PayPal’s fourth-quarter earnings results showed slowing growth along several metrics, as well as continued traction in the company’s branded checkout initiatives.
Total payment volumes were up 7% year on year to $437.8 billion, which was lower than the 9% annual growth logged in the third quarter, according to a Tuesday (Feb. 4) earnings presentation. In the fourth quarter of last year, the annual pace was 15%. Transaction revenue growth in the most recent quarter was 4%, down from the 11% rate at the start of the year.
The number of active accounts was up 2% to 434 million. The overall number of transactions per active account grew by 3% to 60 transactions, slowing from 9% in the third quarter and 11% year-on-year growth in the first quarter.
Investors sent the shares down by roughly 9% in early trading Tuesday as management guidance implied flat to modestly higher revenue into 2025.
As for branded checkout, growth was 6% in foreign exchange neutral total payment volumes, up from 5% growth the fourth quarter of 2023. The branded-checkout related volumes represent 30% of the total TPV.
Venmo TPV accelerated in the most recent quarter, at 10% year on year, up from a steady 8% pace that was a hallmark of the last several quarters.
“U.S. branded checkout growth accelerated in the fourth quarter to exit the year at a high point as our new checkout innovations are scaling to customers,” PayPal CEO Alex Chriss said on an earnings call. “Driven by a renewed focus on pricing-to-value, Braintree has meaningfully contributed to our transaction margin dollar growth over the last three quarters.”
The most recent upgrades to checkout have reduced latency by 40% and driven 1% conversion improvements, he said.
“These upgrades are now live for more than 25% of U.S. checkout traffic, which is up from 5% last quarter,” Chriss said during the call. “We have a lot of room to grow here as adoption increases in the U.S. and then expands globally. On top of the benefit of higher conversion, these new experiences improve the presentment of … solutions like buy now, pay later, which can help to expand our share of wallet.”
PayPal users spend about 30% more on average when using BNPL, and through 2024, the firm drove approximately $33 billion in TPV, up 21% versus 2023.
“Venmo monetization is making great strides with over 20% growth in Venmo debit card and Pay with Venmo monthly active accounts,” Chriss said during the call.
Looking ahead, PayPal will increase its use of artificial intelligence.
“This year, we are prioritizing the use of AI to improve the customer experience and drive efficiency and effectiveness within PayPal,” Chriss said during the call.
Later in the call, Chriss said in response to analysts’ questions that “AI is opening a huge opportunity for us… we saw 26 billion transactions on our platform last year. We have a massive dataset that we are actively working and investing in to be able to drive our effectiveness and efficiency… on the customer-facing side, we’re leveraging AI to really become more efficient in our support cases and how we interact with our customers.”
“We also are leveraging AI to personalize the commerce journey,” he added, leading eventually to “a dynamic, personalized button that starts to understand the profile of the consumer, the journey that they’ve been on perhaps across merchants [and] enable a reward or a cash back offer in the moment.”
The company added more than 1.5 million first-time PayPal debit card users in the fourth quarter, and debit card TPV was up nearly 100% in the fourth quarter, Chriss said during the call.
“The average debit card actives generate five times the transaction activity and two times the average revenue per account compared to users who only use branded checkout,” Chriss said during the call.
Separately, PayPal Complete Payments saw increased adoption, tied to 45% of small- to medium-sized business (SMB) processing and checkout volume, he said.
PayPal Working Capital and Business Loan demand was strong, as merchant lending originations were $3 billion throughout the year, he said.
Chief Financial Officer Jamie Miller said during the call that PayPal was “encouraged to see U.S. branded checkout volume improve in the fourth quarter. Part of this increase can be attributed to a healthy spending environment and specific vertical exposure.”
Later during the call, however, she said that PayPal expects “a handful of large Braintree merchant renegotiations to result in a headwind to revenue growth of about five points in 2025.”
Forward guidance anticipated flat to low-single-digit revenue growth due to those renegotiations. Branded checkout TPV is expected to grow mid-single digits, Miller said during the call.