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

Good morning, and welcome to PayPal's first virtual Investor Day. My name is Gabrielle Rabinovitch. I'm Vice President of Corporate Finance and Investor Relations at PayPal. We're thrilled you're joining us today here from PayPal San Jose, California campus. We'd hoped to meet you all face-to-face for this event, but given current circumstances, we reenvisioned the program with everyone's health and safety in mind. To start the day, Dan will take us through our vision for PayPal's role within this new digital paradigm. From there, I'll bring you a conversation with Peggy Alford and Jim Magats about how we're winning and deepening our relationships with merchants through an expanding value proposition. After that, we'll take a short break. Then I'll speak with Jonathan Auerbach and Darrell Esch for a deep dive on some of our strategies for reaching 1 billion daily consumers. And from there, John Rainey will take us through our medium-term financial outlook. Finally, following a second break, we'll close the day with a Q&A session with our equity analyst community. Please note that all sessions with the exception of our Q&A session were prerecorded late last week and early this week. Before we get started, a few housekeeping items. Today's presentations include forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. Our actual results may differ materially from these statements. You should not place undue reliance on any forward-looking statements, and we assume no obligation to update these statements. Please visit the Disclaimers tab in the event website or our Investor Relations website at investor.pypl.com for information regarding forward-looking statements. In discussing our company's performance, we'll refer to some non-GAAP measures. You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation materials, which will be available on our Investor Relations website after the event. With that, I'll turn it over to Dan Schulman, our President and CEO, to kick off the day. [Presentation]

