The U.S. has 70 million underserved adults. That's almost 1/3 of the adult population. You've got something like 185 million U.S. adults before the crisis, like these numbers are way up right now, who struggle to make ends meet at the end of the month. That was a crisis. What's really happened right now is because you've got unemployment levels at 15% to 20%, the water level has come down, and you really see now the extent of the vulnerability that so many people already had. You can't ignore it anymore. And I think that one of the foundations that is so important to our economy, to our democracy, frankly, is financial health, not financial inclusion. Financial inclusion is typically defined as access to a bank account. My view of financial inclusion is how do we allow all citizens to be able to manage and move their money in the same simple, easy, fast, inexpensive way that affluent populations are able to do today. And I think the foundation of that is through mobile phones and it's through technology. Pretty much over the next 5 years, you're going to have something like 6 billion smartphones in the world. The price of a smartphone in India now is less than $25. You've got all the power of a bank branch in the palm of your hands with that mobile phone. So you've got distribution out there already. You now have these scaled digital payments platforms that can connect to those mobile phones and allow people, instead of standing in line, which they can't do right now anyway, they don't want to stand in line at a check cashing location and do any of those kinds of things but also costs so much time and energy to manage and move your money, you can do that instantaneously. It's one of the reasons why like Xoom is booming right now. It's because you can, without standing in line, send an international remittance to somebody you love back home. And you can do it -- when you do that, not only is it save time both on the sending and the receiving, it's almost instantaneous in terms of its transmission. But the cost is about 1/3 of the traditional methodologies. I mean imagine how much people are saving as a result of that. And I think like if you do go to cash checking locations, they charge 2% to 5%. Like we're doing cash checking basically for free when people do cash checking into our platform. You can put basically checks or cash straight into the PayPal platform. If you want to pay your bills, we'll start to do bill pay. We'll do that in a very inexpensive way. So I think technology brings people in. Interesting, lower income levels are more penetrated in smartphones than upper income levels because it's the only device that they have. So they have to choose a device. They can't afford a laptop or a desktop and a mobile phone. So they all are picking mobile phones. And so you have higher penetration in those lower-income populations. And I think this is a huge opportunity for not just PayPal but the financial system in general to be able to drive savings, less expensive ways of managing and moving money for these populations and allowing them to save in innovative ways, which I think can be extraordinarily powerful for our economy and economies around the world. That's why we're working with governments right now through things like Paycheck Protection Program and direct electronic access to stimulus money for consumers. So they don't have to be mailed checks. It's ridiculous in this day and age. And so we're proud to work with governments around the world. That's happening. We're proud to be able to help these vulnerable populations. And I think this, hopefully, will slingshot the ability to go after these more underserved populations than ever before.

That makes sense. And Dan, just continuing on this theme of opportunities for PayPal, international expansion is clearly a big opportunity for you. Over the last 1 or 2 years, you've had a number of strategic partnerships and investments abroad. Can you talk about your international strategy more holistically? What's the international expansion opportunity for PayPal essentially?

Yes. Well, one of the encouraging things and discouraging at the same time, you see, we really only have our full suite of products and services in probably 10 countries or so. So our opportunity is quite extensive to just expand our suite of services and -- into more and more countries. I'll talk about some of those in particular in a second. A lot of what prevented us from doing that before was our technological infrastructure. We've spent hundreds of millions of dollars updating that over the last several years. We're -- I wouldn't say we're complete, but I would say we now feel like we have an architecture that is modern. We do -- when I first came in, we were doing like 40 to 100 releases a year. We now do 30,000-plus releases a year. And so you can see the radical difference in terms of our velocity. And now when we do and introduce a feature, we don't introduce it in the U.S. first and then to other countries later. As you can see with QR codes, we released it to 28 countries simultaneously. That's basically what our architecture allows right now. And so our ability to expand internationally is -- has been enhanced substantially. It's come with a lot of investment behind it, but that investment will be well worth it. We have a goal inside the company. I've talked about this externally, so I can talk about it here. I don't want anybody modeling it or doing anything. But, like, what we want eventually is to have 1 billion people on our platform, and we want those people to be using it every single day. That's what we are trying to accomplish as a company. And if you are going to get there over the medium to long term, international is the road to get to that kind of user base. And that goes through South America, it goes through India, it goes through Southeast Asia, and it goes through China. And you've seen us start to make partnerships and moves: MercadoLibre in South America, taking a 70% controlling interest in GoPay in China, launching in India, working with companies like Uber and others with digital wallets across the world, really there in India and Brazil. And so I think we have a large opportunity. And what's very encouraging is when I see our net new actives coming in right now and merchants reaching out, it's across the world. I mean that is -- clearly now our scale and scope is generating kind of what I would call network returns for us, and we need to leverage that and move aggressively on that.

