PayPal 2017 Q2 Conference Call Notes

We have completed a rollout of choice across our on-boarding, servicing and checkout experiences in the United States and over 13 million customers have opted into choice. We have the data from millions of customers over multiple quarters. We are beginning to see clear trends resulting from our choice initiative. Choice is both simplify and clarify our customer experiences, which has meaningfully reduced the volume of calls into our customer service centers.

Despite our transaction volumes increasing by more than 20%, our net call volume into our global operations are down year-over-year. The results of choice on the numerous other product improvements, we delivered significant OpEx savings over the course of our three-year finding horizon. More importantly, customers who have opted into choice have meaningful increases in overall satisfaction.

As a result, choice is driving a significant reduction in churn and a meaningful lift in overall engagement. And consistent with last quarter, the impact on our funding cost continues to remain well within our expectations. Based on the success of choice in the U.S., we are pleased to be expanding this rollout into Australia, Canada, The UK and Japan later this year. Choice will also help to expand PayPal’s presence in our customers’ lives. These opportunities are driven by the land mark partnership agreements we have announced with technology companies, financial networks, wireless carriers and financial institutions around the world.

  • PayPal President and CEO Dan Schulman

I thought the major theme of PayPal’s 2017 Q1 conference call was how PayPal is offering its customers more choices than ever before and how overwhelmingly consumers are responding. These choices PayPal can offer its customers comes from all the partnerships it has made recently with payment networks, telecoms, big tech companies, big banks, etc. At one point Schulman estimated during the call that the company had struck 24 partnerships in the past 18 months. Because PayPal is neutral - a veritable Switzerland in the payments industry - it can make partnerships with virtually anyone and offer customers whatever they want. Why? Because as Shulman said in conference call:

We are an open platform and a suite of services, both branded and unbranded, that’s operating system- and device- and technology-agnostic. And so … very importantly, we’re a neutral third-party platform. So we don’t compete with any of our merchants or partners. We are allies in advancing digital payments.

In other words, account holders can use PayPal on any device, operating system, through any bank, etc. that they want. The same cannot be said for Apple Pay, Samsung Pay, Android Pay, Google Wallet, Zelle, etc. That’s PayPal’s secret weapon and is what Schulman seemed to highlight as the secret to PayPal’s growth this quarter.

Let’s go through some more highlights of the call:

• New bank deals with Bank of America, Citibank, and JP Morgan Chase. Not sure about Bank of America, but Citi and Chase credit card holders can now redeem rewards via PayPal, similar to Discover’s earlier deal.

• More on One Touch: 60 million consumers, 5.5 million merchants, increasing by 7 million consumers and 500K merchants since last quarter. Increased mobile payment volumes 50% YOY to ~$36B. Just a little less than a third of payment volume now originates on mobile device. One Touch also drives user engagement which keeps churn down and helps net adds of active accounts.

• Expanded Visa deal to include Europe.

• 1M joint account holders have now enabled PayPal payments on Facebook Messenger

• New partnership with Baidu Wallet, allowing Baidu Wallet users to use PayPAl at merchants outside of China. Not much but a step in right direction to getting foot in door in China maybe.

• Pay with Venmo rolling out now. Merchants like Lululemon and Forever 21 already accepting Venmo and management said it expects “millions” of merchants that accept PayPal to be accepting Pay with Venmo by year’s end

• Venmo facilitated ~$8B of TPV, up 103% year over year.

That’s about all I got. This was a very strong quarter. The company just beat its guidance and raised guidance for the year … again.

This is a management team that knows exactly what they want to accomplish and a have a clear vision on how to accomplish their goals. Shares are up almost 60% YTD but I don’t think it’s done going up yet though I wouldn’t be surprised if it took a breather. JMHO, of course. Please remember I am not an analyst, just a regular investor with pedestrian returns.

As always, I would love to hear others’ comments, questions and thoughts.

Many thanks to Seeking Alpha for providing a full transcript to the conference call at…

MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at


I’m seriously tempted to get some PayPal to go alongside my Square just as I am getting tempted to get some Wax along side my SHOP.


Just to expand a bit on what I wrote above, this is from an article I wrote that just got published. While writing about the benefits PayPal gets from these partnerships, I wrote:

PayPal reaps many advantages from these deals including new accounts, less churn, lower costs, higher customer satisfaction, and greater user engagement across its platforms.

New accounts. This quarter, PayPal increased its active accounts to 210 million, a 12% increase year over year. But the new account growth story doesn’t end there as new accounts are now growing at an ever accelerating pace. This quarter the number of active accounts increased by seven million over the prior quarter, the highest number of new accounts added in a single quarter since July 2015, when PayPal was spun off from eBay.

Schulman also pointed out an underappreciated way that choice is driving new accounts: the streamlined application process. Now, if a customer just wants to have a credit or debit card linked to a PayPal account, they are not required to add additional information or sign up for PayPal Credit.

Less churn. Schulman said that choice is driving a “significant reduction” in churn. Customers have more places, both physical and digital, to use their PayPal accounts, and so they are finding fewer reasons to abandon the platform.

Lower costs. PayPal has already seen some of its new partners (Wells Fargo and HSBC Holdings were specifically mentioned) actively market PayPal to their customer bases. New partners doing some of the heavy lifting for marketing means that PayPal can spend less to attract new customers, meaning that net new active accounts will come at overall lower acquisition costs. Schulman said, “it’s really kind of sort of a 1, 2 punch that’s positive for us now, but especially as we look forward.”

Higher customer satisfaction. Schulman discussed “meaningful increases in overall satisfaction” on the earnings call. One way PayPal measures this metric is by the number of calls into its customer service centers. Management noted that even though PayPal’s transaction volume increased to almost 1.8 billion transactions this quarter, a 23% year over year increase, the volume of calls to its service centers was “meaningfully reduced.”

Greater user engagement. PayPal management said the added choice provided a “meaningful lift” in overall engagement. This quarter, active accounts averaged 32.3 transactions over the trailing twelve months, good for a 10% increase year over year. But Schulman believes this will move much higher once its new partnerships and Pay with Venmo kick in (P2P payments are not included in this metric). He estimated PayPal can ultimately get its customers using the platform two times a week in the next few years.

Read the entire article at…

MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at


As always, I would love to hear others’ comments, questions and thoughts.

Just 1 thought for now, Matt, which also explains why you don’t get many thoughts/questions/comments: Your summaries are second to none. And I thank you–again.

6.8% PYPL

Wow, that’s very kind, Dan. Thanks. You’re no slouch yourself, you know. But to paraphrase what Ant said earlier, just happy I can contribute back to the board sometimes.

8.4% PYPL