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

Ladies and gentlemen, the program is about to begin. [Operator Instructions] At this time, it is my pleasure to turn the program over to your host, Jason Kupferberg. You may begin.

Thank you very much. Appreciate all of you joining us for this fireside chat session with PayPal. And specifically, we have Frank Keller, who is SVP of Merchant and Payments. So we're always happy to have PayPal at our events but this is especially interesting because for Frank, this is his first fireside chat at an investor conference. So Frank, we're honored. Thanks for being with us.

Thanks, Jason. Looking forward to it.

I thought it would be helpful just since many in the audience have not heard from you in the past, can you just talk a little bit about your background, your time at PayPal and then also touch on your current role and responsibilities?

Sure. Happy to. So I've been with PayPal for a while. I joined in 2011 in Germany, I'm German, as back in the days, heading strategy and business operations for the market. The first thing I did, we actually bought a buy now, pay later player in the German market, BillSAFE, which I integrated. Then I ran the market for a while. It's one of our strongest growing markets, the largest market for PayPal. And after that, I moved to the U.S., held several international roles. I was the VP of Europe. I led Global Inside Sales, which is the distribution to our small and midsized merchants, and I helped basically transforming the sales organization. As we've been acquisitive over the years, we've acquired a lot of different companies, they all had separate sales organizations, and we needed to get out to merchants basically selling a whole platform approach. And so we integrated all of these different sales teams and that was a big strategic effort that I led globally, reshaping our sales organization as you see it today. Also with front book and back book as we've been penetrating especially in our core markets, which is U.S., Europe, Australia, Canada. We've been reaching higher saturation points with Pay with PayPal and our product suite became deeper and so we needed a different sales approach. And then now for 2.5 years, I've been on the product side. I'm now the GM, as you said, of the Merchant and Payments business, basically defining the product strategy, owning the P&L of our merchant-facing products and payments platforms. So the key product that, that entails is our checkout products like Pay with PayPal, Pay with Venmo, it's Braintree, our payment processing platform for very large clients. We're just in the midst of building a similar product for partners and small businesses called PayPal Complete Payments, PPCP. There's payout products like Hyperwallet, which we've acquired. It's also post purchase. We've acquired Happy Returns, which is doing return -- in-store returns. And then building out the product suite for our growth markets, which is China, Mexico, Japan, Brazil. And then all the payment platform capabilities, as I said, we've been acquisitive with different payment platforms and integrating all of that, doing FX and pricing. And before joining PayPal, I had my own start-ups in Germany, 2 IT start-ups. And I have an engineering background. I actually have a PhD in software engineering.

Excellent, wow. And you've got a lot on your plate clearly. So there's plenty of ground to cover here. I wanted to start just on modernization of core checkout, clearly a priority for PayPal. We've been hearing more about that on the earnings call. So just outline for us, what does that modernized experience actually look and feel like for the consumer versus the current state? To what extent does that vary between desktop and mobile, between browser and in-app?