And just kind of staying on the theme of opportunities for PayPal, Dan, you're clearly in an enviable position right now with a very strong balance sheet and cash generation. And it's possible that this crisis presents an incremental opportunity for dealmaking. So has your capital allocation/M&A strategy changed in the wake of this crisis?

Well, I would say no and yes is probably the best way. I started with no in that we've always looked at large and small opportunities, some more transformational, some more tuck in. We look at 250, 300 different deals a quarter. I mean we've got a great investment venture/M&A team. We invest in companies across the world. We're on boards of many emerging fintechs across the world. So we have a real view into what's happening and a front seat in that. But obviously, our relative positioning and strength has increased for sure. Our balance sheet is rock solid, and we're generating a ton of cash every quarter. We generated $1.3 billion last quarter of free cash flow. And so in general, our capital allocation remains, as we talked about, in terms of our medium-term guidance. There's really no change in that. But we have more relative strength. We have more relative opportunity. And so we're looking very carefully at the chessboard maybe with more heightened sense around what possibilities are that before did not make financial sense and might now make financial sense. We're very strict in our look at what makes sense to go and do. We have investors who count on us for that. We take that really seriously. But our investor base also wants to be sure that we take advantage of the moment that we are a growth company and that we maintain our market leadership in digital payments, which is my responsibility, and I intend that we go and do that. But we'll be very disciplined in the way we look at it. But clearly, we have more relative strength than we've ever had before.

And are there any specific areas, Dan, that you -- that probably are more relevant now versus before in terms of investments/M&A?

Yes. I mean we've always talked about -- like we would look at geographies where maybe an acquisition might tremendously accelerate us versus trying to do that organically. Less beta in the outcome and much more rapid penetration into those markets. If we're going to be an everyday use case in Venmo and PayPal, which we obviously look for, so tuck-in capabilities might be useful for us. Again, the issue that we have right now is we're much more nimble and agile and successful in deploying through our own software right now. It used to be we really had to acquire to get new capabilities. Our product and engineering teams, our infrastructure is so much more flexible and so much more productive than they've ever been. And we also have a tremendous amount of partnerships. So we can, like, take capabilities and ingest them from partners as well like rewards. People are always like, are you going to put in your own rewards for them? Well, we're ingesting the rewards programs from our financial institution partners right now and allowing PayPal customers to be able to use that; instead of that 1 or 2 locations or through a catalog to be able to use it at 25 million merchants. And so a tremendous more value to our PayPal base and tremendous more value to our financial institution, to their customers, because these are our mutual customers together. And so I think when we look at organic kind of development partnership, and then we look at acquisition after that.

And so Dan, we talked about a number of strategic growth opportunities for PayPal. And we also talked about e-commerce trends, which look much better versus a year ago. So as I look forward, you have a number of these opportunities. Some of your historical headwinds around take rates and transaction expenses have moderated. You've demonstrated operating leverage. You can see where I'm going with this.

Right. Right.

So -- but then on the other hand, your eBay transition, not large numbers. So how should investors think about the earnings growth algorithm for PayPal and how that may be different versus history?