Hi, everyone, and welcome to our 2021 Investor Day. So glad to be here with you. I wish we could all be in person. But obviously, that's not doable. And so I hope all of you are well and healthy. And this format, I think, is going to be quite engaging and informative. The last time we were together was almost 3 years ago in 2018. And at that point in time, we put a 3-year vision together for you, and we've put in place metrics associated with that. And here we are today, and I'm pleased to announce that all of those guidance that we gave 3 years ago, we have exceeded. Whether it be revenues, whether it be earnings, whether it be margin expansion, all of those, we've exceeded. And today, we're going to talk about what our journey looks like over the next 3 to 5 years. And obviously, the world has changed dramatically. We've leapfrogged into a new digital era, and these trends all greatly benefit PayPal. We need to execute to assure that we take advantage of all of those trends. But if we do, we have a very exciting plan in place. John will share with you most of those metrics. And we feel very comfortable, and we've spent a lot of time thinking about that so that you can take those metrics and incorporate those into your thinking about the PayPal of the next generation. Any presentation needs to start off with an acknowledgment that everything we do involves our employees. I am so proud of what our employees have done over the last 5 years, and they are led by this management team. And this is my senior team. I've handpicked pretty much every single one of them, and they are all as individually talented as can be. But what sets this team apart is how much they respect each other, how aligned we all are in our vision and our go-to-market activities. And when we say we are going to do something, we do it. We really hit our stride in 2020, and I'm so excited about what we plan to deliver and what we are going to deliver this year and in the years to come. Now John will spend a lot of time talking about really kind of all of our metrics and what we've accomplished the last 5 years. But I want to spend some time and quickly flip through some slides on what we've accomplished because I think it sets the foundation for everything we want to do in the next 5 years. And so the first thing that I would point out is, obviously, we've grown our scale substantially. We've gone from 180 or so million active accounts in 2015 to 377 million exiting 2020. This is the first time we're going to talk about a metric, but I'm very excited that over the next 5 years, we believe we can grow this 377 million to 750 million active accounts on our platform. And the reason we feel so confident about that is that we are seeing engagement levels increase dramatically throughout our base especially with the new products that we've put out. Over the past 5 years, we've seen engagement levels grow by 1.5x. But given the success we've seen with the introduction of things like cryptocurrency, our off-line or in-store strategies, our buy now, pay later capabilities, we are seeing historic engagement curves start to bend and accelerate. And that's especially important because those do 2 things. One, they obviously increase the average revenue per user. And we expect that to grow substantially over the next 5 years. And at the same time, it also reduces our churn rate. And as we get larger and larger, the more our churn rate reduces, the more our net new active cohorts can grow. And so that combination of scale and engagement is very exciting for us as we look forward. The reason that that's been happening and the reason we've had such dramatic increases in the past 5 years and expect even more going forward is the breadth of our product portfolio. When we were together 5 years ago at our very first investor meeting and I showed our product portfolio, it basically consisted of PayPal Checkout and our P2P capabilities, our peer-to-peer capabilities. 5 years later, due to the tremendous performance of our product teams and our engineering teams as well as all the acquisitions we've made, we have a robust portfolio of products and services across our consumer and merchant portfolios. And this is just the beginning. We introduced more product than ever before in 2020. We intend to increase that pace in 2021. And part of the reason why we can increase the pace of our product development is that we've invested in foundational capabilities. Our risk management and our compliance teams are now world-class. When I first came to PayPal some 6.5 years ago, we had only a couple of hundred people in our risk management and compliance functions. Today, we have almost 4,000 people in our risk management and compliance functions. And I consider that investment to be a competitive advantage. If you look at some of these headlines, you can see the things that we've been able to accomplish. And we are now able to work hand-in-hand with our product teams, our risk teams, our compliance teams to rapidly deploy products and capabilities, working hand-in-hand with the regulators across the world. The other thing that we've done is we've put hundreds and hundreds of millions of dollars into our tech platform. We've taken that from being a C++ monolithic platform to be a service-oriented architecture with modern programming language that allows us now to vastly accelerate the amount of software releases we have from what were hundreds a year to now what are tens of thousands of software releases each and every year. We can now scale our platform seamlessly. That's been especially important this past year with availability levels at all-time records. This past year, our availability was over 99.99%, our highest level ever. And interestingly, this year, as you can see from this chart, in our peak minutes during the holiday period, we were transacting over 1,000 transactions per second. And that is kind of the scale that we operate at now. We're also clearly expanding internationally, whether it be the 100% acquisition of GoPay in China that allows us to own a domestic payments license in that country, working hand-in-hand with the PBOC; our partnerships with MercadoLibre in South America, Central America and Mexico; our partnership with Gojek in Southeast Asia; and hundreds of other partnerships around the world, we think that we have a large opportunity to scale our business well beyond the core markets that we serve today. Importantly, all of this stands on a foundation of brand trust. The most important thing we have is our brand -- is the trust that consumers and merchants have in us. And they believe that not only do we have privacy, capabilities that protect them, security that assures that their transactions and their financial services are safe and secure but also just trust that our service works for them. If you look at some of these market research quotes that people are 54% more willing to buy when a business accepts PayPal. And almost 60% of PayPal users will not complete a transaction if the PayPal button isn't available because they are afraid of that transaction. They may not trust it. And so this is foundational for us especially as we start to move into more capabilities like super apps and digital wallets. And importantly, we're a company that stands for values that has a mission that inspires to democratize financial services, that has values that we act upon. We put our employees front and center because I believe that our employees are our single biggest competitive advantage. We know we operate within our communities and that the communities are so important. We don't operate isolated as a company. And whether it be one study after another or one like the Fortune Change the World, we were ranked #3 in the world this past year, very important that our ESG metrics reflect that. And if you look at the S in E, S and G, we are a leader across the world. And finally and obviously, over the past 5 years, we've delivered for all of our shareholders. Since our separation from eBay, our market capitalization has grown by at least 7x. All of our metrics, whether it be our revenues or our operating margin or our EPS, our free cash flow have accelerated dramatically. But the really exciting thing is I think that the past 5 years, as proud as I am of those, as proud as I am of what every employee in PayPal has accomplished, but the next 5 years offer us even more opportunity because we are moving into a digital paradigm. And this digital paradigm is going to change the way that we live, the way that we work, the way that we play, the way that we pay and the way that we shop, the way that we stay healthy, the way we bank, the way we travel and the way we're entertained. It's going to change pretty much every element of our lives. And the lines between physical and digital are not just blurring, but they're actually disappearing. And this is going to reshape business. It's going to reshape business models to how business is conducted. And what's going to happen is that physical will become digital, and previously distinct channels like online versus off-line are collapsing and converging together. You've got stores that are closing physical locations but are expanding dramatically because they are now doing digital commerce. And I think that digital is going to define a consumer's commerce journey, including their experience and their engagement. And digital is obviously going to be the front door for a merchant to get and keep a customer relationship. It's clear that retail strategies have changed. Every retailer I talk to right now is thinking less about how do they attract consumers to their physical storefront and how instead do they optimize for home delivery or in-store pickup. And that's because consumers have become habituated to online shopping during the pandemic. It is simply -- affords more benefits to a consumer. There's time savings, convenience, ease, choice, deals. All of that is what a consumer has, and there's no going back from that. And as you think about that, consumer, who's now operating in the digital era, things like digital wallets or what's referred to as super apps are clearly going to emerge. And these super apps are going to intermediate dozens of other apps across multiple verticals. We all have like 30, 40, 50 apps on our phones, but we really only use 8 to 10 of them every day or every week. And nobody wants to remember 40 or 50 different passwords or 40 or 50 different navigation systems. Nobody wants to put in all their payment details across every single one of those apps. And really, what a digital wallet wants to do, what a super app wants to do is turn all of those separate apps into a connected ecosystem where you can streamline and control data and information between those apps. Between the act of shopping, the act of paying for that, all of your financial services can all come together where you create a simple way through this super app to enable to pay and to track transactions across all touch points. And then you have this common platform and common data that allows machine learning and artificial intelligence to kick in and give personalized recommendations to those consumers. The next interesting thing that's happening clearly right now is as consumers turn away from going to a physical storefront, commerce is going to be done in new spaces and end points. And merchants now need to figure out how to get the attention of a consumer when they're not coming into their storefront. In fact, merchants are now trying to figure out how can we be where the buyer is. And that's really what contextual commerce is all about. It's how can you not only be where the buyer is but provide relevant and tailored offers that need to be personalized to attract the attention of that consumer. I bought an item recently from a retailer. And ever since then, I get 2 or 3 e-mail messages per day from that retailer. Add that to all of the other e-mails, and I'm just inundated, and it's hard for a merchant to break through and gain my attention. And this is where we're so excited about the shopping component of our digital wallet, where we will have hundreds and hundreds of millions of consumers building up their own personalized wish lists, really, in effect, their own demand curves that retailers will be able to come to our platform and address and do all of that in a way where on our platform, we can provide a universal checkout experience. And finally, there's no question in my mind that in this new digital era, we're going to see a new financial system emerge. The technology that is in place right now is antiquated. It takes days to clear a transaction. It's expensive. Many elements of our populations are excluded from our financial system. People no longer want to handle cash. And financials, basic financial services are just going to be a part of any platform that has hundreds of millions of consumers because it's all tied in to the everyday transactions that we're going to see. And so I think you're going to see a new system evolve, new rails, payment rails evolve. And PayPal can be a large part of helping to shape that future financial system. All those trends naturally lead to our deployment of our digital wallet, which is such an important element of our strategy looking forward. And it's just a natural evolution as consumers navigate a new digital landscape. Our digital wallet can bring together previously disparate capabilities that range from payments to shopping to financial services and even new forms of digital identification into one super app. And I think that all of these capabilities need to be linked by a common platform that shares data and machine learning. And those together can drive personalized recommendations in order to maximize a consumer's financial health, in order to maximize the transactions they do in the digital era. And obviously, this is a huge step to everyday usage, and it leverages the power of the PayPal brand. That trust, security and privacy is essential if one is going to be trusted when they put out a super app. And it also requires scale, scale both on a consumer side and a merchant side. When I think about those 3 different elements: payments, shopping, financial services, I think about payments first because payments is what we're known for. And those payments will obviously all be digital. They will be both online and off-line. And they will also encompass not just any financial institution, credit card, debit card, ACH, but will also include things like rewards points redemption, utilizing cryptocurrency as a funding instrument, utilizing central bank-issued digital currencies when that becomes a reality. And all of those transactions need to be instantaneous. They need to be secure and tokenized, and they need to be easy to use across our entire global network of merchants. When I think about financial services, here, we are likely going to partner with different financial institutions. There may be some of these financial services we do organically internally, but a lot of these will be done in partnership. But importantly, even when they're done in partnership, it will be a seamless PayPal experience across all of our financial services, which could include things like high-yield savings accounts, direct deposit and check cashing, investment capabilities because if somebody's going to be putting their money onto our platform, we want them to be able to grow that money, to invest that money in not just things like crypto but in individual stocks and other assets that we can digitize and allow people to invest in. We're obviously going to continue to enhance our bill payment capabilities, our subscription management so that all those monthly services of streaming services you sign up can be managed in one place, and all of that together with budgeting tools. And finally, we'll have a full tab on shopping. We will have hundreds of millions of consumers building their own wish lists, their own demand curves that merchants can access so that they can give them customized, personalized offers and deals. We will provide the ability for consumers to do price monitoring, to get rewards and for our platform to be a universal checkout so that you don't, as a consumer, need to go from one website to another, figure out different payment instruments but do everything from one place. It's clearly going to be a multiyear journey for us. But it is so exciting to be able to create this super app that is going to enable our consumers to get the most out of their digital life. At the same time, we have a 2-sided network. We have tens of millions of merchants that are looking to us to help them not just survive but thrive in the digital era. And the PayPal Commerce Platform is to our merchants what the PayPal digital wallet is to our consumers. It's going to enable a merchant to embrace a digital-first commerce strategy across all of their channels and back-office systems, where we are now evolving from being a pure payments platform really to a digital commerce enablement engine. The great thing is we are now seen as a strategic partner to our merchants. And our conversations have moved from how do we improve checkout conversion, which, by the way, we'll always do, but really now how can we use our platform capabilities across a merchant's full customer experience, from engagement to loyalty, and help them drive incremental sales in the digital era. We are working hard to integrate all of our solutions into one platform where a business can integrate once and get access to the full suite of our capabilities. We are also creating an open platform where merchants can integrate their back-office systems right into their platform so they don't have to rip and replace if they're going to implement the PayPal Commerce Platform. And finally, we are going to provide a robust set of marketing tools that will allow merchants to take full advantage of the fact that we have a 2-sided network, that we have a platform with hundreds of millions of consumers that are basically telling the merchant, "Here's what I want," and allow merchants to tap into those demand curves. And we clearly believe we can be a differentiated and compelling partner to merchants of all sizes. And finally, I want to take a moment to talk about our efforts related to blockchain, to crypto and to digital currencies. As I mentioned, there is no question that digital currencies and the underlying technology have the potential to drive the next wave in financial services. And I think those technologies can help solve some of the fundamental problems of the system, the fact that there's this huge prevalence and cost of cash, that there's lack of access for so many parts of the population into the system, that there's limited liquidity, there's high friction in e-commerce and payments. And I think that distributed ledgers can form the new foundation of a new way to manage and move money, to really create new rails, a new way of thinking about how we manage, how we move money in the digital era. And I think our platform is uniquely situated to help enable this vision, to provide both broad access, increasing utility and, very importantly, to work hand-in-hand with governments, regulators and central banks. At our last Investor Day, I put up this slide, which basically talked about the huge opportunity that PayPal has as we look ahead, that we operate in a $110 trillion addressable market and that we really only enjoy maybe 1% market share of that. But the truth of the matter is, several years ago, when we looked at really of that addressable market, where did we compete, it was only in online retail, P2P, remittances and digital services. Today, because we're seeing a collapsing of financial services, shopping tools, payments, we're now able to move into more parts of the world through partnerships and through acquisitions. We believe that we operate in all of the colored-in sections of our addressable market. In fact, we have increased the part of our addressable market that we play in by over 6x in the last 3 years. And that gives us a tremendous amount of opportunity. I believe we are entering into the next chapter of PayPal's growth and that the opportunities over the next 5 years will dwarf the opportunities that we saw in the past 5 years. The new digital paradigm is opening up so many venues of growth for us. And these emerging trends and the capabilities that we now have inherent within PayPal provide an enormous opportunity for us. The impact we can have for our consumers and for our merchants can truly be meaningful and allow everyone to have access to the digital economy. It is for all of those reasons that I believe PayPal is entering into this next chapter. Clearly, our opportunities to grow and increase our relevance to become an essential everyday app for consumers and to provide a comprehensive platform for merchants to move into the digital economy have never been more apparent. And I think there are a few companies in the world who can even aspire to this vision. And why is that? It's because it requires capabilities that cross industries, from financial services to payments, to shopping, to technology. And it requires that you have a tech-forward company that basically can do massive numbers of software releases, that has platforms that can scale, that has relationships with governments and regulators around the world and has a brand that consumers can trust. All of those things need to be in place to aspire to this vision. We can be that company. We've invested over the last 5 years to have the capabilities, to have the tech platform, to have the skills and the employees that are so necessary to take advantage of all of those trends that are clearly playing in our favor. And we are so excited to help consumers and merchants navigate and thrive in the next generation of the digital age. So I want to thank all of you for this. We are really looking forward to the rest of the program with you. And at the end of the day, John and I will be together to answer any of your questions. Thank you very much. [Presentation]

