PayPal Holdings, Inc. (PayPal) operates as a technology platform that enables digital payments and simplifies commerce experiences on behalf of merchants and consumers worldwide.
PayPal is committed to democratizing financial services to help improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world.
PayPal’s payment solutions enable the company’s customers to connect, transact, and send and receive payments...
PayPal Holdings, Inc. (PayPal) operates as a technology platform that enables digital payments and simplifies commerce experiences on behalf of merchants and consumers worldwide.
PayPal is committed to democratizing financial services to help improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world.
PayPal’s payment solutions enable the company’s customers to connect, transact, and send and receive payments, whether they are online or in person. The company provides proprietary payment solutions accepted by merchants that enable the completion of payments on its platform on behalf of its customers. The company operates a global, two-sided network at scale that connects merchants and consumers with 426 million active accounts (consisting of 391 million consumer active accounts and 35 million merchant active accounts) across approximately 200 markets as of December 31, 2023.
The company offers its customers the flexibility to use their PayPal or Venmo accounts to send and receive payments for goods and services, as well as the ability to transfer and withdraw funds. The company enables consumers to exchange funds more safely with merchants using a variety of funding sources, which may include a bank account, a PayPal or Venmo account balance, PayPal and Venmo branded credit products, including its installment products, a credit card, a debit card, certain cryptocurrencies, or other stored value products, such as gift cards, and eligible rewards. The company’s PayPal and Venmo products also make it safer and simpler for friends and family to transfer funds to each other. The company offers merchants an end-to-end payments solution that provides authorization and settlement capabilities, as well as instant access to funds and payouts. The company helps merchants connect with their customers, and offers tools and insights to help increase sales, power omnichannel experiences, and manage risk.
The company earns revenues primarily by charging fees for completing payment transactions for its customers and other payment-related services, which are typically based on the volume of activity processed on its payments platform. The company also generates revenue from customers for currency conversion, for instant transfers from their PayPal or Venmo account to their bank account or debit card, and to facilitate the purchase and sale of cryptocurrencies. The company also earns revenue by providing other value-added services, which primarily comprise revenue earned through partnerships, interest and fees from its merchant and consumer credit products, interest earned on certain assets underlying customer balances, referral fees, subscription fees, and gateway services.
The comopany measures the scale of its platform and the relevance of its products and services to its customers through certain metrics, including total payment volume, payment transactions, and active accounts:
Total payment volume (TPV) is the value of payments, net of payment reversals, successfully completed on the company’s payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
Number of payment transactions are the total number of payments, net of payment reversals, successfully completed on the company’s payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on the company’s platform, not including gateway-exclusive transactions, within the past 12 months. A platform access partner is a third party whose customers are provided access to PayPal’s platform or services through such third-party’s login credentials, including individuals and entities that utilize Hyperwallet’s payout capabilities. A user may register on the company’s platform to access different products and may register more than one account to access a product.
In late 2023, the company reorganized its operations to be more closely aligned to the customers it serves—consumers, small businesses, and large enterprises—and to help enable its teams to deliver more seamless and differentiated end-to-end experiences.
Merchant Value Proposition
The company partners with its merchants to help grow and expand their businesses by providing global reach and powering all aspects of digital checkout. The company offers alternative payment methods, including access to credit solutions, provide fraud prevention and risk management solutions, reduce merchant losses through proprietary protection programs, and offers tools and insights for utilizing data analytics to help merchants attract and engage customers and improve sales conversion. The company employs a technology and platform agnostic approach intended to enable merchants of all sizes to quickly and easily provide digital checkout online, including through PayPal-branded checkout and unbranded card processing (primarily consisting of Braintree), as well as in person at the point of sale, across all platforms and devices, and to securely and simply receive payments from their customers.
PayPal’s payments platform enables merchants to accept all types of online and in person payments, including those made with the PayPal and Venmo digital wallets, the company’s consumer credit products, credit cards and debit cards, and competing digital wallets, as well as other popular local payment methods. The company’s diversified suite of products and services is tailored to meet the needs of merchants regardless of their size or business complexity. The company offers a seamless, omnichannel solution that helps merchants manage and grow their business. By offering simplified and personalized shopping experiences for consumers, the company helps merchants drive increased engagement and sales conversion.
The company offers access to merchant financing products for eligible small and medium-sized businesses through the PayPal Working Capital and PayPal Business Loan products, which it collectively refers to as its merchant financing solutions. The PayPal Working Capital product allows businesses to access a loan or cash advance for a fixed fee, based on their annual payment volume processed by PayPal. The PayPal Business Loan product provides businesses with access to short-term financing for a fixed fee or interest based on an evaluation of both the applying business as well as the business owner. In the United States (U.S.), these products are provided under a program agreement with an independent chartered financial institution. The company’s merchant financing solutions enable it to deepen its engagement with its existing small and medium-sized merchants and expand services to new merchants by providing access to capital that may not be available from traditional banks or other lenders.
