UPDATE: This article includes comments from PayPal's management and analysts.
As PayPal's strategic pivot enters a second year, CEO Alex Chriss says the company's massive database can be used to personalize the customer experience and to increase market share.
With PayPal's new strategy entering its second year, CEO Alex Chriss contends the company's massive database can be used to personalize how consumers use the company's products, gaining a broader share of customer relationships.
PayPal processed 26 billion transactions across its platforms in 2024, enabling AI-powered products such as the Fastlane checkout system and the PayPal assistant customer service engine to become more granular based on individual users, Chriss said during Tuesday's earnings call.
"AI is opening a huge opportunity for us," Chriss said under analyst questioning about how the company's financial recovery last year will extend into 2025.
PayPal in September launched PayPal Everywhere, a feature that enables consumers to choose a monthly category of spending, such as groceries or clothing, and receive 5% cash back on up to $1,000 when using a PayPal debit Mastercard. These offers can also be stacked by saving offers in the PayPal app from brands such as Sephora, Domino's, DoorDash, Instacart and others.
Chriss said that during the fourth quarter, engaged or monthly Venmo users grew 4% to 64 million; and the number of Venmo accounts that were used for more than transfers grew 24%. Additionally, about a quarter of Fastlane's new users were also new to PayPal. This boost adds to the data that AI can analyze to improve future performance for these products, according to PayPal.
"We are working with merchants so when consumers show up at checkout it's not a static button anymore," Chriss said. "It's a personalized button that understands the profile of that consumer and the journey they have been on with that merchant to present them with a reward, or cash back or even a BNPL loan at the moment of checkout."
PayPal's earnings
For the quarter ended Dec. 31, PayPal reported non-GAAP earnings per share of $1.19, beating FactSet's analyst prediction of $1.12. Net revenue of $8.37 billion was above the Wall Street estimate of $8.26 billion. Net income was $1.2 billion, down 2% from the prior year.
Investors were disappointed, sending PayPal's stock down 12% to its lowest level in about three months.
PayPal projects earnings per share between $1.15 and $1.17 in the first quarter of 2025 and $4.95 to $5.10 for the full year. Analysts' projections for the full year are $4.90 a share.
"We set out at the beginning of 2024 to narrow our focus, improve execution and reposition the business," Chriss said in his presentation during Tuesday's earnings call. "The improvements we made to branded checkout, peer-to-peer and Venmo, plus the progress we made on our price-to-value strategy, are beginning to show up in our results …The strong momentum we've created sets us up well for 2025, which is about scaling adoption."
Analysts say PayPal will be challenged to continue the stock's increase in 2025. "We believe PayPal is starting to face increased competitive pressures, in particular with mobile payments," investment firm Edward Jones said in an analyst note.
While payments at PayPal's Braintree payment technology unit continue to show strong growth, PayPal branded payments have slowed, potentially pointing to greater competition and lost market share, noting PayPal faces threats from Block (Square), Stripe, Adyen, Wepay, ApplePay and Intui, the analysts said
"Branded payments carry higher profit margins, and this dynamic will weigh on overall profitability," Edward Jones said.
Analyst firm William Blair said PayPal's management has done a laudable job driving better transaction dollar growth and EBIT margin, but these gains have come at the expense of enterprise processing share.
"Initial 2025 guidance points to the limits of PayPal's turnaround potential, evidenced by decelerating," William Blair said in a research note, adding PayPal is projecting roughly 5% transaction dollar growth and EPS just 2% above Wall Street estimates.
"We acknowledge that initial guidance is likely conservative, but we think higher transaction and credit costs could weigh on transaction margin," the analysts said.
Chriss' strategy
As the payment company battles its competitors, Criss has called for "
PayPal's flagship product Fastlane enables consumers to make payments with a one-time password in a few taps. Fastlane performs like a payments facilitator, drawing on consumers' past payment choices to recommend checkout options through AI-powered analysis. PayPal has added more than 1,000 merchants to Fastlane since August and has inked several distribution deals designed to add to that scale in the coming months.
A collaboration with checkout technology company
In the digital asset market, PayPal in late 2024 added scale for its
Another new partner is Yellow Card, a major stablecoin on/off ramp in Africa and the first African fintech to list PYUSD.PYUSD, which launched in late 2023, has lagged behind larger stablecoins such as Tether's USDT and Circle's USDC. PYUSD and USDT recently suffered a setback in Europe as Crypto.com delisted the stablecoins, along with some other cryptocurrencies, in an effort to follow new European Union cryptocurrency regulations.
PayPal has signed cryptocurrency firm
