PayPal’s investor day was eventful. The team walked us through its progress in modernizing the company and strengthening its foundation. It then offered its vision of the future (with financial targets). I split this review into each executive’s presentation, with notes from Alex Chriss’s keynote included throughout.

Venkatesan’s part of the event focused on unifying PayPal’s disparate platforms. The company has unmatched account, volume and data scale in the world of payments. They want to take these strengths and build on the transactional, payment-centric niche to morph into more of a “commerce platform” for its customers. To do this, they need to unify product silos to aggregate all of that lucrative, broad-ranging data and truly unleash its potential. Data means personalization and more engaging experiences, as well as better customer outreach and targeting. It means acting based on what you know your customers want – rather than what you think they want. Under old leadership, its foundation began to show structural cracks as their plumbing became archaically disorganized and velocity of innovation slowed.

It takes time to fix gigantic messes like this was, but progress is being made. The company has fully integrated PayPal and Xoom platforms, with Zettle making great strides and Venmo work now beginning. Once Venmo is finished, it will handle Braintree and PayPal Complete Payments Platform (PPCP) by the end of this year. 

This is what will enable the company to match the pace of product iterating and innovating delivered by modern, well-run companies. It also will mean pocketed operating expenses (OpEx), as PayPal halts running and maintaining redundant systems on multiple platforms. It’s a massive piece of PayPal's ambitious financial targets that I’ll outline later in this piece.

The end result of all this work will be “PayPal Open.” This will collect data across all of its product pillars and allow them to seamlessly work with one another. Access to “PayPal Open” will come via the “PayPal Commerce API.” This is what will enable deep experience personalization and things like real-time checkout customization at large scale. It’s how merchants can access everything within PayPal open – such as its 80 million customers opted into data sharing to target. Companies can seamlessly plug into this single integration to unlock hundreds of ecosystem connections. This means more optimal payment orchestration and a vast sum of context to guide better, more custom, increasingly data-driven interactions. 

“Let’s say I get invited to go camping and haven’t gone in a long time. I don’t have the equipment to do that. I go online and have to filter through and try to figure out what I need. As a merchant, this is terrible for friction. They want to get me to the right item… We think we can take data and create a better way… I should be able to go to a site and actually have it personalized for me. We should be able to leverage the commerce API to tell the merchant I want to camp. I should be able to create profiles to know their favorite colors and shoe size.”

CEO Alex Chriss

The overarching unification will mean Braintree clients get faster access to checkout updates across PayPal and Venmo; it will mean PayPal and Venmo accounts are finally searchable across both apps; it will mean more data to more effectively underwrite and raise pre-approval rates; it will mean Zettle can directly support pay later and Venmo checkout from in-store settings. It will help everywhere and allow PayPal to finally leverage the power of its broad ecosystem. As you can see below, easier cross-selling (which this unlocks) has a great impact on transaction profit dollars per merchant:

PayPal is also evolving from a single-region infrastructure to a cloud-native, localized approach across the globe. Previously, it routed all transactions through its U.S.-based data centers and then all the way back to the transaction location. This meant material latency disadvantages the farther away from the U.S. a transaction had to travel. By finally embracing a more modern approach and migrating its apps to the cloud, it has enjoyed 20% lower transaction latency (and 2-3x faster product time to market) for Braintree specifically. That work just wrapped up, with focus now moving to migrating all PayPal apps to the cloud.

Next, as another part of this “one everything” evolution, PayPal is consolidating all developer processes. It has spent half a year streamlining and combining all of these workflows, which has led to a 40% boost to app build speed and a 20% boost to app build success rate. This has also freed PayPal to move from weekly to daily checkout updates. 

In other news, PayPal debuted an internal chatbot for its developers. It’s reducing overall coding tasks by 10%-30%, greatly helping to update legacy C++ code and expediting product work. This will increasingly handle account-to-account interactions and quicken data pattern uncovering from days to minutes. These patterns augment its transaction optimization offering. They help improve fraud and authorization rates, as well as surface more relevant offers and checkout customizations for customers. In terms of how AI can help here, PayPal ran a simulation with 10% of a transaction pool to show the new technology saved $50 million in added perks and cashback. Using AI models, PayPal can more effectively push customers to the most rewarding purchase options amid a sea of seemingly identical choices.