The comopany generates revenues from merchants primarily by charging fees for completing their payment transactions and other payment-related services. The company also earns revenues from interest and fees earned on its merchant loans receivables.
Consumer value proposition
The company focuses on providing affordable, convenient, and secure consumer financial products and services intended to facilitate the management and movement of money. The company provides consumers with a digital wallet that enables them to send payments to merchants more safely using a variety of funding sources, which may include a bank account, a PayPal or Venmo account balance, its consumer credit products, a credit card, a debit card, certain cryptocurrencies, or other stored value products, such as gift cards, and eligible rewards.
The company also offers consumers P2P payment solutions for domestic and international transfers through its PayPal, Venmo, and Xoom products and services. The company’s Venmo digital wallet in the U.S. is a leading mobile application used to move money between its customers and to make purchases at select merchants. The company’s Xoom international money transfer service enables its customers to send money to people around the world in a secure, fast, and cost-effective way. P2P is an important source of customer engagement and also serves as a customer acquisition channel that facilitates organic growth by enabling potential users to establish active accounts with PayPal or Venmo at the time they make or receive a P2P payment.
The company also focuses on simplifying and personalizing shopping experiences for its consumers by offering tools for product discovery, price tracking, saving through deals and offers, convenient package tracking, and redemption of shopping rewards, which help its merchants to increase consumer engagement and sales conversion.
The company offers credit products to eligible consumers in certain markets as a funding source at checkout. The company’s consumer credit offerings include its buy now, pay later products in the U.S., United Kingdom (U.K.), France, and Germany, among other markets, and in Japan through its Paidy brand. A key attribute of its buy now, pay later products is the absence of interest or consumer late fees for missed payments in most of the geographies where the company offers them. Further, the company offers interest-bearing installment products for consumers in the U.S. (issued by an independent chartered financial institution) and in Germany. In the U.S., consumers may apply for the company’s PayPal- and Venmo-branded consumer credit cards and its PayPal Credit revolving consumer credit product, which are offered through a partnership with an independent chartered financial institution. The company offers a PayPal-issued PayPal Credit product in the U.K.
The company has expanded its consumer value proposition through enhancements to the PayPal and Venmo digital wallets, which provide functionality to enable consumers to more easily check out, explore deals and offers, track and redeem rewards, and to transact with certain cryptocurrencies, including buying, holding, selling, sending, and receiving them in certain markets. The comopany generates revenue from consumers from: foreign currency conversions, instant transfers from their PayPal or Venmo account to their bank account or debit card, and facilitating the purchase and sale of cryptocurrencies; interest, fees, or other revenue from its credit products; and other miscellaneous fees.
Protecting Merchants and Consumers
Protecting merchants and consumers on the company’s payments platform from financial and fraud loss is important to successfully compete and sustainably grow its business. Fraudulent activities, such as account takeover, identity theft (including stolen financial information), and malicious activities by counterparties, represent a significant risk to merchants and consumers, as well as their payment partners. In addition to the protections afforded by applicable law, the company provides merchants and consumers with protection programs for certain purchase transactions completed on its payments platform. The company’s protection programs help protect both merchants and consumers from financial loss resulting from, among other things, counterparty non-performance.
The company’s ability to help protect both merchants and consumers is based largely on its proprietary, end-to-end payments platform and its ability to utilize the data from both sides of transactions on its two-sided network, specifically from buyers and sellers and from senders and receivers of payments. The company’s ongoing investment in systems and processes is designed to enhance the safety and security of its products and reflects its goal of having PayPal recognized as one of the world’s most trusted payments brands.
Strategy
The key elements of the company’s strategy include growing its core business; expanding its value proposition for merchants and consumers; forming and expanding strategic partnerships; and seeking new areas of growth.
Technology
The company’s payments platform utilizes a combination of proprietary and third-party technologies and services intended to facilitate transactions efficiently and securely between millions of merchants and consumers worldwide across different channels, markets, and networks. The company’s payments platform connects with financial services providers around the world and allows consumers to make purchases using a wide range of payment methods, regardless of where a merchant is located. Consumers who use the company’s payments platform can send payments in approximately 200 markets around the world and in approximately 150 currencies, withdraw funds to their bank accounts in 56 currencies, and hold balances in their PayPal accounts in 24 currencies.
The company has developed intuitive user interfaces, customer tools, transaction management databases, and payment network integrations on its platform designed to enable its customers to utilize its suite of products and services. The company’s payments platform, open application programming interfaces, and developer tools are designed to enable developers to innovate with ease and offer robust solutions to its global ecosystem of merchants and consumers, while at the same time helping to maintain the security of its customers’ information.