Sure, happy to. So I mean, most of you probably, I hope, are using PayPal for shopping. And what you see is basically the result of 20 years of history of the company. We've been integrating our services and expanding our services over the last 20 years with merchants and with partners. And so the result is a high variation not only of flows that we offer but also of integration patterns. So tech changed. We have different types of technical integration that merchants are sitting on. Regulation has changed, which led to different requirements on the flows. We have entered new verticals, use cases. So we started out with physical goods, then there came digital goods and services. We went into government. We're working now on new verticals like transportation and hospitality and franchisees. And so all of that led to a certain degree of fragmentation in what a consumer experiences as they go on a merchant's website. And then to the next merchant, it might look slightly different. And that's what we're working on right now. And -- which basically means that we need to work through the different merchants and through the different integrations to really make sure that the experience itself is similar but also our harmonizing our flows. And if you look at -- one of the challenges that we get reported a lot is about something doesn't work on the merchant website. And as we've been digging into it, a lot of it is actually an integration issue on the merchant side. So basically, something breaks on the merchant side, and there, it doesn't help that we have a plethora of all these different variations and permutations of integrations. So it's very complicated. So one of the things we're doing is really having a much more simplified approach to integrations, also deprecating some of the old patterns that we have. And excuse me if I go into some technical language here and there, but as an NVP/SOAP and then we have REST integrations and GraphQL and some of these older ones we're trying to eliminate. That obviously leads to why should merchants do it and what's the advantage there. The other thing that we have really gotten feedback on is developers. We have not focused a lot on developer experience. And one of the reasons was actually that we always had a white-glove treatment approach almost for especially large merchants and partners, where we help them integrating. And our developer experience, our tooling infrastructure wasn't great. And about a year ago, we started focusing on that. And I'm really, really happy to see the progress. And one of the examples is Postman is one of the tools out there that's used by 20 million developers, one of the top tools in the industry that help developers to test APIs and to help with the integrations. And they -- we were ranked one of the top 10 APIs actually last year. And even though we've been just new on this, we're actually #7 out of 10, the #1 in fintech ahead of some of our very famous competition that is well known for nice -- nicely done integrations and APIs. So very happy to see the progress. And one of the things that I want to talk about today is we are putting focus on where the pain points are, where the pain points of our customers are. And what we see is if we don't do a scattershot but really our focus on some of these issues, we see progress. The other part I want to talk about is operational effort. It's also something we have not looked a lot at is what is the operational effort we put on merchants in their back end. A lot of the challenges are actually not front-end challenges, there are also back-end processing challenges, which make it hard for merchants to use PayPal. That's one reason I talked about going into new verticals, when you go into a franchisees and so on. It's a very heavy lift for those franchisees like hotels and so on. McDonald's is a great example. And we're simplifying the way the lift they have to do and I see good progress there. Latency, another issue where we've already reduced 40% of latency, but it goes across all of our stack. So if you think about how our architecture is designed, you have different domains. So I have the checkout domain, which is kind of all the front-end stuff and then it goes through risk and it goes through payments and it goes through compliance and all these different domains. In order to bring latency down, what we had to do is really cross-functionally create this objective of bringing latency down and chopping that off across everything. Also, like we're focusing on bringing more of the compute capabilities to the edge, which means closer to the consumer that the payload, meaning the data that is transported over the web doesn't -- isn't that much, and therefore, the speed goes up. So it's a lot of detailed execution that needs to happen to improve the experience. But I'm very, very happy see that we're making progress there. Same on presentment. We want to be earlier presented in the funnel. We've done quite a good job on buy now pay later, and I think we'll talk later about that. We've done a lot on mobile, for instance. We have not had a mobile experience. And I think that it's also something we want to go into later. And last but not least, I think the -- what we're, right now, a lot focused on, I see as a huge opportunity especially as we've made so much progress also on the unbranded side of the house, meaning our payments processing capabilities with Braintree and PPCP. I see there is a huge synergy that we can drive for merchants. If you take the lens of a merchant right now and you take PayPal, the share of checkout ranges depending on the merchant and the use case and so on, let's say, 5% to 25%. But from a merchant perspective, we want to manage all of their payments, and that is the big strategy. And now that you see all consumers, you can also improve some of the things that we see on Pay with PayPal and the branded side of the business because we know those consumers as they onboard, they have a better experience. We have more data. And I think what you will see us talking much more about going forward is actually the data play as we are one of the few players that is in every transaction. And we see all the details there. And this is where our integrated product strategy is also important as we go from prepurchase, meaning offers to consumers, to actually doing the purchase to post-purchase services as Happy Returns, our package tracking.

Okay. Let me pick up on your comments around mobile because that's a topic that comes up a lot. And if you can just maybe hone in on some of the specific efforts that are underway to modernize that PayPal checkout experience in mobile, whether that's mobile, web or in-app.