Finally, Venkatesan spoke about using all of the agentic AI work from industry leaders to embed shopping agents in its apps and flows, as well as partner surfaces. This also relies on a solid foundation and complete ability to leverage all company data so that recommendations and tasks are completed in a desired manner. PayPal needs to walk before it can run and it’s still somewhat in walk mode.

PayPal:

Scotti’s talk focused on how the firm wins consumers within PayPal and Venmo. Starting with PayPal, there are three things he’s fixated on to drive differentiation and market share. 

First is “Pay Everywhere” to drive habituation. The debit card is a big piece of this, as it drives a 24% boost to omni-channel checkout market share post adoption. To Scotti, “Pay Everywhere” also entails letting consumers buy and sell more of the things they want to, like crypto. And? For accounts that sell crypto for dollars, more than 25% of them are using those funds for PayPal checkout. Login frequency also doubles on average after a customer transacts crypto for the first time. These important byproducts led to 136% Y/Y trading growth and 280% transfer volume growth in 2024. It’s important to remember that this growth was off of a small base and 2024 was a great year for this asset class. Still notable.

The next theme is “Pay Your Way” to drive more convenience. Whether it’s automating recurring payments, which 20% of its active accounts use, or adding options in its digital wallet to raise total payment volume (TPV) per account by 240%, more choice is good for consumers and for PayPal. Peer-to-peer (P2P) updates are an important aspect of this mission as well. PayPal delivered 13% Y/Y transaction growth in 2024 and has accelerated that growth for 6 straight quarters. Better, more interoperable search and products like Venmo Pools (pool funds to pay for a trip or a gift) are working. P2P is very low margin, but is its best product for top-of-funnel growth. It generates nearly ⅓ of its user growth and also led to $10 billion in incremental funds re-spent on checkout in 2024. 

Lastly, PayPal wants to deliver the most value. It continues to focus on raising prevalence and convenience of vaulted payments to optimize conversion rates, and is also working hard to make its “wallet smarter.” This gets back to the idea of PayPal’s open ecosystem and deep partner integrations allowing it to combine rewards across various vendors. This means PayPal can present offers with higher overall perks to motivate usage. These benefits are automatically earned and aggregated within the PayPal app. To give an idea of how powerful this value proposition can become over time, rewards earners deliver 160% more TPV on average. For more signs of PayPal offers driving traction:

Happier shoppers; happier merchants; happier PayPal. Again, this is the power of fortifying that aforementioned foundation, opening up its ecosystem and unleashing diverse customer data. Targeting gets more precise, placements get more valuable, deals get more compelling and everyone is better off. Another part of making the digital wallet smarter is allowing customers to set pay later preferences to be automatically implemented across channels. If they want to pay monthly for any purchase over $500, they can easily express that desire and let PayPal handle it.

Finally, PayPal hopes to keep adding more value via post-purchase interactions. These include its smart receipts (which contain more merchant promotions for cross-selling), package tracking and more. TPV rises by another 80% for customers using one of these products.

As PayPal layers on P2P, online checkout, debit, pay later and post-purchase, the impact to average revenue per account (ARPA) is quite profound. The chart below depicts that and also shows how untapped the opportunity still is across these categories (even within its existing user base). 

All in all, checkout progress helped it deliver 10% power user growth in Q4 to far outpace the rest of the business.

Venmo:

In case you missed it, earnings reviews sent this earnings season to read:

“Venmo is starting to hit its stride. That team is winning in key mobile-first verticals. Our execution has improved, teams are focused and we’re accelerating.”

CFO Jamie Miller

Over the last year, we’ve heard CEO Alex Chriss speak about the need to give Venmo users more reasons to keep their money on the platform. He has called the 90% of Venmo funds ($18 billion per month) leaving the ecosystem within a month unacceptable, and knows the product needs to give consumers more value to fix this. At the very least, this represents a large net interest income opportunity, with clear opportunities to find more transaction and interchange revenue too. 

To address the problem, Scotti wants to turn Venmo into a “next-generation money movement app.” Within this, its debit card and checkout product are the two key focus areas. As reviewed in the Q4 earnings article, debit card actives rose 30% Y/Y while Pay with Venmo actives rose 20% Y/Y. Today, it also added that Pay with Venmo revenue rose by 59% Y/Y and eligible merchants there rose by 50% Y/Y. These two things are largely why Venmo’s average revenue per account (ARPA) rose by 12% Y/Y in 2024 and why monetized account penetration rose from 14% to 17% last year. Long way to go… which is exciting based on progress finally being made.

