Why Paypal Desperately Needs A New Comeback Strategy

Forbes

With its stock down 80% from its pandemic high and its share of online payments slipping, the fintech pioneer and new CEO Alex Chriss need a win.  Read the full story on Forbes: https://www.forbes.com/sites/jeffkauflin/2024/06/21/why-paypals-comeback-plan-could-take-years-if-it-works-at-all/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Today on Forbes, why PayPal's comeback plan could take years, if it works at all.

00:08The past three years have been tough for PayPal, one of Silicon Valley's oldest and largest

00:12fintech companies.

00:14PayPal is a storied business that counts Elon Musk, Max Levchin, Peter Thiel, and Reid Hoffman

00:20among its founders and early employees.

00:23Now, its stock has fallen 80% from the $360 billion all-time high market value it hit

00:29in July 2021, the share of e-commerce sales worldwide that flow through its branded PayPal

00:35button has been eroding, and some of the company's recent attempts to rejuvenate its product

00:40lineup have gotten little respect from analysts.

00:44Wall Street's smirks and yawns are likely a harsh reality check for PayPal's 46-year-old

00:49CEO Alex Criss, who became CEO just last fall after 19 years at Intuit, where he was an

00:55executive vice president and oversaw its QuickBooks business.

00:58He was brought in to help the 26-year-old San Jose-based company regain its momentum,

01:04but it appears that won't be easy.

01:07Nearly a decade after its spinoff from eBay, which acquired the payment startup in 2002,

01:13PayPal still has a profitable franchise, with over $4 billion in net income in 2023.

01:19Its digital financial network of 220 million monthly active customers is one of the world's

01:24largest, standing behind juggernauts like Apple Pay and China's Alipay.

01:29While PayPal has done dozens of acquisitions and entered nearly as many new business lines,

01:34more than 60% of its $14 billion in gross profits still comes from the PayPal button,

01:40according to Autonomous Research.

01:42That's the icon people click to pay for anything from tchotchkes on eBay or Etsy to diapers

01:47from Target.

01:49Many users still see it as a safer way to transact instead of trusting an unfamiliar

01:53website or person.

01:55But transaction growth for PayPal's branded button is slowing.

01:59Last year, it grew just 7% in dollar terms, compared with about 9% for e-commerce overall.

02:06From the outside, that button appears largely the same as it did years ago.

02:10FT Partners managing director Craig Maurer says, quote,

02:14The core business is still effectively the cache of the internet.

02:17Payments 1.0.

02:20Part of the problem seems to be that PayPal has long struggled to modernize and integrate

02:24disjointed parts of its payments technology.

02:27Meanwhile, the risk and fraud prevention benefits that have buoyed PayPal for so long have ceased

02:32to be the competitive advantages they once were, with products like Apple Pay and Shopify's

02:37ShopPay taking a growing share of the market.

02:41Now Chris, who was awarded a $42 million pay package by PayPal in 2023, part of which is

02:47contingent on the company's future performance, is hanging his hat on new strategies, including

02:52a so-called Fastlane product to speed up guest checkout.

02:57But some analysts are skeptical of the impact it will have on profits and think the plan

03:01will take much longer to make a difference than investors realize.

03:05Before Chris took over at PayPal, former American Express executive Dan Schulman ran it for

03:10nine years, nearly quadrupling PayPal's yearly revenue to $30 billion and growing earnings

03:16per share from under $1 to $3.85, according to FaxSet.

03:22Yet today, in retrospect, some Wall Street analysts fault Schulman for going in too many

03:27directions.

03:28They point to acquisitions that haven't seemed to pay off, such as iZettle, a Swedish company

03:34that makes point-of-sale checkout devices, which PayPal paid $2.2 billion for in 2018.

03:40They also point to HyperWallet, which PayPal bought for $400 million the same year, which

03:45makes payout technology for e-commerce platforms.

03:49And also Honey, a platform that helps website visitors automatically find coupon codes and

03:54cashback offers, cost PayPal $4 billion in 2020.

03:58Schulman, who is 66 years old and who owns about $40 million worth of PayPal shares,

04:05told Forbes some acquisitions have worked out, quote, extraordinarily well, while acknowledging

04:10others have done worse than expected.

04:12When asked if he took on too many different priorities, Schulman responds, quote,

04:17Every year we looked at what we were trying to drive and tried to do fewer things rather

04:21than more things.

04:23It's not always easy to do.

04:26For full coverage, check out Jeff Kauflin's piece on Forbes.com.

04:31This is Kieran Meadows from Forbes.

04:34Thanks for tuning in.

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