There was a lot going on during PayPal’s quarterly earnings report yesterday (April 25), as the original “Pay” player managed to beat analyst expectations nearly across the board and even forecast a better-than-expected result for the rest of the year.
Growth was the big story: PayPal saw transactions on its platform increase, its user base swell by an additional 8 million active users and its P2P platform Venmo rapidly grow its footprint. Even the number of partnerships the company is pursuing with other big players in the ecosystem is climbing.
While the growth story was key to PayPal’s post-earnings victory lap, the firm was also quick to point out it has more to do when it comes to growing its platform. PayPal CEO Dan Schulman told investors that the company is committed to making sure that growth hits everyone — particularly those who are currently shut out of traditional financial services markets.
“We firmly believe as a company that everyone should have access to affordable, convenient, secure and low-cost financial services,” Schulman said, noting this vision does not — as some have speculated in the past — speak to an overwhelming desire on PayPal’s part to become a bank or to try to replace bank-based services.
PayPal does not want to be a bank.
“I think what we are trying to do is not try to compete or replace what’s going on with banks, but work with the financial system to fill in the gaps in the current system, so that everyone can afford the opportunities that the digital economy is extending,” he explained.
That means, according to Schulman, being a better cooperator in the U.S. and around the world and finding the right partners to better midwife an era of democratized access to financial services solutions that need to vary and speak to the needs of the underserved population being helped. Not all cases are the same, and thus there is not a one-size-fits-all solution to bring the approximately 2 billion unbanked to the table.
Speaking of the estimated 9 million households in the United States that exist outside the financial mainstream, Schulman noted the importance of jailbreaking consumers from under the grip of high-cost, high-friction financial products in favor of a better option.
“We’re working closely with partners across the financial ecosystem to introduce what will be a comprehensive value proposition for the tens of millions of U.S. consumers that currently rely on shadow banking services like check cashers and payday lenders,” he said.
Those better options have consisted of the ability to load cash into PayPal accounts via a prepaid card, and the acquisition of TIO network last summer to make it easier for unbanked customers to directly and digitally pay their bills.
More recently, the company has debuted PayPal Cash Mastercard, which Schulman told investors is “aimed at giving greater financial flexibility to underserved and unbanked consumers in the United States.” The card allows cardholders to spend their PayPal funds at millions of physical store locations, access cash from ATMs and load their PayPal account with cash at over 20,000 retail locations.
Consumers can also add direct deposit services to their account or leverage mobile check cashing.
“It is the central tenet of our mission to provide underserved consumers better access to the opportunities afforded by the digital economy, and I’m very pleased that we’re taking the first steps on this journey,” Schulman said.
And that journey, he noted, is happening outside the U.S. too.
Schulman praised PayPal’s recent expansion in India, having successfully completed its pilot program. The company is now able to work with “merchants across India” to offer the platform to local consumers and PayPal’s entire global audience.
Schulman also focused on PayPal’s recent partnership with African mobile payments powerhouse M-PESA to also push the power of digital payments to the continent’s underserved population.
“We recently announced the partnership with M-PESA, the transformative mobile payment system in Kenya. Through our relationship, Kenyans can now seamlessly move money between their M-PESA and PayPal accounts, removing barriers that had prevented Kenyan consumers and businesses from fully participating in the global digital economy,” Schulman told investors. “With almost 28 million M-PESA customers in Kenya, we see this as a meaningful step forward in working with partners to drive the democratization of financial services.”
As for the costs of this commitment to financial inclusion and what it means for PayPal’s efforts at not just providing payments, but monetizing them as well? That was the question of Deutsche Bank’s Bryan Keane.
PayPal’s COO Bill Ready noted that this push on PayPal’s part is not new and comes as part of the company’s long-term, comprehensive effort.
“We’ve had some products in market for a while that give us exposure to how these products are, one, used by customers and, two, what those mean to us financially — both prepaid cards we’ve had in market for a while, merchant debit cards, things like that,” Ready explained.
He noted that the company’s long exposure in the area has taught them there is not much difference when it comes to offering services to the excluded, or monetizing those services.
What PayPal can do — has been doing and plans to continue to do — Schulman said, is use emerging digital technology to find ways to bring people into the digital era of financial services and commerce in a way that is profitable for all the parties involved.
“We think that we can use technology [to] reimagine financial services for sort of a mobile-first customer and provide not only a great consumer value proposition but also a great proposition from merchants and the rest of the ecosystem as we bring people into the digital economy,” Schulman said.