Yes. Well, we've always had eBay in our plans, and they're 7% to 8% of our volumes right now. I think that's going to be a very manageable transition. It's certainly very different than we and others might have looked at it 5 years ago. Our MS volumes, MS is our volumes off of eBay, have -- yes, have exploded. And eBay is an important strategic partner to us and will be for a long time, but they're one of a number of important strategic partners to us. I think -- so that's in the calculus and everybody's calculus of PayPal and our operating model. I do think we are seeing things now, with the scale that we're at, that leverage and economies of scale are really playing out in the cost structure of PayPal. I look at our loss rates or fraud. Even in this time where other players are seeing increased fraud and loss, ours are at all-time lows right now. And we've got very sophisticated models but fed by tons of data right now. That's being really helpful. Our -- John Rainey and his team and the operations are doing an amazing job of leveraging technology, and our costs are coming down. Sri and his team on the tech side, our cost per transactions are coming down. We have aggressive goals on all of that. And so I think inherently, our operating leverage was going up. But I think actually, and this is a point you made in one of your -- in your -- one of your notes, and I think this is right, the calculus of the PayPal operating model, I think, is at this inflection point right now because of this inflection point and this discontinuous move towards not just e-commerce, which are some of our, obviously, higher-margin products and services, and to your point, take rate is ameliorating, it predominantly was always a mix issue, right? But as Venmo is monetizing, our same-stores kind of take rate sales, if you will, have always been consistent. And so we have the opportunity to really kind of rethink what our model is, what our long-term margin structures might look like. And we're in the middle of taking a real hard look at all of that and how much do we want to invest back into the business to seize the opportunities that we have. But we're in the fortunate place right now where this doesn't happen frequently where there are a lot of tailwinds that we need to take advantage of because they're sort of a once-in-a-decade opportunity for us, as you pointed out. But we also have the wherewithal to invest in those to take advantage of them and return, I think, great returns for shareholders at the same time. And so that's a rare moment in time for a management team and for a company to be at. But I think that's the place where we are right now. And we'll come out, obviously, over the next quarter or 2 with kind of our thinking about what the future for PayPal looks like, but there are clearly a number of tailwinds right now that the recent events and the crisis have brought forth. And I sure hope this crisis ends as soon as possible, but I don't think that the trends associated with the crisis, and I think that we have now seen a discontinuous moment, and it will only accelerate from there.

That's very helpful. And let's talk about Honey. It's been a few months since you closed the acquisition. How has the value proposition of Honey changed or evolved in this kind of environment? And one of the questions I often get from investors is how does an integrated PayPal plus Honey experience look like when it comes out?

Yes. It's a good question. Really good question. Well, look, I think Honey is one of the most exciting acquisitions that we've ever made. And by the way, I don't mean to -- just any of the other acquisitions that we do, excited about all of them, and I love all of our acquisitions. But Honey has the ability to be transformational for us. First of all, just -- we were fortunate in some ways. The value prop of Honey right now is more apt for these times than ever before. We're in an economic crisis that is accelerated by this health crisis that we have. And Honey is all about making money fair and saving people money, and it's kind of an online e-commerce play working with merchants and consumers, and there's been a surge in demand for it. I think net new actives in like the April-May time frame for Honey versus January-February are up something like 180%. It's just phenomenal. Like -- and engagement is up something like 35% to 40%, maybe 43% in those same sort of relative time frame. So obviously, a tremendous amount of interest in Honey. But that's with Honey's, like, current value proposition. The way that I think about Honey is, look, why do merchants want to work with PayPal? The predominant reason they want to work with PayPal is that we help them to increase their sales. And how do we do that today? It's predominantly because when you use the PayPal button on your site and it's presented the right way, it's upstream, et cetera, we have significant advantage in conversion rate on that button versus anybody else. And so when you have better conversion, less drop-off, more -- and scale like we do, so it's worth the time to integrate the PayPal button into your e-commerce platform and to your overall commerce platform because you just get more sales. Honey now enables the following. Basically, Honey is coming up with demand curves on an individual basis, which is I like kind of ratty sweaters and always have. And -- but -- and this -- I want to buy another one of these. I want it at this cost, this color, the SKU from wherever the retailer may be. And I can start to put my shopping list into that and a number of other things into Honey. It's integrated into the PayPal/Venmo apps. And then I basically say, when it hits that level, buy it for me. And buy it using either rewards points first or credit first or debit second, whatever it may be. And then eventually, merchants, even the long-tail merchants, will be able to do self-service tools to be able to look at anonymized forms of demand curves to say, if you take your price from X to Y, you will get x amount of demand guaranteed back to you. And so this is a way -- and by the way, instead of saying, I'm going to do $20 off and not know how many people are coming in, you could do $13 off and get exactly a demand curve that you want to get as a result of that. And so what we are really trying to pull together is a move further up in the shopping journey for PayPal consumers so that their life can be simpler and easier in terms of buying and shopping and paying for that. And for merchants, not only can we help them in conversion and other extensive tool sets in a platform that we're offering them, everything from invoicing to contextual tool sets to full-stack processing, but now we can help them drive, for sure, sales. And that's a very powerful combination of things that we're going to be able to do if we do the integration of Honey, PayPal and Venmo the right way. That will take some time to develop towards that vision. But clearly, I think it can be very transformational and very powerful for both consumers and for merchants and consequently for PayPal.