Peggy and Jim, you and your teams have been working closely with our merchant population to understand their needs and deliver meaningful solutions. I'm excited to talk with you about that today. I also think for context and level-setting, it's important for our audience to appreciate that between Peggy and Jim, we have approximately 35 years of experience working at PayPal on this stage. To get started, can you share a little bit about the evolution of your career at PayPal, your role today and what your respective teams do? Peggy, let's start with you.

Sure. Thank you. So I've actually been at PayPal -- I started in 2002. And I actually started on the finance side, and I've had a number of operating roles. And currently, I run global sales, which means that I have all of the sales teams around the world, but I also have the customer success teams, the ones that are actually protecting the back book, those that are our customers -- our same-store sale customers and then also all of the sales enablement teams across the world that help the sales team sell.

Wonderful. Jim?

I started in early 2004, a team of 4 people looking at our payments and our expansion into Europe and Asia, and spent time always in the payments realm in some form or fashion. And currently, my scope of responsibilities, I look after our merchant-facing product experiences. Inclusive of that are our Braintree product, iZettle and Hyperwallet as well as the underlying payment systems and payment partnerships that enable our branded and our full-stack solutions.

Great. Thank you. Peggy, you're on the front line with our merchants. Last year, the playing field completely changed for them globally. Can you tell us how you're helping our business customers navigate this evolving environment?

Well, obviously, the theme has been around digitization. There's been a real need to digitize commerce. And so that's been a theme that sort of spans all segments and all types of customers. But different customers have actually had to adapt in different ways that we've seen. So there's the platform customers that -- the likes of Uber, where they had been able to really shift their strategy from one of rides to one of delivery. And so that has been some of those larger platforms have been able to adapt very easily. And then for companies like IKEA, we were able to help them really move online and all of -- move out of the store environment into really expanding their digital footprint. And so using the PayPal solutions, we were able to help them digitize across the globe, and they expanded that digitization footprint into new markets. I think that there were examples like Spotify, where we were helping them, with our PayPal.Me, create solutions where they could actually help their artists be able to -- help their listeners be able to contribute to artists or to other charities of their choice or just connect listeners with the creators. And so it's really just been about the digital connection and enabling that digitization of commerce, but it's been different depending on the segment. There definitely has also been the adoption of our solutions across the commerce journey. And so everything from -- contactless payments was a huge focus for us this year and was needed by merchants of all types. So everything from the farmers' markets with the small merchants having to really come online to things where we were actually launching very large merchants like CVS using this contactless payment solution. Flexible payment options was another need of merchants of all types. And so our buy now, pay later could not have come at a better time. And we were able to launch it in the U.S. with Pay in 4 and Pay in 3 in the U.K. And so it's really just been about being a consultant to all of these different types of merchants and use all of our solutions together to be able to meet across the commerce journey.

It's fascinating. It's amazing how we pivoted so rapidly to help serve their evolving needs last year given the rapid change we saw. Jim, you're developing products for these business customers. Given what Peggy shared, what are you prioritizing right now?

Well, what's interesting, just the surge of the amount of merchants that are digitizing, Peggy indicated, in every segment. And for us, it starts with just getting the basics right. We have on average about 15,000 net new merchants coming onto our platform every day. That's more than many other PSPs have in total. And for us, it's really getting the basics right, from onboarding, approval rates, dispute management, integration. A lot of these merchants don't have a deep sophistication and technology because they're just coming new to the digital space. And so we're really just trying to get the basics right for them. And beyond that, really, what we're looking at is for all these merchants, they're really time-starved. They want an integrated solution. So we're taking all of our great assets via Braintree, Hyperwallet, what we do on credit and what we're doing from a risk management perspective, Venmo, all those, and trying to integrate them in a very seamless, easy platform for them to utilize. And we call this our Commerce Platform. And really, the Commerce Platform is around connecting customers and connecting these tools together. And so for us, we've already started with integrating Simility, our risk and fraud management service, into Braintree. We've already integrated our payout solution Hyperwallet and our Mass Pay solution together. We've integrated our QR code and a lot of our online payment acceptance capabilities into iZettle. And we're looking to do more of that as we go throughout the year. The other piece that a lot of our merchants come to us and tell us about is they want an integrated omnichannel solution. So they want to have one set of solutions that can work, whether they're customers in-store or online. And to that degree, we're focusing with our Braintree customers having soon rolled out an in-store solution. So if you're a customer of Braintree, it doesn't matter whether the customer comes online or in store. It's integrated from a complete end-to-end experience. And what we can start to do with that when we bring a lot of our assets together is really create a connected experience for the customers of these merchants. So imagine, you show up in store, they already know what your payment information is. Imagine you're in-store and you look at a particular shirt and you go home, and that shirt is in your shopping vault online as you work through that. So these are all things that we can do together from a large merchant perspective. The other thing we're really excited about is what we're going to do with iZettle. iZettle's going to come to the U.S. later on this summer. And iZettle is really about an integrated solution for physically first merchants. And why that's important is PayPal has predominantly played with digital-first merchants. And there's estimates that about 47% of all small businesses don't have an online presence. So for us, it's going after a huge segment of those that have need. And so we're going to be integrating iZettle. And what iZettle really does is create interoperability with their tools, like their order management, inventory management, accounting services and have a great in-store solution. And then as they need digitized solutions, we're in a position then to give them all the wonderful things that we do from an online perspective. Beyond that, we're looking -- from a geographical expansion, we're looking in terms of Brazil and China, Mexico. Japan is a focus area. And all the wonderful things that we're doing from our branded products like Pay in 4 and QR code, we're making sure that those can be curated and easily subsumed by our merchants.

Fantastic. Jim has talked a little bit about how we're serving small- and medium-sized businesses, especially in bringing iZettle to the U.S. These businesses are really foundational for our economy, but they're also foundational for PayPal. And last year, we added more than 5 million SMBs to our platform. This is an increase of more than 100% year-on-year. So we really saw incredible growth. How are we serving the segment from your side? And what do they need?