Yes, sure. PayPal has grown up in the web era, not in the mobile era. And it's why you see a lot of our experiences start and started with a web experience. And we had gaps to mobile experience. Even though a lot of our volumes actually go through mobile, especially when you take an example, a merchant app. The experience is a mobile web browser experience, meaning you go and select PayPal, and then you go out of context, a mini browser pops up and the actual PayPal login experience and so on happens all in that mini-browser, which doesn't feel like it's native in the app. It's embedded. You have a context switch, which leads to drop-offs. And what we've done, we've developed a mobile -- native mobile experience for merchant's apps where the consumer does not leave the context, where it does not have a redirect, where we are going password-less, which is a big, big initiative for us, is to recognize customers on their device so that we know it's them and we don't have to prompt for a password. If we have to do so, we have different means of authentication like onetime passwords and others. We're deploying long-lived sessions across all of our experiences but that's especially important on mobile. We're still, today, we see across the industry a lot of breakage in checkout. So from a development approach, the big shift is to a mobile-first approach. And we have in-house with Venmo, clearly, a mobile leader. They are mobile-only. And that's something that we're learning from and disseminating that across the business. And the other thing that I would say that is important is that we take a much more scientific approach in how we progress with experience improvements. That's something our new Head of Product, John Kim, brought to us and is pushing really hard in terms of high-frequency experimentation. So in the past, we did let's say, we did 5 tests, and now we're doing hundreds of tests to see what wins. We know that only 4 out of 10 that's industry practice of improvements in experience actually create a lift. And what we see with the mobile experience, for instance, we see a 3% to 10% lift. But it's not very clear from the beginning what kind of experience changes will win. So we need to have that scientific approach of fast learning and iteration, having a data-driven approach for creating hypothesis out of that data and testing that out. And then getting nuanced because not every experience is the same for every customer. That's kind of where I see us heading to is how can we be as tailored as possible, Jason, for you in this moment right now on that type of merchant, what you want to do. You have different expectations, right? If you buy jewelry, let's say, for your wife for over $1,000 versus you buy some accessory for $10. It's very different expectations. You're definitely nervous about it, and I think we need to humanize that experience more. And that is something that I see, it's very challenging for merchants to do because they are not experts in checkout. Very, very few are really experts in checkout. And having the data, having the experience, how to optimize their overall checkout, and I mean now not only the Pay with PayPal or Pay with Venmo but their overall checkout experience is something where I see PayPal playing much more in the future.

Okay. Yes. I mean I know we've heard as recently as the latest earnings call, some of the progress that's been made. You're getting more and more. You're starting with the big merchants, right? So more and more of the top 100 are now in some way, shape or form, on some of the latest checkout integrations. So I wanted to drill into that a little bit. I mean how much time, how much money does it take for -- if you're a top 100 merchant, and PayPal says, okay, we want to bring you this modernized checkout experience, what does that look like in terms of implementation time? Do you get pushback on this? And as you do more of these, do you get better at them? Do they go faster?

Yes. Last year was really doing a lot of digging. And I come back to the 20 years of history. Our merchants have been very creative in how they've implemented PayPal and made it work for use cases we never thought in the beginning when the experiences came out. And what we had to learn is that some of the hurdles that we had were that between different version of our checkout integrations, there were incompatibilities. So meaning, a merchant couldn't lift to the latest because a minor feature wasn't available on that newest version. And we've closed most of those gaps. So that was a huge effort going through all the top 100. What we've also seen is a merchant is not a merchant. If you have a very -- let's say, you have a mobile app player that's huge globally around the globe, but has just one use case, it's much easier than you have a conglomerate of retailers that show up as a top 100, but in reality, it's about 100 retailers with 500 use cases, right? And then the degree of variation is very different. And so we're working through those. The upgrades work through value-add, value-add sales basically. And so the strategy that we're shifting to, and this is why the unbranded and the branded and the whole product suite is so important is that we're trying to cross-sell additional capabilities. And as we do so, we upgrade the integration, give you an example. Buy Now, Pay Later is a good one. So a lot of merchants want Buy Now, Pay Later. I think we're going to dig a little bit deeper later. But we've been very successful in actually entering into that market and driving the cross-sell. We see that consumers who adopt Buy Now, Pay Later, spend about 30% more with PayPal and 90% is incremental. So that is the reason for the merchant to say, "All right, I want Buy Now, Pay Later. But now in order to get a great experience, I need to upgrade it." And for instance, we've done a billing agreement integrations, which is basically storing the PayPal credentials on the merchant so that when you go there, you don't have to log in all the time. The problem is now you want to also cross-sell Buy Now, Pay Later. And if you have remembered and stored your funding method, let's say, your Bank of America card, and in this case, you want to use something else, it conflicts with Buy Now, Pay Later because that funding method is stored. Choosing Buy Now, Pay Later is now an option you want to have, even though that's prestored, and that requires an integration change. But the good news is that with the strategy of using Braintree and PPCP as our core platforms, these will be the rails that all future integrations are going through. So meaning whatever kind of new capability PayPal is going to sell and offer to you, Mr. Merchant, we will go and offer that through the Braintree and PPCP rails and technology. And that will make it easier for everybody to consume additional services. While in the past, we've done, as I told you from a sales approach, we've been selling them independently but also the product needs to have that integrated experience.