The technology infrastructure supporting the company’s payments platform is designed to simplify the storage and processing of large amounts of data and facilitate the deployment and operation of large-scale global products and services in both its own data centers and when hosted by third-party cloud service providers. The company’s technology infrastructure is designed around industry best practices intended to reduce downtime and help ensure the resiliency of its payments platform in the event of outages or catastrophic occurrences. The company’s payments platform incorporates multiple layers of protection for business continuity and system redundancy purposes and to help mitigate cybersecurity risks. The company has a comprehensive cybersecurity program designed to protect its technology infrastructure and payments platform against cybersecurity threats, which includes regularly testing its systems to identify and address potential vulnerabilities. The company strives to continually improve its technology infrastructure and payments platform to enhance the customer experience.
Research and Development
The company’s total research and development expense was $1.6 billion in 2023.
Government Regulation
Among other regulatory authorities, the Luxembourg Commission de Surveillance du Secteur Financier (the CSSF), the U.K. Financial Conduct Authority (FCA), the Australian Prudential Regulation Authority, the People’s Bank of China, the Monetary Authority of Singapore, the Reserve Bank of India, the Central Bank of Russia, and the Central Bank of Brazil have asserted jurisdiction over some or all of the company’s activities in their respective jurisdictions.
The company serves its customers in the U.K. through PayPal U.K. Limited (PayPal U.K.), a wholly-owned subsidiary that is subject to regulation as an electronic money institution in the U.K. by the FCA. PayPal U.K. is authorized and regulated by the FCA from November 1, 2023. The company serves its customers in the EU (and the U.K. through October 31, 2023) through PayPal (Europe) S.à.r.l. et Cie, S.C.A. (PayPal (Europe)), a wholly-owned subsidiary that is licensed and subject to regulation as a credit institution in Luxembourg by the CSSF.
The company’s U.S. consumer short-term, interest-free, installment product is subject to federal and state laws governing consumer credit and debt collection, and PayPal holds multiple state licenses as the lender for this product. Paidy, Inc. holds multiple licenses for the issuance of its consumer installment products in Japan and is registered with the Ministry of Economy, Trade and Industry as a Comprehensive Credit Purchase Intermediary. In Australia, PayPal Credit Pty Limited offers a consumer short-term, interest-free, installment product that is exempt from regulation by the primary consumer credit legislation, but is subject to other laws which cover the provision of financial services, credit reporting, debt collection, and privacy. PayPal’s consumer short-term, interest-free, installment products in the U.K., France, Germany, Spain, and Italy are generally exempt from primary consumer credit legislation; however, certain consumer lending laws, consumer protection, and banking transparency regulations apply to this activity.
The company’s U.S. consumer interest-bearing installment product is subject to federal and state laws and is offered by an independent chartered financial institution. PayPal’s interest-bearing installment product for consumers in Germany is subject to applicable local laws, such as consumer (lending) laws, consumer protection, or banking transparency regulations. These loans are originated by PayPal (Europe).
PayPal and Venmo co-branded consumer credit cards and the PayPal Credit revolving consumer credit product are issued by an independent chartered financial institution in the U.S., and are subject to laws and regulations governing these programs. PayPal Credit in the U.K. is a regulated, revolving consumer credit product subject to applicable local laws and regulations.
The company’s U.S. merchant lending products are subject to federal and state regulations and are offered by an independent chartered financial institution. The company’s merchant lending products offered in Germany and France are subject to the laws of Luxembourg and certain local laws, and its merchant lending product offered in the U.K. is subject to U.K. regulation. The loans offered to European and U.K. merchants are originated by PayPal (Europe) and PayPal U.K., respectively. The company’s merchant lending product in Australia is subject to the laws of Australia and originated by PayPal Credit Pty Limited. As a larger market participant of remittance transfers, the company is subject to the direct supervisory authority of the Consumer Financial Protection Bureau (CFPB).
PayPal is subject to anti-money laundering (AML) laws and regulations in the U.S. and other jurisdictions, as well as laws designed to prevent the use of the financial systems to facilitate terrorist activities. The company’s AML program is designed to prevent its payments platform from being used to facilitate money laundering, terrorist financing, and other illicit activities, or to do business in countries or with persons and entities included on designated country or person lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Controls and equivalent authorities in other countries. The company’s AML and sanctions compliance programs, overseen by our AML/Bank Secrecy Act Officer, are composed of policies, procedures, and internal controls, and are designed to address these legal and regulatory requirements and assist in managing money laundering and terrorist financing risks. PayPal is subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in the jurisdictions in which the company operates.
History
PayPal Holdings, Inc. was founded in 1998. The company was incorporated in Delaware in 2015.
