PayPal 2018 Q3 Conference Call Notes

I thought one of the biggest themes of PayPal’s quarter was this double-whammy: More active users that are using the platform more. This was one of the first things CEO Dan Schulman led this quarter’s conference call with:

As pleased as I am with our financials, the highlight of the quarter was our growth in net new actives and engagement. We drove a record 9.1 million net new active accounts, surpassing 254 million customer accounts by the end of the quarter. We added 34 million net new actives to our platform in the past 12 months, averaging almost 3 million net new customers per month. During the quarter, we drove 2.5 billion transactions growing 27%. Our engagement per active user increased 9.5% to 36.5 times per year.

The user growth is accelerating! Which gives credence to the fact that PayPal is developing a network effect moat, a competitive advantage that grows more valuable the larger its network gets. This feeds into a virtuous circle: The more consumers that join PayPal’s platform, the more merchants will want to accept it as a method of payment. The more merchants that join, the more attractive platform it becomes for consumers. And on and on it goes…

One of the keys to PayPal’s growth are the partnerships it is securing. This quarter it had two major announcements on this front, announcing a partnership with American Express (finally) and increasing its cooperation with Walmart.

With Amex, the partnership is similar to its other deals with credit card networks, especially Discover’s. Amex gets a more prominent place within PayPal’s platform, its reward points can now be redeemed with merchants that accept PayPal, PayPal balances can be used to pay consumers’ Amex bill, etc. PayPal gets access to Amex’s token. Amex card holders can access PayPal/Venmo through the Amex app too. These features will be rolled out to mutual customers over the next year. Schulman said:

In just over two years, we’ve signed over 35 partnerships with some of the world’s largest and most influential brands in finance, technology, and commerce. Today I’m very pleased to announce that we’ve signed a multi-multifaceted partnership agreement with American Express. As one of the leading brands in the world, it always made sense that PayPal and American Express would become strategic partners.

With Walmart, PayPal account holders can now add cash to their accounts at Walmart locations or withdraw cash from their balances. This is in addition to the PayPal Mastercard being able to be used in-store, in-app, or online at Walmart. This is just another way PayPal is actively reaching out to the unbanked community. Schulman said more deals like these were coming too:

And this is just the beginning. We are currently working hand in hand with the Walmart team to introduce even more capabilities in the future. Walmart and PayPal share the belief that managing and moving money should be affordable, accessible, efficient and secure for all segments of our population. And while digital and mobile commerce continues to grow at remarkable rates, there are tens of millions of people that still do not have access to the benefits of the digital economy. This partnership which leverages and combines the unique strengths of both our companies is aimed at addressing that issue.

For more on how PayPal is reaching the underbanked, see…

PayPal continues to lead with mobile payments. In Q3, mobile payment volume grew to $57B, a 45% YOY increase. Mobile payments now make up 40% of PayPal’s total payment volume.

The biggest news of the quarter might very well be Venmo though…Wow, that is taking off like a rocket ship! For the third consecutive quarter, Venmo added a record number of new accounts. The app’s payment volume rose to $16.7 billion in the quarter, a 78% increase year over year. The best part is that, until recently, Venmo was almost exclusively a peer-to-peer (P2P) payment app – that is no longer the case.

Schulman stated that 24% of Venmo users have now participated in a monetized activity on the platform, up from 17% last quarter. When asked if this was finally going to push Venmo towards profitability, Schulman still called for patience, but did state Venmo was definitely trending towards that direction:

On Venmo … it’s hard not to be excited about some of the growth numbers that we’re talking about today and the fact that each of the last three quarters we’ve seen a record number of net new customers come to the platform, but this is a long game … we’re going to be measured in terms of our approach to this make sure that we optimize for the experience and profitability will certainly come … [S]o that is a transition that will take place in a couple of years, not a couple of quarters. And so we expect to see improvement in our Venmo economics next year and each year thereafter.

Pay with Venmo is the option to use the platform as a payment method when checking out with merchants. It has seen particular traction with Uber and Uber Eats, where Venmo’s monthly volume grew a whopping 300% in September over August. Other merchants seeing strong Venmo use were Eat24, GrubHub, and Seamless.

Overall, Pay with Venmo grew 185% from August to September.

Venmo’s debit card saw payment volume grow 320% from August to September.

Those are both month-over-month growth rates!

In a recent thread upboard, we already discussed the recent Venmo instant transfer fee increase, but Schulman said that simply made them comparable to others offering the same service. In September, Venmo processed $1 billion in instant transfer payment volume. Management does not believe the price increase will hinder the payment volume at all.

For three consecutive quarters now, Venmo has added a record number of new users.

That’s about all I got. Questions/comments/thoughts … please respond!

Intuit (INTU), MasterCard (MA), PayPal (PYPL), and Square (SQ) Ticker Guide
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Almost forgot…

A full transcript of PayPal’s conference call can be found at…

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

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Square seems to be a major competitor to PayPal. They are getting much attention with their pay by credit card system that plugs into your cell phone.

Many still see PayPal as an online payment system, but they too have a card reader that plugs into your phone. And appear to be a Square competitor.

PayPal is a better established company. I wonder how many Square prospects end up at PayPal.

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I like and own both stocks PYPL perhaps longer term more established and SQ remains to be seen how long term, impressed with the upward price movement of both over the past 18 months or so. SQ offers so much more than online payment of course.