Right, right. And when a merchant is signing up for modern checkout, are they doing it on their website and in their app at the same time, typically, these top 100? Or are they doing it more piecemeal?

Yes. As I told you, it really depends on the merchant, what they focus on. But with our mobile native SDK, we're now very systematically going to every merchant that offers a mobile app, make sure they get the best integration. And they have -- like we're in the game of conversion uplift. And so the merchants are usually quite receptive to eliminate any kind of breakage later in the flow. Because from a merchant perspective, if you have breakage in checkout, it's very, very expensive. You've done all your marketing. You have the right inventory. You convince them that they should put things in their basket. Now they want to buy it. So you've done all the work and now it doesn't work, right? And so you want to get every bp out of -- every basis point out of this in order to make this happen. So yes, merchants are upgrading across the board, and we need to show them that it drives value, and then they are going to do it.

Right, right. And I think some of the numbers that were mentioned on the earnings call, what was it, a 1% to 3% uplift in checkout for those that are on the new experience? I mean everything you're saying makes it certainly seem like you expect this will help PayPal to actually take share in the core checkout market. Is that a fair assumption?

Yes. PayPal in general, as I said, is a conversion uplift. So when you compare to traditional cards, we have around 600 basis points better conversion rate, which means translated, that like out of 100 customers, we approve 6 more, right, out of 100 purchases. And on top of that, we've seen, with mobile for instance, 3% to 10% uplift with some of -- if you think about all the optimizations that we're doing, touched upon them already, it's the integration, which means the way how it is expressed, not -- the way how the different flows is on us. We have all these different permutation, that's focus of the team. Merchant doesn't have to do much here. This is behind the scenes. Latency is behind the scenes. So some of the experienced uplifts require the merchant to do something and some of them actually don't. And we're focused on both.

Okay, okay. I'll ask you one more on modern checkout and then we're going to jump over to Braintree. So I guess, so if we think about going forward, more of your merchants are going to be on modern checkout. How do you make consumers aware, right? Is that something that PayPal is going to do or do you do that jointly with the merchant? Because clearly, it seems like there'll be some real benefits to the consumer, but unless or until that consumer happens to go to that merchant site or app and sort of almost discovers it by accident, how do you create that awareness so that you can drive the adoption of the new checkout experience from the consumer perspective?

Yes. On the merchant side, we do co-marketing programs, especially if you think about we're introducing Buy Now, Pay Later, for instance, where we go upstream and do upstream present -- and we do banners on the merchant's website so that they know that they got that type of experience. We're also playing around with what kind of messaging we can have actually on the button that is dynamic to your situation. We are working on, in general, upgrading our value for merchants. And again, if you think about pre-purchase, purchase, post-purchase, these general additional value props of having better rewards, having offers, having Buy Now, Pay Later, i.e., meaning it's more flexibility in the purchase. And then also post-purchase. Package tracking is something our merchants are quite interested in, for instance, because it allows them -- a lot of the questions merchants get is, where is my item and where is my money. And we get those 2, and we can help them if we show through our channels the consumer where the package is, then they don't call the merchant. But another benefit for the merchant is as they get protection claims, if they're participating in our program and deliver us the data that they have shifted and what it is, it reduces their operational hassle because a lot of the claim handling has already happened so they don't have to do anything because they have provided us a proof of shipment. What we're seeing here, for instance, super interesting is that now merchants can actually, instead of doing the claim on the transaction, claim handling, they can go on the line item. Imagine you have bought 5 different things but only 1 pair of shoes didn't arrive. So you don't have to claim on the whole transaction but on that line item detail. And that is the sophistication that we're getting into. As those value-added things are happening that the merchant is happy about, they are also promoting our services more. And then the app is for us, of course, a key outlet, 50% of our customers are using it. We see a lot of engagement that is driven through that as we can offer -- create offers and so on through the app. And we're focused on marketing that as well.

