John Rainey PayPal

  • PayPal has been an independent company for five years since it was spun off from eBay, which acquired the payments platform in 2002.
  • With the expiration of its eBay operating agreement, PayPal is eyeing growth through partnerships with global e-commerce platforms like Alibaba and Shopify.
  • The company has been red-hot in 2020, with its stock more than doubling since mid-March. 
  • John Rainey, PayPal's CFO, told Business Insider the payments giant wants to do more than process payments for other companies. PayPal has ambitions to replace physical wallets and become consumers' go-to way to spend. 
  • Visit Business Insider's homepage for more stories.

PayPal has made plenty of big moves since it spun off from eBay in 2015, including a string of acquisitions to solidify itself as more than just the default payment method for the electronic marketplace.

But 2020 has arguably brought the most success the payments giant has ever seen, with its stock more than doubling since mid-March as it reports record numbers of new accounts and transactions.

Part of that is due to the global shift to online spending as a result of the coronavirus pandemic. But PayPal is also making renewed pushes with new products, like QR codes as a way to pay. And its peer-to-peer app Venmo has continued to grow, even amid shelter-in-place conditions.

In the second quarter, PayPal reported 30% growth in volumes, and 25% growth in revenue. It also added over 21 million new accounts, an all-time quarterly high.

"A decade ago, PayPal was thought of as a way to pay on eBay," John Rainey, CFO of PayPal, told Business Insider. 

"Now, we're launching experiences where you'll be able to go into a CVS pharmacy or a grocery store or a major big box retailer, scan a QR code with your iPhone, and check out that way," he added.

Splitting from eBay was always the plan, and PayPal is ready to take off

Today, eBay represents just 9% of PayPal's transaction volume. And Rainey expects that number to drop to around 6% by the end of the year.

"This is a very manageable transition," Rainey said. "We should be able to withstand this without any fiscal impact to our income statement in terms of profitability."

Beyond eBay, PayPal has seen massive transaction volume growth through marketplaces like Etsy and Shopify. While eBay saw about a 30% increase in volume in the second quarter, Etsy and Shopify both reported over 100% growth in sales volumes. 

As part a five-year operating agreement established after PayPal's split from eBay, the payments giant continued to process the vast majority of eBay's transactions. However, PayPal was required to give the marketplace better pricing than a handful of eBay's competitors, the names of which were redacted from the agreement. 

Now that the agreement has expired, eBay will begin to migrate its payments in-house. But PayPal will still be offered as a way to pay on eBay going forward. Rainey said historically, when marketplaces have made the switch to managing their own payments, PayPal retains around 50% of the checkout volumes.

Read more: eBay will manage its own payments now that its 5-year agreement with PayPal has expired, and its head of payments is eyeing $2 billion in new revenue

What's more, PayPal is now free to partner with any marketplace, either domestically or abroad.

"Now we have the unfettered ability to go partner with anyone in the world," Rainey said. "If you think about some of the larger marketplaces, like MercadoLibre or Alibaba or Amazon, should we have the opportunity to work with them, we now can do that without any restrictions."

PayPal is already partnering with MercadoLibre, as well as the likes of Facebook and Google to power their payments. 

In its core markets like Canada, Germany, the UK, and the US, PayPal's strategy is to increase user engagement, Rainey said. Internationally, PayPal has more room to grow, with lower penetration in regions like Asia and South America.

"MercadoLibre is obviously very big in markets like Brazil, Mexico, Argentina," Rainey said. "Those are places where we actually had some white space in terms of our network."

PayPal is also looking to partner with the large e-commerce marketplaces in China, Rainey said. Last December, PayPal acquired Chinese payments platform GoPay, making it the first foreign player with a licence to provide digital payments in China. 

PayPal wants to become your daily-use digital wallet

PayPal also wants to be a part of consumers' daily lives. Over the past few years it's been laying the groundwork to become more than just a payments processor. 

With its acquisitions of peer-to-peer payment app Venmo and rewards startup Honey, it's looking to become a full-fledged digital wallet where consumers can manage their payments, rewards, bills, and credit all in one place.

"The analog is somewhat akin to what your physical wallet is today," Rainey said. "We want to invest in areas that are value-add consumers and really play into our value proposition."

For example, PayPal wants to help users manage their subscription services to keep credit cards up-to-date and proactively prompting users to renew cards set to expire. It's also looking at ways to integrate rewards into its PayPal and Venmo apps, not only through Honey but also through the existing relationships it has with retailers and banks.

Read more: POWER PLAYERS: Meet the 8 PayPal execs shaping the payment giant's future as its stock skyrockets and e-commerce surges

Given these relationships, PayPal could serve as a central wallet linking consumers' loyalty points across brands and cards.

To that end, PayPal plans to spend $300 million working on these initiatives during the second half of this year.

"Even more broadly, if we were to add airlines or rental cars, we provide utility with those loyalty points because our customers can use those as a funding instrument through our wallet, with any of the merchants that we process around the world," Rainey said.

Rainey has big plans for using Venmo

As consumers' financial lives move increasingly online, PayPal isn't the only player trying to replace physical wallets.

Apple and Samsung are making big pushes toward adoption of their respective mobile wallets. Goldman's consumer bank, Marcus, is also working on mobile-based products that could optimize its users spending, saving, and investing. And American Express has been building out its app, looking to bring together customers' spending and rewards.

For PayPal,Venmo figures to be a key part of its digital wallet strategy. 

Often, the app has been used in social settings by groups of friends splitting checks at bars and restaurants. But users are still sending money on the platform. During the second quarter, Venmo's transaction volumes grew by over 50%. The app currently has roughly 60 million users. 

"Historically, there have been more limited use cases for Venmo," Rainey said. 

Especially when it comes to PayPal's push for QR codes as a way to pay, Venmo will be a critical platform to increase user engagement. Venmo also now offers business profiles, and will launch its credit card later this year, Rainey said.

Read more

PayPal's CFO explains why the payment giant is going against the grain and betting big on QR codes as the new way to pay in-store

Goldman Sachs is building an AI-powered digital assistant and checking account for its Marcus consumer bank. Here's how it's shaping up.

POWER PLAYERS: Meet the 8 PayPal execs shaping the payment giant's future as its stock skyrockets and e-commerce surges

SEE ALSO: Here's how PayPal is looking to boost its credit business by leaning into a buy now, pay later frenzy

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