While these two projects are quite important, continued work on its original P2P product is too. That’s still a powerful source of customer growth and leads to consumers having funds in their accounts more frequently. For debit and checkout to work as well as they can, maximizing that frequency of fund availability is paramount. In 2024, Venmo worked hard to improve search functionality and added needed features like Venmo Groups (400,000 made in 2024). It also launched scheduled payments, which is an important use case for things like rent. Landlords receiving their rent checks in their Venmo accounts can only be good for engagement and monetization, as P2P more effectively spins the overall monetization flywheel.

As you can see below, layering on all of these services remains an extremely early opportunity, with great potential to lift ARPA. For 2025-2027, PayPal expects Venmo revenue to compound at a low-teens CAGR. This includes a 20%+ debit card TPV CAGR, a 40%+ Pay with Venmo TPV CAGR and about 5% annual user growth.

Winning Checkout:

Keller reviewed a lot of the work PayPal has done to optimize its checkout flows. It launched a new payment ready signal to give merchants the data needed on what checkout options would most appeal to a customer. Considering the popularity of PayPal and Venmo, this often leads to better placement for the company. On average, merchants adopting this signal to more effectively customize consumer checkout enjoy a 1.5%-4% TPV lift. PayPal also launched password-less, biometrics-based checkout, which raises completion rates from 86% to 96%. Generally speaking, it “completely rebuilt its 20+ year checkout codebase” to make it faster and to enable easier, lighter-weight, more frequent updates going forward. As always, checkout will remain a game of constantly removing friction… inch-by-inch… wherever possible. One small optimization can be the difference between higher conversion and a merchant making it or not. This advancement has already led to 40% lower latency, a 2.2 point boost to vaulted signup success rate and a roughly 7.5% boost to TPV per merchant.

For one-time checkout, PayPal redesigned its mobile checkout flow in 2024, which is yielding a 105 basis point lift to mobile conversion. This is the channel where it has struggled the most in recent years.

Aside from catching up to others in terms of checkout friction, which I think it has, the most exciting thing PayPal is working on is checkout page personalization. It is launching an adaptive checkout design for merchants that will become increasingly available and impactful over the coming years. This uses PayPal’s extensive databases to granularly tweak checkout pages based on observed customer attributes. For example, it can more prominently display pay later options for the large portion of customers this appeals to. Based on early data, doing so raised pay later usage by 20%.

For guest checkout and Fastlane, PayPal reiterated a lot of what we’ve already heard. 75% of users are either new to PayPal or previously inactive users. It has a 40% consumer opt-in rate and fosters 36% faster checkout. For merchants, this means 51% higher conversion rates. For PayPal, this means quickly racking up 16% of guest checkout market share with participating merchants. Notably, Fastlane added JP Morgan payments as a new partner in the UK and Europe.

All of these new checkout experiences are rolled out to 30% of the U.S. today. It will aim to get that to 80% by 2027. I wanted this to be faster, but I think I was being a tad ambitious. The aforementioned integration of its platforms is a massive, massive task. And it’s also a prerequisite for all of this work finally being completed. As PayPal moves closer to 80%, it expects growth to directly benefit. Specifically, it sees 6% branded TPV checkout growth accelerating to at least 8%-10% growth by 2027. As we’ll see in the guidance section, this is also a material part of its vision for accelerating overall growth in the years ahead.

Braintree:

For Braintree, PayPal has its mind on total addressable market (TAM) expansion to offline settings. It already has great contracts with vendors such as Uber, to offer proof of concept within a high-volume use case such as that one. To expedite this progress, it partnered with Verifone (point of sale vendor) to advance its go-to-market efforts. Other Braintree priorities include introducing a larger portion of its value-added services to more countries and, generally speaking, selling more of those services in all of its markets. 

Meta is a good example of why this matters. The two companies started with just branded checkout, with Meta later adding Braintree processing, optimized transactions service for cost reductions, Hyperwallet for payouts and its FX as a service product to lower Meta’s costs even more. This led to exponential profit dollar growth from the mega-cap. Next, Be Forward (biggest used Japanese car exporter) also started with branded PayPal checkout in Latin America. It then adopted Braintree processing, alternative payment method enablement to add more consumer choice, FX as a service and pay later options. PayPal’s share of that merchant’s checkout rose by a full 500% following these additions and margin from them rose by 600%. It expects 30% TPV growth from Be Forward in 2025 as the company purchases PayPal’s ads service and other promotional tools.