Okay, understood. It all makes sense. So yes, let's switch over to Braintree, always a hot topic. Maybe just if you can sort of succinctly articulate what you think the real core value proposition of Braintree is for merchants as well as a bit on your go-to-market strategy and where that stands today.

Absolutely. We're super happy with the progress of Braintree. Braintree started out as a payments gateway, I would argue mostly as a mobile payments gateway. But it has really grown into a full stack processor that's today serving the most sophisticated digital platforms that are around, like super high demand customers, where we actually process in some share exclusively or are the primary processor for them. Take, for example, Live Nation, Airbnb, Uber, DoorDash, in Brazil, iFoods. So we've made huge progress with these large global brands in providing full stack processing, alternative payment methods, pass-through pricing, payments optimization, off-rate optimization, treasury reconciliation. So it's really a full stack service. We're in 50 markets across U.S., Europe, Australia, Canada, Brazil, 230-plus currencies. Our Braintree vault that stores consumer credentials, financial instruments and other customer data is actually one of the most sophisticated in the industry. We have superior auth rates where we win a lot of actually deals based on our auth rate capabilities. It also enables different use cases like where we keep the merchant safe. So they have a, for instance, the loyalty program, and they want to pass on information in a PCI-compliant way. We help them forwarding those credentials, and that's a key capability for us. It also, as I said, serves as a platform for our own APMs with PayPal and Pay with Venmo as an integration -- way to integrate and provide the best possible experience. And as we're doing all of that, we're also generating a lot of data and with very sophisticated ML models and AI that fuels risk decisioning, auth rate optimization, cost optimization for merchants. So it's really a fantastic platform. We had so much growth that over the last 2 years, we've put a lot of effort into actually scaling up the core capabilities, integrating it more into core PayPal and something my teams right now are super focused on. Another thing that I'm super passionate about is orchestration, which means merchants see PayPal as their primary point of interaction, right? We have a plethora of services and -- but they also need backup processor, right? They need backup PSPs. They need PSPs in markets that we don't serve. And that's where our orchestration and forwarding capabilities come into play. And I think we'll talk about PPCP later, which is our new platform for SMB and partners.

For sure, for sure. So as Braintree's capabilities expanded over time, tell us a bit about how the competitive landscape has evolved. This comes up a fair amount in investor conversations. We naturally think of an Adyen or a Stripe kind of being on that short list alongside Braintree. So how does Braintree really differentiate itself?

Yes. As I said, the huge advantage that we have is we have 20 years of relationship with a lot of merchants. We are integrated in 80-plus percent of the top 1,500 merchants in our core markets. And we're leveraging that relationship, create bundled capabilities. We're really this trusted partner out there that can serve Pay with PayPal, Pay with Venmo, Buy Now, Pay Later, post-purchasing capabilities out of one hand. And those packaged deals are sticky. They create a nice value prop. They provide us the ability to negotiate top of the stack placement. And we're strong in the U.S. but we also expand internationally. Brazil is a core market that we right now expand. And we also differentiate through value-added services. I talked about orchestration. One of our approaches is really having an open ecosystem, not a closed ecosystem, because we fundamentally believe merchants need choice, and choice has been always a core principle at PayPal. And so merchants can play with different players and we're the facilitator of all of that. And I think with our whole suite in pay in but also payout, we acquired Hyperwallet, as you know. We also have our on PayPal -- our payout capabilities with Mass Pay and so on. We have highly differentiated capabilities. What we're working on right now and that's still in the making, is bringing them all together so that it's, for the merchant, operationally easier to handle and they don't have to log in to different portals and so on. That's still ongoing. But Hyperwallet is also a very strong capability.

So how much of the Braintree business is international? And are there specific international markets you would highlight as seeing particular degrees of strength for Braintree?

Like a lot of our -- like what we call global accounts are residing in the U.S., but they are going internationally, really around the globe, almost any market. Take Uber, for example. And so we are very strong in the U.S. We're also in Canada. We are also in Australia. We're making strong progress in Europe. And Brazil is a market where I've seen fantastic growth. We've also taken share from not only incumbents but also the 2 that you've mentioned. So we're winning deals, again, Adyen and Stripe, especially through our bundled value position and our integrated offering.