Yes. It's interesting because you're right that SMBs have always been the bread and butter of PayPal and tremendously important to our consumer network. And in the last year, they have often really suffered because a lot of them had much more of an off-line presence than an online presence, and suddenly, COVID required that they completely digitize everything quickly in order to survive. And as I mentioned earlier, a lot of times, small businesses don't have the resources or even the expertise to really focus on how they might do that, whether it's the actual payment experience required for digitization or even earlier in the journey that how do you attract customers in a way online. And so we needed to really serve as consultants and use all of the services and products that we had that could help them really digitize and compete where there was absolutely no choice but to be fully online. And so everything from using our Honey and shopping products and really trying to make sure that we can create the demand gen necessary for them to attract consumers online, really creating solutions that they could easily integrate because they don't have a lot of time and resources to be able to integrate all of our solutions together. Jim talked about our Commerce Platform where we're really able to weave together all of the products and services that we offer for an easy integration. That's tremendously important to our small business customers. And then really reaching new audiences as well with the likes of Venmo and potentially introducing new consumers that maybe they weren't able to reach before. But all of this requires a full integration of how we think about product, how we think about marketing and how we think about sales because the levers for growing the SMB business is really all 3 of those. And so our focus has really been able to bring all of those capabilities together to serve small customers.

That's fantastic. Thank you. Jim, we've talked about bringing a record number of merchants to our platform. At the same time that we've brought a record number of merchants, we actually brought a record number of consumers as well. So I think last year, we brought about 65 million new consumers onto our platform. This presents really unique challenges, and we were able to grow volume at record rates while minimizing our losses. So the sort of challenge of maximizing authorization rates while minimizing the risk on our platform is something we were able to deliver. How does your team do that? And how do you think about that problem?

What our teams have done is absolutely fantastic. I would equate it in the payments industry to the trifecta. We have increased our auth rates. We've lowered our loss rates and, at the same time, kept our transaction expense at an all-time low. And in doing so, what we've been able to do is to remove a barrier or a decision that a lot of our merchants have historically had to make. They've had to choose between increased auth rates and then basically having to deal with more risk losses or lowering their risk losses and, at the same time, reducing their auth rate, which hurts their conversion and hurts their relationship with their consumers. And so we've been able to give them the best of both worlds. If you look since 2018 in the 3-year period, 2018 to 2020, we've increased our auth rate on our PayPal Wallet by up to 400 basis points, which in effect, has meant that we've been able to deliver for our consumers and merchants of PayPal Wallet an additional 1 million transactions each day through the work that we've enabled on auth rate. And what we've also seen is we started to benchmark our data versus industry standards and industry standards that we've seen with the payment networks. And we've seen up to 600 basis points better our PayPal Wallet in terms of auth rate than they would see and they've measured in terms of the average card transaction. So if you're a merchant and you're taking PayPal Wallet, you're going to see 6 more transactions out of every 100 than they would if they weren't taking PayPal Wallet. All the while, we've been able to lower our risk loss rate. And I already thought the teams have done an absolutely fantastic job. But if you look at the numbers, since 2018, we were at 18 basis points of risk losses and now we're at 12 basis points of risk losses. And they've done that in the situation where we've had a record number of net new users and continue to have a lot of cross-border transaction. And net new users and cross-border transactions are -- very, very much create a headwind for our risk losses as we work through that. And they've been able to do that with good experience. And so how we've done it, we've focused, one, on leveraging industry standard tools and really taking what is today very fragmented tools and scaling them. One example of that is network tokens. And network tokens are capabilities that help with life cycle events like when a card is lost or stolen. And we've been able to scale that. Right now, we have over 400 million tokenized cards within our payment vaults. We will, by the end of 2021, have 750 million tokenized transactions. We also have developed our own proprietary capabilities, things like smart routing, which if there's a problem somewhere within the payment ecosystem, we're able to reroute a transaction and maximize the chances that it gets approved. We also have developed different algorithms and machine learning that help with predicting when a card is about to go stale or lost or stolen. What would the next card information that we can automatically update that within our ecosystem. What we've also done is leverage data, and we have a lot of data. We estimate that we manage securely about 500 petabytes of risk and transaction data that we have within our ecosystem. And so in doing so, that 500 petabytes of data basically equates to about 25 Library of Congresses. That's the amount of data that we have. And what our risk and fraud and decision sciences team do is they curate that data because not only do we have a lot of data, we have a lot of heterogeniality of that data. We estimate that we have about 400 different industry standard types that we support. We support customers from nearly 200 different markets. And so in doing so, we take all this data and we curate it into the most appropriate data for risk management for us to basically score every transaction very seamlessly. To put it in perspective, within 0.3 seconds, we're able to run hundreds of models using thousands of different data variables to score a transaction, to maximize the amount of good users that are using our systems and eradicate bad users from our platform. So what we're doing next because we're not satisfied where we're at. We think we have wonderful capabilities and we can do even more. Our first focus area is on our PayPal Wallet. We want to move to what we're calling 100% good user approval rate. That means that any user that is not a fraudster, that has good intent and has money in any one of the particular funding sources that they put within the PayPal Wallet, we're going to find a way to approve. The second thing that we're going to do is focus on our Braintree merchants and take all the wonderful capabilities that we've scaled for our Wallet and bring that to Braintree. We've already started that with many of the top merchants that use Braintree, things like network tokens, real-time account updater, the smart routing logic I discussed. All those are going to be focused on our Braintree merchants. And last but not least, what we're going to look to do is to bring to our unbranded, our Braintree merchants, chargeback and fraud protections, something that our merchants love for PayPal volume. We're now going to bring that and scale that for our Braintree merchants. So regardless whether it's a PayPal transaction or another type of transaction, they can offer and feel protected against unwanted transactions. So with that, we're excited where we're going.

Thank you. Peggy, we've talked about our expanding set of capabilities that we're bringing to our business customers. We've also talked about the evolving needs that our customers have. How have these factors changed our sales process?

It's really -- we've had to evolve with it. If you can imagine, if you go 5 or 6 years back, the majority of what we were selling was our branded Checkout product, right? And so you could almost think of it like our sales folks, we're selling to different segments to different markets around the world, needed to be very well-versed in terms of what was going to resonate with our network, both consumers and merchants. But at the same time, we were selling a few products, and so it's more of a product sale. If you can imagine, when you start to think about all of the sort of digitization of commerce and all of the various -- the product development that have enabled us to add capabilities to that journey, along with all of the acquisitions that we've done, whether it's Braintree to be able to do credit card processing; whether it's Simility to be able to do risk services; Venmo, enabling you to really reach a new set of consumers. All of these things require the need that you have expertise in all of those areas. But more importantly, they all need to sort of fit together into more of like a solution sell as opposed to a product sell. We're also having to speak to very different people at our customers than we were in the past. So in the past, we were often talking with the payments team or the CFO or the treasurer. And we were talking about how we were going to save them costs and get them more transactions or a better conversion rate. Now as you start to think about the -- attracting additional customers and competing on the demand side for customers, now we're starting to speak with the Chief Digital Officer or CMOs. And so enabling our sales teams to be able to sell all of the solutions in a cohesive way, in a way that enables us to resonate credibly with people across the C-suite, is something that has required a real change in how we train our salespeople. In addition to that, in the past, we would really look to be aligned with marketing. So we would have -- marketing was really focused on how to create this network effect that is the magic of PayPal. And we were focused on ensuring that we were -- we had consistent messages with that but maybe not as integrated. Now we are -- it is required that we are fully working, marketing and sales are working together. Because if you think about all business customers really care about is that next customer, that larger transaction, the bigger basket size, and so being able to create these integrated marketing offerings and then offering them in a credible way to our customers when relevant is something that requires a real integration between sales and marketing. And so that's been a real change as well.

Incredibly helpful. I'd like to shift gears a little bit. Jim, we've made a lot of progress in China over the past 18 months. I think it'd be great to hear about where we are in that journey and what comes next.