And Dan, let's zoom in a little bit more on Venmo. So you talked about how the use cases are evolving, how, obviously, you can integrate Honey within that. Now can you talk about how your current thinking has changed on the relative importance of different monetization drivers for Venmo in terms of Pay with Venmo, the debit card, instant deposits in this current environment? And how does the monetization for Venmo look like?

Yes. Another good question. Well, look, Venmo is just continuing to scale impressively. We have well over 50 million people on Venmo just in the U.S. Venmo net new actives are hitting all-time records. So is PayPal. So it's just -- they're all at very elevated levels right now. What's really interesting to me is Venmo always was a kind of a social payment type of thing. You go out with friends to bars, split bills, pay roommates, that kind of thing. It's still that, but it's morphed into just like a platform where people are doing everything from paying for their classes online, tipping virtual bartenders online, sending money, paying rent, doing everything over that platform. And we're seeing well more use cases of instant transfers of Pay with Venmo both online, and I think this QR code is going to really accelerate Pay with Venmo off-line. But as our scale is growing so much, you're seeing retailers wanting to put on a dedicated Pay with Venmo button because e-commerce is so much more important than Venmo. Venmo is a verb for a reason. I mean it is the way, what I used to say, a generation is managing and moving their money. But that has actually expanded. Like Venmo is becoming a platform now that parents are on, their kids are on, grandparents are on because these -- like in these times, people needed a common platform to be able to manage and move money because they couldn't leave their homes. They were signing up their grandparents. We saw an older demographic come on to PayPal and to Venmo because their kids were using it and explaining to them how to use it. So I'm really pleased with the monetization of Venmo. It continues to accelerate. We're going to add more and more capabilities into the Venmo wallet. And it's just part of the vernacular right now. And so anyway, it's good. I'm glad we have Venmo.

And Dan, we are running out of time, so my last question for you is one of the most frequently asked questions I get on PayPal, which is the flip side on the strategic opportunity, which is the competitive risk. So there, core buttons still drive a sizable portion of your revenue and profits. So how do you see the competitive environment evolving for PayPal over the next 2 to 3 years?

Yes. Well, first of all, I think if you think about the total addressable market for PayPal, clearly now, the off-line space has opened up. And I think clearly, many more components of the digital wallet have opened up. And so I think our TAM was always $100 trillion TAM. I mean it was huge. But the question always was is that realistic for you to play in parts of that TAM. I think now, much more of that TAM has opened up to us. And there's never going to be one player who owns that entire addressable market. I think there's room for a lot of players to be meaningful players in that market. But we are the market leader in digital payments outside of China. And what I say to my team these days is this is our time. This is an opportunity that comes infrequently, but you have all of these tailwinds coming in. Our products and services have never been more important and more relevant. We've never had more opportunity to actually invest behind that. And I'm probably more energized, focused. My team might say relentless and demanding, but it's energizing for everybody in terms of the opportunity in front of us. This is all we do. This isn't a sideshow to us. Digital payments isn't part of what we do, it is what we do. And I think if we can execute against the 3 to 5 things that are most important -- and we've had the fortune, that opportunity to have been investing hundreds of million of dollars into risk and compliance and our platform. Like these are foundational. Without it, you can't do the other things. Those are closing in on -- like I hold them up to almost anybody as maybe not world class because I never want to say that, but that's certainly what we're aspiring to in all those pieces of it. But now we can build on those, and we've got the wherewithal and the demand for it. So I think that's what we're focused on right now: how do we move into more parts of that addressable market and how do we become even more a daily part of our customers' lives.

Great. Dan, the investors and I have a lot more questions for you. But unfortunately, we are out of time. For those of you who are listening in, investors, please complete the Procensus poll, and you'll get access to the poll results immediately. Thank you very much, Dan, for joining us today. And thank you, everyone, for participating.

Thank you, Harshita.