Okay. I mean last year, if we look at the unbranded processing for PayPal, it was 40%-plus volume growth there in 2022, obviously a big number, and Braintree is a large piece of that. And at the time, we knew that there were some large merchants obviously ramping during the course of 2022. So if you can just talk about some of the key drivers maybe of Braintree's success last year. And then how should we think about the growth trajectory for Braintree in 2023?

Yes. I mean we're now processing more than $400 billion in volume on Braintree. So it's a substantial platform, right? We've won, over the last couple of years, especially last year, a couple of very, very large deals, especially in the travel and ticketing industry as well. And some of the things that we are a bit cautious about this year is lapping those major deals. But also lapping, we've seen a lot of uptick in the travel and ticketing industry. As people were coming out of COVID, everybody wanted to travel, everybody wanted to go to concerts. We see the huge spikes on Live Nation and people buying Taylor Swift tickets and others. And so we're a little bit cautious about that lapping into this year. But I must say, huge kudos to our sales teams because the pipeline is super strong. And we had a really good start into the year, and I'm very pleased with the successes that we're seeing, even though we've been a little bit cautious about that lapping of the massive growth that we saw last year. I feel we're really well positioned. And as we're enhancing our orchestration and machine learning capabilities, one of the things I see us going next into more is actually omnichannel, meaning in-store. And what I mean by in-store is not going after the in-store pure play but rather those merchants that have a strong online offering but also an in-store property. Because they want more out of one hand, they want both businesses to be served, because their customers are shopping in-store and are shopping online, and that's something we're, right now, working on. We're having the first pilot merchants going live as we speak, and we'll see much more growth. And there is a much higher addressable market also in that space. But again, this is where merchants need the sophistication of playing truly omnichannel, playing truly also in the future, how do they sell not only on their website, how do they sell, for instance, on social and so on. And I think democratizing and linking it back also to checkout, democratizing our one-click checkout experiences through Braintree but also our new SMB and partner platform is something that -- where we want to bring those things together. And leverage really is centered -- everything is centered around a holistic customer identity. So we recognize, Jason, no matter where you buy with what you want and need so that we can reduce your friction as you go through the checkout on different merchants. And that is what I'm really, really excited about, is that we break the silos between merchants and provide them more seamless experience across different merchants. Something we've done with PayPal, i.e. Pay with PayPal, but what we also now are bringing to almost every merchant with our processing platforms.

So let's actually segue over to PPCP, which is the latest new acronym, PayPal Complete Payments. You touched on it a little bit. You're taking the Braintree-like solution for unbranded processing to the SMBs. And I think that's starting in the first half of this year. So just touch on the market opportunity there as well as the sales strategy, both for new and existing merchants. Let's start there.

Absolutely. So it's a huge market, right? $750 billion total addressable market roundabout. And what Braintree really is good at is being very sophisticated and nuanced in the needs of those merchants. What it doesn't -- isn't specialized on is supporting especially large-scale partner platforms and helping them to onboard hundreds of thousands and millions of merchants at scale, providing KYC, providing us taking the risk, them taking the risk, all these different models. And that is what PayPal Complete Payments is doing is it is much simpler to integrate. It's much more cohesive. It is focused on scale and number of merchants. It is focused on leveraging the strength of the PayPal platform that is around the globe. And yes, we start in the U.S. We have first pilots live. We're super excited about the results that we're seeing. We were -- we had focused last year on getting capabilities out like vaulting that we know from Braintree, all the different third-party payment methods that merchants need. And you asked about the sales approach. The approach is 2-tiered. Our -- especially the inside sales teams will lead with that platform going forward, selling all of our capabilities to SMBs and mid-market. Also Pay with PayPal, also the integration upgrades. And the true enablers is partners. I don't know how much you are aware but a fairly large share of our volumes go through partners. These are shopping platforms like Bigcommerce, Adobe and others. And as we are providing those services for those partners, they also get their integrations upgraded. And so we have to make sure those partners are enabled and then our sales teams actually co-sell with the partner in going out to merchants, addressing them directly, addressing them through the marketing channels of our partners. And that has been always, for PayPal, a great leverage, and we're repeating that principle for PPCP. It's also something where we deprecate some of our legacy products. We have HSS, Hosted Solutions. We have PayPal Plus, especially in Mexico and Germany. Those are legacy products that we're deprecating and replacing with PayPal -- with PPCP as the more modern platform that's also scalable for new capabilities. And Pro is another example where we've -- where we haven't invested in the past and so you'll see us having really end-to-end capability in full stack payment processing for our small merchants as well.