Yes. So I think when you view our platforms, one of the things that I think a lot of people should appreciate is the access to customers that we create. And I think China is a great example that sets us apart from others. I think we are uniquely positioned to unlock China for many of our merchants that sit outside of China in terms of giving them access to Chinese buyers as well as our consumers around the world to get access to Chinese sellers. And what we have done in the course of the last several months, and literally it has been several months, we've, one, gotten a payment service provider license, and we are the first non-Chinese company to get a payment service provider license in China. We stood up a whole instance of PayPal in China to utilize that license. And that was going to be done in about 6 months. And so our ability to react to the market conditions, get the license and now be in a position to really thrive and grow in China for us. And let me give a little bit of context as to what we can do now with this license. Historically, because we were an unlicensed operator in China, we were unable to support certain service types. So for example, if a merchant needed to process VAT, needed to process different tax or custom information, we're unable to do that. We're unable to clear and process in local RMB. Now that's something that we're able to do because we'll be able to process transactions. And if you're a merchant of PayPal, you don't have to go to a third party to get your money out. We're also able to work now more collectively with different merchant types. We're also able to work with several of the banks like we've done in the U.S. to partner with them and to basically create a situation where they can promote PayPal and promote PayPal out to their customers for cross-border buying as they work through this. The other piece that we're excited about is we can now utilize this commerce platform approach that we're taking. We're integrating Hyperwallet into our GoPay solution. So if you're a merchant that's operating in China, you can utilize Hyperwallet and the capabilities associated with that. Or if you want to just use Hyperwallet, we can leverage our GoPay entity there for RMB withdrawal. And what we're also planning to do is to eventually launch Braintree in the market. So all of our assets start to come together based upon the license and what we've done. And so we're really excited that we're focusing first on standing up and scaling our export selling solution. We estimate that right now, PayPal support is about 10% of export selling. And so we think there's a huge addressable market now that we can go after. We're going to go after our cross-border buying and unlock those Chinese consumers to the rest of the world. And what we're also doing, which is an interesting play on a lot of things that you've heard about in store is that we're enabling our QR code solution for tourists as they come to China. And if ever you've been to China, it's very challenging sometimes to use your typical cards in terms of them not being supported. So leveraging our partnership with China UnionPay, we'll be able to effect a QR code solution, so any tourist or anyone visiting China can pay at any location that accepts the China UnionPay QR code, which is most merchant locations.

That's great. Historically, we haven't had as much penetration in some of the Asian markets, in some of the South American and Latin American markets, so it's great to see those deals move forward. Peggy, spinning the globe a little bit, which market do you think provides the greatest near-term opportunity for PayPal?

Well, an area that is a high priority for us in the next year is Europe, EMEA. And if you think about EMEA, it has a similar GDP as the U.S. but we're less penetrated. And the margins of Europe are higher than they are in the U.S., and so that is appealing in itself. There's also a lot of regulatory complexity in Europe. And so we have the capabilities to really be able to set apart and really serve our customers in those markets. And so we're incredibly excited about Europe, specifically, the U.K., Germany, Switzerland, France, Italy, Spain. So the core, what we call our core European market is an area that we're really focusing on. Jim also mentioned what we call our growth markets. So Japan is incredibly exciting, the third largest economy in the world and very specific capabilities needed there. And we intend to invest heavily in Japan. If you think about China, obviously, Jim mentioned why that's so appealing. There's an incredible amount of potential just in the export, on the cross-border side with China even before you start thinking about what we could do domestically, even just with consumers who are looking to purchase from Chinese sellers or from Chinese sellers that are looking to sell to the 330 million NNAs that -- consumers that we have globally that are wanting to also -- that they're also wanting to reach. And so lots of opportunity in the growth markets, but I would say lots of near-term focus on EMEA.

Super exciting. Jim, we've done a lot in Brazil and Mexico, both organically as well as through partnership. Talk a little bit about how you're seeing that market and what the potential there might be.

Yes. We're really excited about both markets in terms of having a complete product set that's going to allow us to compete and win in those markets. If you look at Brazil, we have had, for several years, PayPal Checkout. We now have Braintree live in the market. We have iZettle live in the market. We have working capital through a partnership in the market. So we're really excited about our position of having all of our products native there. What we're seeing is really good uptake. A lot of our global accounts are now looking to us and Braintree to support us in Brazil. What we're also seeing is a local flavor of our capabilities and with a really good case study of how we bring our assets together. There's a particular merchant called Ipiranga, which is, I think the second-largest gas station provider in Brazil, has about 6,500 locations, and we're powering all their pay-at-the-pump app solution. So basically, you show up, you go on to your app, you pay for that particular petro purchase, and it's powered by Braintree and PayPal. And really, what they wanted through that is chargeback protections. And so what we're doing is taking all that wonderful risk management solutions that we have, take our Braintree capability and bringing them together because what they wanted to make sure was there wasn't fraud and risk. And we're giving them their protections through those transactions. And it's a very powerful example of the commerce platform mindset that we have in bringing our assets together. And so we're also -- on the consumer side, we've rolled out something called PIN-less debit. So again, in some of these markets, there's a lot of friction to use your funding instruments. And through our risk management capabilities, our partnerships in the market, we're in a position right now to give our Brazilian customers the ability to pay with their debit card without that friction. We also have another set of partnerships with a bank called Neon Bank. Neon Bank is one of the largest neobanks and it focuses specifically on micro merchants. And we've created a partnership with Neon Bank for iZettle to be effectively their main distribution partner and their main point-of-sale and integrated MPOS solution for their merchants. And we've had a long-standing partnership in Brazil with Itau, one of the largest banks there on the consumer side to distribute PayPal. So a lot going on in Brazil. Mexico is another market that we continue to be doing really well in. Historically, that has been a cross-border market, just given the proximity to the U.S. And over the course of the last couple of years, the teams have been doing a wonderful job of developing and cultivating a domestic market for us. We estimate now that our domestic volume, basically, consumer and buyer in -- buyer and merchant in Mexico is bigger than our cross-border business. And we probably have over half of the top 50 internet merchants in Mexico on our platform. And so between what we're doing in terms of enabling those use cases. We have iZettle in the market. We have now a full stack acquiring solution for large merchants. We're really excited about the potential for LatAm for us.

It's great. Both you and Peggy have touched on partnership as part of one of our major strategies. When we think about how we're different from separation and what we've been able to do through partnership, you've been a key architect of that strategy. It would be great to hear what it's enabled, the product innovation has allowed us to bring to our customers, and then from a P&L standpoint, what that means for the resiliency of our income statements. Maybe you could take us through both the strategic side as well as some of the financial complexities to it.