All in all, PayPal sees Braintree transaction margin dollars doubling over a 3-year period through 2027. This represents a 25% CAGR over that time. The company will continue to struggle with revenue growth here for most of 2025 as it continues to trim cash-burning contracts. Throughout this, transaction margin growth should remain strong as it prioritizes that metric; top-line growth is expected to pick back up by the end of the year.

As you can see from the image below, the presence of PayPal is uniformly good for a merchant’s business. At the same time, leadership thinks they lost focus on product, integrations and go-to-market through 2022 and 2023. This neglect led to Zettle accounts falling 5% Y/Y and lackluster results for the segment overall. 

It has reshaped go-to-market to lead with solutions and its singular PayPal Open brand – rather than discombobulated point products. It moved from 35 screens for a merchant to onboard to 7, and also added an optional detailed questionnaire for merchants wanting to offer more info. Merchants opting into this questionnaire deliver 50% higher activation rates, 100% higher product attach rates and 50% higher margin per merchant. It has found a better balance between ease-of-use for merchants wanting rapid onboarding and thoughtful nuance for those caring more about the perfect fit. This work helped SMB TPV growth turn from negative to positive from 2023 to 2024. Much more progress is expected.

To become a better merchant ally, it will raise its partner integration roster from 200 to 550 and get far more active in managing these partnerships. It will work harder to build joint solutions with other vendors and build better, more valuable integrations too. Partnerships that it is actively managing lead to a 205% TPV uplift on average.

SMB is also another area where getting customers on its latest checkout flows is a high priority. Doing this raises total product adoption by 33% and gets merchants the industry-leading conversion, lower latency, higher auth rate checkout flows that PayPal’s latest offering entails.

This year, PayPal will launch business-to-business (B2B) bill pay to give merchants fewer reasons to even transfer funds out of their accounts. Just like with Venmo, PayPal struggles with 80% of merchant funds quickly leaving the platform. This is one way it hopes to lower that percentage. It also plans to double merchant originations in 2025 thanks to careful work to improve its underwriting algorithms and compile more needed training data. This has already boosted eligibility by 43% while more prominent app placements for merchant loan offers have boosted adoption by 90% in 2024. 

Finally, it plans to keep doubling down on more merchant outreach. This boosted TPV by 4% in 2025 and product usage by 6%. It thinks it can drive a lot more momentum through more hands-on interactions with its customers. AI will be a big part of enabling this objective to scale without exploding OpEx.

Everything we’ve covered thus far leads us to newly issued PayPal guidance. It reiterated 2025 targets calling for 5%+ transaction margin dollar (TMD) growth ex-customer balances and 8% EPS growth. By 2027, it sees TMD growth accelerating to the high single digits and EPS growth accelerating to at least low-teens growth. Depending on the pace of this acceleration, that positions PayPal well to meet or exceed 11% earnings CAGR expectations from 2024-2027. It also positions it very well to meet an expected 4% TMD CAGR from 2024-2027.

Finally, it offered “longer-term ambitions” beyond 2027. The team explicitly called these targets optimistic and bold, but added this is what they want their company striving towards. Specifically, it’s aiming for 10%+ TMD growth and 20%+ EPS growth beyond 2027. That’s much better than current long-term consensus expectations.

More Stats:

I’ll keep this short and sweet. While many consider PayPal to be boring and past its prime, I consider it to be a quality company that was in need of a good leadership team. They now have it. It’s hard to overstate how deep of a hole the old team dug for Chriss and company. The last year has been spent plugging these product holes and racing to bring its suite up to par with the rest of the field. That has already led to accelerating growth, stronger cash flow generation and also much better investor disclosures.

These things take time to fix, but I remain confident that Chriss is doing everything he needs to do and keeping this company on a good path. I’m excited to see how all of this work translates into their view of above-consensus profit growth for the next 3 years. I’m also excited to see shares be more meaningfully rewarded as (I think) leadership continues to meet their promises. 

At 15x 2025 EPS and 11x 2025 FCF, I continue to think there’s a lot to like here. I also continue to think the initial 2025 guide was set to be surpassed, as contributions from ads, the advanced offers platform, Fastlane, Venmo and PayPal checkout improvements kick in. The team explicitly chooses to avoid baking in contributions until they see “points on the board.” I think those points are coming and I’m happy to stay patient here.