Okay. How would you -- how long would you estimate it takes until PPCP can potentially move the needle on PayPal's overall TPV? And are these initial pilots and the broader rollout just going to be in the U.S.? Or how do you kind of phase this overseas potentially as well?

Yes, we are launching in the U.S. Europe is actually the second half of the year, and I expect that to really roll out across all of our key markets. I expect actually a huge driver out of this. We -- this is where our stronghold is. We've always been strong with small businesses and mid-market businesses, very strong relationship. We're very trusted. And we haven't served them in the full stack processing part that well. We had early products, think about WPS, one of the first methods for merchants to accept payments in general on their website. But it's outdated. And replacing those old products with new capabilities and doing more for our merchants, especially together with partner platforms, is where we'll see huge amount of growth. And these could be very large-scale platforms, these could be small platforms. So we'll go across and I think we'll see moving the needle quite a bit.

Okay. And I guess do your efforts start initially with the existing base of SMB merchants that you already have converting into PPCP? Or not just that?

It's both. It's front book and back book. The back book is really focused on upgrading existing experiences and deprecating old experiences to get the best-in-class consumer experience out there. And the front book is really opening up new opportunities. And this makes it easier to distribute our own payment brands, Pay with PayPal, Pay with Venmo.

Right, right. So we've covered a lot of ground. We've talked about a lot of product initiatives that are pretty active right now for PayPal. I mean does the company have the quality and the quantity of engineering talent that's needed to execute on these key initiatives?

Talent is actually something I'm super excited about. I have -- we have brought in really, really strong industry talent. And I would say we're driving, right now, a massive cultural change of getting the best-in-class experts in the roles. So under me, we have product line leaders. We have somebody from Braintree who's been a long-tenured expert in driving payment processing with one of the largest platforms out there. Same on PPCP. On checkout, we brought somebody in who's been on the merchant side, knows exactly -- has client empathy and understands really the merchant and what they need. In go-to-market, I brought in somebody over, for instance, from our sales teams because the person really knows what it means to distribute through our ecosystem. And we're -- on my team, my [ Knicks ] bench, I feel really, really solid. And they're driving a lot of upgrade of our capabilities and also from a talent perspective. I would say, the biggest shift is we're super focused, we're super client-centric. We have a lot of empathy and we're detail-oriented. Detail matters. Attention to detail matters. It's the small things that throw customers off, and getting that right is very important. You need the right people that are able to do that, to not accept, "Oh, this is how we've done it the last 20 years." No, this is what the customers expect now and also have some level of foresight, where is everything heading and how can we bring our assets together? Think about the $400 million that I talked about on Braintree. Now we do the same on PPCP, and we have Venmo and PayPal. These are massive assets. We have all of our payouts capabilities. We know billions of customers actually around the world, bringing all of that together, having a data-centric culture and bringing -- upgrading our experiences is what we're doing. I would say the huge difference between last year and this year is we've gone through restructuring, which has helped us because we had so many people coming in and more people create more complexity. And as we have been refining our internal structures, training more end-to-end empowerment across all of the business, so the person leading, right now, leading Braintree, does it end-to-end and brings all the different functions. The person leading checkout does it end-to-end. The person leading PPCP does it end-to-end, versus you need a bunch of people to come in together to make it happen. I mean we still have that but it's empowerment. And you need the right talent. And as -- like we, people have let people go. There's a lot of great talent out there that are actually super hungry to join our mission. And we're doing the upgrade on the engineering side. We're doing it on the product side. We're very, very focused on data and AI right now. We have industry-leading machine learning and data experts. The reality is we have used a lot of that actually for risk and fraud management and auth rate optimizations and so on. And now we're getting that also into our experiences. And that's kind of what we're focused on, is not using just our capability internally around data and ML but really expressing it so that our consumers and merchants are directly experiencing those things.

Well said. Well, we are out of time. I think we covered a lot of topics here, and it's been super insightful. Frank, we really appreciate you joining us and sharing all your thoughts on what's going on within the product organization. So thanks for your time, and thanks to everyone who listened into the presentation. Our next session will be 1:15 Eastern with privately held Socure. So thank you, everybody.