So when we were thinking about what we wanted to be 5 years ago, we operated with some very fundamental principles. One is we want to give choice. We want to make sure that we operate an open platform, and we want to make sure that we're operating interoperably so we can work with others. We firmly believe that digitization is a team sport, and we need to get everyone involved to bring that to fruition for us. And so we embarked on a strategy that many questioned at the time, but we embarked on a strategy where we wanted group participation, to give our customers better access to their funding sources, better access to different platforms and really creating an interoperable set of solutions for those customers wherever they're at. And so we embarked basically on a strategy to work with tech platforms like Google and Facebook as well as banks as well as other channel partners for us. And you start to see the stitching come together. And in many cases, what we've talked about over the course of the last couple of years is really on the backbone of those partners that, in many ways, will be very below the surface in certain cases. In certain cases, it'll be very explicit in terms of what we're doing. So examples, we now are in a position where if you're a small business, you have a very easy integration into Google for selling, very similar on Facebook. If you're an iZettle merchant, we have a partnership with big commerce. So any of your inventory that you store within big commerce is subsumed within the inventory management solution of iZettle. So there's a lot of interoperability that we've created. On the bank side, what we've been able to do is really look at all the different parts of the life cycle of a customer. I think one of the really good examples of what we're doing now with American Express. So if you're an American Express customer, you have the American Express app. You can basically go to your app. You can push your American Express card into PayPal. If it's a Platinum Card, you're going to get, right now, for the next several months, $30 back each month based upon a different spending threshold. You can pay with rewards. You can then take that $30 that goes back into your Amex app. And from the app, Venmo, $30 to anyone. And all below the surface, we're using network tokens to make sure that if your card gets lost or stolen, it's automatically updated. And at the same time, we're sharing risk data to give you the best approval rates. So there's just a litany of different things that we're doing with all of our different partners to bring that to fruition. Visa and Mastercard is another example. We've launched instant transfers. And we see about 35% of our consumers and small businesses all the time utilizing that service as how they get money out. And so we're really excited in terms of what we've seen over the course of the last couple of years with these partnerships. One of the more evident areas, things like Pay with Rewards. And that's something that we've launched in the last 2 years. We now have about 16.5 million active customers with a Pay with Rewards card. And we will endeavor, by the end of this year, to have about 30 million in our portfolio here in the U.S. And we'll have Pay with Rewards from the top 8 issuers by the end of the year. And through our partnerships with FIS and a partnership that we'll be launching with Fiserv, we have over 2,000 different banks with Pay with Rewards that we'll be able to utilize within our platform. So all of it's come together very nicely in terms of creating that wonderful end-to-end experience that we're really proud of for our customers. And a lot of these, and I'd say all of these partners are absolutely thrilled with the incrementality and the great experience that they've seen. On the cost side because that's typically where I think a lot of people want to know, what does this mean? Because I thought a lot of people, again, thought we were crazy to do a partnership with banks and basically thought that, that would screw up our operating income as we went through this. And I'm very proud that this year, 2020, we had our best year ever on transaction expense. I think 85 basis points as we work through that. And a lot of that is through the function of these partnerships because what these partnerships do is they enable better capabilities in terms of adding your funding instrument. And we saw, last year, a 25% increase in debit cards into our portfolio. And so we're just seeing a lot of better use cases that we're creating around P2P. We're seeing use cases in terms of the ability for our customers to pay at lower ASP, merchants, which drives down typically a lower funding cost that the consumer is using. All these taken together, we're really thrilled where we're at with transaction expense. Is it sustainable, is an obvious question that we get a lot. And I think it is because our product experiences are really going after use cases where low-cost funding sources tend to be prevalently used. And look at our product experience, as every one of our product experience, be it crypto, Pay with Rewards, Pay in 4, these are all funding instruments or funding mechanisms that typically are drawing upon low-cost funding instruments. So taken together, we're excited where we're at, and we're keen to continue that as we go forward.

That's great. Peggy, Jim, our session is rapidly coming to a close. Before we finish up, in a few words, can you share, first, what your most important priority is for 2021?

Well, we talked about solution selling and all of the capabilities and wanting to sell those together. We have some really exciting new products that we launched this year, Buy Now, Pay Later and QR. And so a huge priority for our teams is integrating that into our solution selling and making sure that we help scale it.

Great.

#1 priority is execution. We are really thrilled with the momentum that we have from a product side. We're really thrilled with the innovation that we've seen. But we've got to execute. Our customers are going through a very challenging and exciting time, and we've got to be there for our customers. We've got to execute on our product delivery.

Understood. Both of you spend a fair amount of time speaking with external stakeholders as well as your work within PayPal. What do you think is the most underappreciated attribute about PayPal when you speak externally?

I think it's the scale of our merchant side and the scale of our consumer side and that network that, that creates, so that all the solutions that we're building actually are able to resonate with scale.

Thank you.

To me, what's underappreciated is how much people care. And I mean, how much the average employee within PayPal cares about our customer and cares about our mission. And it's very interesting. We're in our building here where no one is here but we're everywhere. Our employees bleed PayPal blue. They bleed the cause and they really believe in the mission. And it may sound very aspirational, 1 billion daily active users. But you ask every one of our employees, they believe that we're actually going to do that. And what I've seen in this past year has been remarkable in terms of everyone working from home, the capacity for our organization to do things like distribute laptops around the world within days. Just the willingness to succeed, the willingness to be there for our customer, I think, is underappreciated.

Well, thank you so much. I really appreciate the time you spoke with me today. We're ready for our first break. We'll restart the program in approximately 15 minutes. If you haven't had the opportunity already, please explore the Merchant Showcase tab of the event website to meet more of our incredible PayPal businesses. Enjoy the break. [Break] [Presentation]

That video is really illustrative of how consumer behavior around shopping has changed amid the pandemic. Jonathan and Darrell, thank you for joining me today. I want to talk about how we're focused on increasing our consumer value proposition to make both PayPal and Venmo even more relevant on an everyday basis. I've had the privilege of knowing both of you for a few years. But for context, let's start with some background on each of you. Tell us about your role at PayPal and how it's evolved over time. Jonathan, let's start with you.

Thanks, Gab. Hi, everybody. I'm Jonathan Auerbach. I lead Strategy, Growth and Data at PayPal, and this includes the development of PayPal strategy, our mergers and acquisition and our venture investing. It also includes marketing and data sciences as well as 2 fast-growing business units: our China business, where we have 100%-owned subsidiary with the domestic payments license; and a recently created crypto blockchain and digital currencies business unit. But I should also say, Gabs, that today, I'm sitting in for Mark Britto, our excellent Chief Product Officer, who is unable to make it today. But I'm really comfortable doing that as Mark, Peggy and I work incredibly closely across products, sales and marketing. In fact, I've never worked on a team that works together as seamlessly as this one. So I'm very happy to sit in for Mark today.

Thanks so much, Jonathan. Darrell?

Hey, guys. I'm Darrell Esch. I am the GM of Venmo and I also lead the Checkout Product and Engineering team. I'm a 10-year veteran at PayPal and most recently, coming off of leading the global credit business.

Amazing, thanks. Jonathan, 2020 was a record year for us as the pandemic sped up the move to digital. At the same time, as we are managing the transition to working from home and new ways of collaborating as a team, we launched more products than we ever have in our history. Tell us how PayPal was able to pivot so rapidly.

Thanks, Gabs. So look, the pandemic has accelerated everything, as we know. In particular, it's accelerated the migration of commerce and financial services to digital. And PayPal has benefited from these tailwinds, there's really no doubt about that. That said, I think the reasons why we've been able to benefit so much from this global movement to digital is that we've spent the last several years actually building out so many elements of our business that have allowed us to actually benefit from this. First, we've been adapting our technical infrastructure and our platforms to scale globally. And these efforts have really paid off. Our software releases last year were up 26% over 2019 with 25% fewer bugs. We've also been working incredibly hard to build our risk and compliance capabilities, our sales and our marketing capabilities and the alignment across all of them, which has allowed us to innovate faster and to really benefit from the tailwinds created last year. Second, we really are benefiting from our global scale. Our business has already achieved a scale of 377 million accounts, including close to 30 million merchant accounts. And the global reach of our 2-sided network is such that when the pandemic caused people to engage more in digital channels globally, for many, we were their best choice. For many, we were actually their most trusted choice. So when we introduced more great products in 2020 than we ever have, products like Buy Now Pay Later or cryptocurrencies or QR codes, they all achieves scale amazingly fast. And third, we added roughly 73 million net new actives to PayPal in 12 months. So we start 2021 with essentially 25% more customers than we started last year. And these new cohorts are using PayPal more than the old cohorts did, which is a remarkable accomplishment. But it's not simply due to the pandemic. We've gotten much better as a company in generating and engaging high-quality net new actives. So yes, 2020 was a phenomenal year for us. Some of it was due to the great tailwinds we saw, but if we weren't really ready to capitalize on the massive shift to digital globally, you wouldn't be seeing the record number of product introductions, NNAs, customer engagement and volume coming on to our platform.

Thank you. The engagement has been incredible. And that alongside watching how we've been able to innovate at scale has really been -- it's been fun to watch but it's also been -- it's been an incredible journey for us. Darrell, similarly, 2020 involved pivoting in Venmo to address the evolving needs of your growing customer base. In April, you increased weekly sending limits in response to cash displacement, and you also ramped direct deposit to help distribution to stimulus payments. This is really a jumping-off point for a very active cadence of product introductions throughout the year. Can you tell us about how Venmo evolved last year and how Venmo's positioned for the coming years?

2020 was a great year for setting up Venmo. I'm really enthusiastic about how we're sitting coming into 2021. A couple of big things that happened and then I'll touch on the pandemic response to the customers as well. But the couple of big things that happened in 2021 is we really started a migration from making Venmo a business of scale to making Venmo a business of scale with breadth. And we have, for the history of Venmo, really been focused on P2P. And what you're seeing now in 2020, late in the year, we started getting new products out the door in terms of pilot mode, at least. A lot of those things, we're going to be starting to scale and ramp up in the first half of this year. But we're getting a lot more opportunities to our customers to engage with Venmo on a day in and day out basis. So that's the first thing is moving from business to scale to scale plus breadth. The second big change, evolution in Venmo in this past year was we've moved towards really leveraging the collective power of the PayPal enterprise. I think after the acquisition, which was roughly 8 years ago now, Venmo still continued to pride itself on operating like a start-up. And that was great in terms of innovating quickly. But now that we're really ready to turn the corner and drive up the scale of Venmo more broadly even, leveraging the enterprise capabilities is going to be so much more important. So using the common platforms and services that will allow us to have greater stability, it will allow innovation faster out the door. And ultimately, it's going to lead to Venmo being able to expand around the globe more rapidly.

Back to Jonathan. 2020 was notable in part because of the extraordinary shift in consumer behavior. And picking up on this innovation thread and our ability to rapidly develop and scale new products, developing more comprehensive in-store payments experiences has been on our road map for quite some time. Last year, we're able to meaningfully accelerate these initiatives. Can you give us an update on our current in-person payment strategies?

Yes. Thanks, Gab. Look, our in-person payment strategy is really simply a critical component of our overall strategy to be relevant to our customers every day. COVID-19 accelerated our in-store efforts, given the enormous merchant and consumer demand for safe, contactless in-person payment solutions. And we responded incredibly quickly to the demand for in-person payments. In a matter of months, we launched QR code payments for micro and small businesses in 28 countries, followed by an expansion of our QR functionality for large enterprises, which was also powered by a really strong network of channel partners that we feel very lucky to work with. We've already passed 600,000 small and medium-sized businesses using our QR codes. 6 months following the launch of the SMB solution, we launched our first national retailer, CVS, and we've signed and we're bringing QR codes to many, many more large retailers this year. But I think what's most exciting to me about this is that our work in building out our QR code value proposition and functionality has really unlocked many new and expanded use cases both for our merchants and for our consumers. Let me give you a few examples. We've built the ability for merchants to create onramps for consumers to enroll in their loyalty programs. We've developed prompts for consumers to rate their experiences with reputable third parties. We've created tipping and donating use cases, order ahead, pay at table, order ahead, pick up in store, order ahead and pick up curbside. We've developed installments at the point of sale. And choice is really at the center of our proposition. And I'm not talking simply about choice in financial instrument, but it's choice in device, choice of platform. And we really believe that this value proposition of choice really positions us well in the market, certainly vis-à-vis competitors whose primary value proposition stops at the choice of how to pay. And we see this as a unique opportunity for PayPal to both serve the needs of consumers and merchants and merchants who are increasingly trying to innovate to find new ways to serve their customers during this period of time. So we're incredibly impressed with the traction that we've gotten over the past year in-store, and we're going to continue to invest heavily and continue to build out our safe contactless in-store acceptance being more and more relevant to our customers' daily lives.

Thanks. It's very exciting. And in addition to the consumer shifts we've in-store and online, we also just saw a major consumer shift in behavior on Venmo. Historically, Venmo has been synonymous with shared experiences, splitting fares, reimbursing friends for dinner, being in the same place with the same people and sharing that experience. But what's truly remarkable is that as our customers' lives began to drastically change last year, they didn't stop using Venmo. Actually, their usage accelerated. Our customers really never stopped connecting with each other. So Darrell, it'd be great to hear from your perspective what that tells you about the power of Venmo and how it informs the way you're thinking about your strategy.

Yes. I think, in particular, the pandemic taught us and really confirmed the power of the brand for Venmo. And we've got 3 primary brand tenets that have really defined Venmo from the beginning and which will carry forward even in the new products we're developing now. Those real tenets are one is around community. Venmo is a community nearly 70 million strong. And it's a community of smaller communities, of people who know each other well because, as you called out, Gabs, these are people who are generally doing social experiences with each other. They're using Venmo to pay each other back for a show or for a ride or something. So it's community. It's app-powered money. Venmo has always been about pay people from the app. And then it's social in nature, the feed where we're sharing our experiences, and it's a fun social piece. So those are the attributes of Venmo. And one of the things that really popped in the pandemic is we saw the power of community really shine. So we did see actually an initial pullback in March when shelter-in-place became a norm and those things like sharing a ride and sharing a pizza and going to a show all ceased to exist, but it was very, very quickly replaced with the trend of people helping people inside of the community. So you saw customers helping caretakers who were working around the clock and Venmo-ing for groceries and the like. You saw people doing online yoga classes and tipping instructors where studios had been closed down. And then one of my favorites, which goes back to the beginning of Venmo, so Venmo initially, the earliest use case was around tipping musicians. And we got to see during the pandemic, all of these musicians who, frankly, are making their money playing games on Friday and Saturday nights, and now all of a sudden, those venues are closed. And so they had to innovate, and they started doing, streaming shows on Facebook or other social channels, and they ultimately used Venmo. Venmo became that pickle jar with the tip word in front of it. And so this is how the community came together. So we really saw community rise up and be a big proof point during the pandemic. So everything now that we're working on, I think as you look at how it's going to lead or inform our strategy, we are staying true to those tenants of community, app-powered money and social-funded nature with all the things we're doing even with something like a credit card, which I know we'll have a chance to talk about in a little bit.

It definitely will. Yes, speaking of app-powered experiences, Jonathan, let's move to our digital wallet strategy. How are you envisioning the user experience?

So Gab, we're in the process of building super app functionality to allow our customers to both begin and end their commerce and financial services journeys in our digital wallet. For example, we're strengthening our digital wallet dramatically -- our wallets dramatically because obviously, Venmo, as Darrell has been talking about, is one of our digital wallets. But we're strengthening our digital wallets in a number of different ways. Let me start with our enhanced payments hub. Leveraging our partnership with Paymentus, people can now increasingly be able to pay their bills and manage all their subscriptions in their digital wallet, paying for TV, gas, electricity bills or any subscription in the wallet itself. Second, we're building a richer rewards hub into PayPal, expanding the ability of our customers to leverage their issuer and their merchant rewards points. And talking of expanding, we're expanding PayPal shopping. We're building Honey shopping and coupon engine into our wallet. So consumers will be able to set their product preferences and complete product purchases at some of the best prices available all within their wallet. And fourth, we are now developing additional financial services to help consumers move and manage their money much more cost effectively. We're working with partners on some of these experiences, but we're always going to ensure a seamless PayPal experience. And these new services are broad, and they include, just as a few examples: saving vehicles like term deposits or savings account; investment tools such as brokerage tools to invest in stocks or fractional shares; enabling crypto in digital currencies, initially with the buy, hold and sell use case in the wallet but increasingly as a funding instrument to fund commerce. And as I mentioned, we're working with different partners to power a number of these services, but they're always going to have a PayPal user experience like we've done with crypto in the wallet and the PayPal Wallet or, as Darrell is going to explain later, with the Venmo credit card. And I'm not going to steal his thunder, but the Venmo credit card experience is absolutely fabulous.

Darrell, the Venmo wallet is also diversifying and moving beyond its core P2P value proposition. The monetizable experiences are ramping. And we've indicated that we believe revenue for Venmo will approach $900 million this year. How are you thinking about the evolution of these experiences over time? And what will Venmo look like in 5 years?

Yes. 5 years is a really long time for sure, but I'll take it in blocks. So in the immediate term, that path to the $900 million of revenue that Dan has talked about on earnings calls, it really is driven by a few key strategies this year. So -- and these are all in process at this point. Some are already ramping to consumers and businesses in the first case. So the first of the strategy is around commerce and moving from -- Venmo has historically been P2P. The thing that our customers say they would like most to do with Venmo in addition is to pay businesses and to buy things with Venmo. So on a commerce track, we have 3 things that are happening. One is we are on the journey with PayPal on QR code. So just as PayPal is out there with some of the large named partners like CVS, Venmo is there as well. That's thing number one. Thing number two is, we have now business profiles that we're ramping now. So these are already out into the market. And this is going to allow small businesses to have a Venmo profile, and it's going to -- I think it's going to be really powerful because it's going to give them the chance to interact with and have a digital experience of getting to new customers through friends of their customers. So the social nature of Venmo and having the feed available, we are going to be able to do things like it. If I go out and make a purchase, I'll have the ability to have that show up in my feed, and my friends will go there, see that I went there, and we think that's going to be really powerful for the small business community. When you think about it from an endorsement perspective, I would -- as a business owner, I don't want to take part in this because I would much rather -- much rather reach new customers through endorsements where their friends have voted with their wallet to buy something as opposed to maybe seeing a review from a stranger that you wonder whether the owner wrote the review in the first place or not. So I think that's going to be powerful for commerce. We have some really elegant online pay with Venmo experiences that are starting to ramp now as well. We'll see those in greater scale near midpoint of the year later in the second quarter. And then the other areas that we're depending upon right now are crypto. We've had great success on the PayPal front based on who the Venmo customer is. We think they're going to really love and take hold of the crypto capabilities when those come to market here in this first half of the year. And then again, the credit card, which is now out, and I'm happy to say it's actually, right now, available to 100% of our customers and imminently. So in the days and weeks ahead, we'll start the more broad rollout of that program. What's beautiful about it is this is an 11-year old business now, Venmo, nearly 70 million active customers. And at this stage in our life cycle, we're going to be accelerating revenue quarter-by-quarter as we go through 2021. The other thing, as we look out longer term, relative to the 5 years, I think after this first period, we will start to go deeper into providing financial solutions that our customers can use day in and day out. And then we will eventually find our way around the globe. That's one of those things that I mentioned early on that the power of leveraging the enterprise capabilities and platforms and best-in-class practices and compliance expertise and so forth is going to help us ultimately take Venmo this great capability instead of capabilities that expands. We're going to take it outside of the U.S. eventually in that 5-year time line for sure. And I think the thing here is leveraging those PayPal capabilities and platforms doesn't necessarily mean we'll go to every PayPal market, but I think it means we'll have the ability to go to any PayPal market.

It's incredibly exciting. Darrell touched on crypto as it relates to the Venmo wallet. Jonathan, I'd love to talk a little bit about crypto and the PayPal Wallet. We launched our buy, hold, sell experience in October. We've seen a tremendous response from our customers in the U.S. Can you share a little bit more about this initial experience and how it's performing and then what the longer-term vision is around digital currencies more broadly?

We're really excited about enabling PayPal customers to buy, hold and sell crypto currencies in their digital wallets. This, as you mentioned, is only the first use case for crypto and digital currencies for PayPal. That said, even as a first use case, our early results are incredibly strong and, frankly, have exceeded all of the expectations that we had for this use case. The number of daily users of crypto services continues to grow rapidly. Every day, we're seeing an incredibly healthy influx of first-time users and increased engagement once they've made their first crypto purchases. Customers who have purchased crypto have been logging into PayPal at roughly twice their login frequency prior to actually having purchased crypto, which is amazing. This year, though, we're going to be, as you mentioned, increasing access to crypto and digital currencies to more customers around the world, and we will be enabling crypto as a funding instrument for transactions at millions of businesses around the world. So if you even just think about the road map for the first half of 2020, building on what Darrell was talking about, we're going to see crypto and Venmo on track to go live in the first half of the year. We've got crypto as a funding instrument for commerce going live in several months, and we plan to expand our crypto offering geographically to the U.K. in a number of months as well. So look, we're still at the early days of our development of our crypto aspirations, but we really do believe that digital currencies, CBDCs and the collaboration with central banks and regulators will open new ways to exchange value and power global commerce and financial services for entirely new segments of the population. And as I talked about before, crypto services will broaden the range of financial services offered through the PayPal and Venmo apps. And that's going to support the transformation of those apps into being destination apps, not only for financial services, but for commerce. In addition, we're actually looking at our crypto services to help position PayPal to help shape the role of crypto currencies and CBDCs in consumer payments, commerce and financial services safely and securely. So look, early days for us here, but we're moving rapidly. We're moving with discipline, and we continue to build on our crypto capabilities, and this is going to be an area of growing focus for us going forward.

It's incredibly exciting. I think about our ability as PayPal to bring a solution to mainstream consumers. We're able to essentially create an experience for 100 million U.S. consumers being able to buy crypto pretty instantaneously in October, and we've seen great demand. Darrell, Venmo's user growth continues to be astounding. Last year, we reached nearly 70 million customers with growth being more than 30%. Who are Venmo customers today? And how has the demographic shifted over time? And can you tell us just a little bit more about what that means for the lifetime value of these customers?

Yes. It really has been amazing. It's hard to argue with the success. If you look back over the now 11- to 12-year history of Venmo and you see how this space has just continued to grow, and 30-ish percent to a number of $70 million is just amazing. So it's amazing that it keeps growing. So the -- sort of the journey of the customer, Venmo originally started with college students as the original adopters and enthusiasts back those 11 or 12 years ago. And at 70 million users in the U.S., the reality is Venmo serves customers from every walk of life. Those original enthusiasts who took the program are now in their 30s. They're in the houses, they're forming families and they brought a lot of us along with them along the way, and that's how Venmo has continued to multiply along its journey. Customers are enthusiasts. They love it. This community and social nature, it just has largely spread naturally up till now, and we expect that to keep growing. But who the customer has become from an over-indexing perspective is Venmo over indexes towards millennials. They are digital natives. They're highly educated. They are solidly middle income and rising. They tend to be fairly well banked. They're just starting to invest, and they skew female. And so with this profile, along with the stated needs and desires of what the customers are looking Venmo to deliver to them, we really think the commerce agenda is a powerful way to start. And again, playing off of what Jonathan just said, the crypto phenomenon that has really come out of strong with PayPal, we think, given the audience, this millennial-based, digitally oriented and rising income just starting to invest, we think crypto, of course, is going to play really well with this group as well. So that's kind of where we think in the immediate term. Again, we're at the beginning of a streak here. We're going to be bringing more and more feature function. This year, we're going to ramp more feature function into the Venmo community than literally in the first 11 years collectively.

It's incredibly exciting. Just Jonathan, and talking a little bit more about launching new commerce initiatives. Last year was really exciting for us from an installment pay launch standpoint. Our buy now, pay later solutions were another incredibly successful launch in 2020. And I think it really illustrates the power of our 2-sided platform and our ability to bring solutions both to our merchants as well as our consumers at the same time, which creates very strong network effects. Love to hear your perspective on how we're positioned relative to the competition as it relates to installment pay.