About 18 years ago PayPal’s digital money scheme hit the market. Then, it was all about a new vision for how to move money between people digitally.
A little more than 18 months ago mobile industry veteran Dan Schulman took the reins as CEO – with a new vision for how to move money between people. This self-described vision for a "new PayPal” takes PayPal down a very interesting – and perhaps even a paradoxical — path. A vision that doubles down on the acceptance mark that underpins PayPal’s 180 million consumers and 14 million merchant network at the same time it works hard to move well beyond its roots as a “button at checkout.”
That vision wasn’t all that bad, Schulman explained. It cemented the brand “PayPal” as a digital player years before the world awakened to the notion that digital commerce would be a big thing.
But Schulman believes that, 15 years later, that “ship has sailed.” It’s time, he believes, to think differently about the role that PayPal would play in driving innovation in the increasingly crowded digital payments space.
A vision - and a path to achieving it - that Schulman laid out in detail during a fireside chat with Karen Webster at Innovation Project 2016 in March.
"My goal is to get us laser-focused on who we are going to serve and who we are going to hyper-serve – and how," Schulman said.
Rewind the clock 18 months. Schulman took the helm after "quite a long and bruising proxy fight" that culminated in the spinoff from its longtime parent company eBay in 2015.
"I think stepping into the role when I did was certainly a historic moment for PayPal," Schulman said. "I thought when we became an independent company it would give us a chance to re-imagine the company moving forward."
And embrace what it truly means to be a public company.
"Today, we finally have our own balance sheet. We’ve ramped all of our tech stacks. We’ve revved up the innovation engine,” Schulman said, taking a quick run through of PayPal's post-eBay life. "There were lots of challenges, of course, but also lots of opportunities. Luckily, we had a lot of assets to build off of. That helped us quickly turn ideas into a whole new strategy for us to embark on.”
Assets, Schulman reminded the audience, that both offer and operate at scale.
“We have a network of roughly 180 million+ customers and 14 million merchants across more than 200 countries, a mobile expertise that’s a natural extension of our digital DNA, technology that enables consumer and merchant interactions to be seamless and frictionless, and a platform that helps merchants tap into new customer bases online, in-store and in-app.”
The 'New Money,' New PayPal In Town
Getting structure around PayPal’s new vision, Schulman said, started with “being open to new ideas and tossing what wasn't working aside.”
"We were throwing quite a number of things in the kitchen sink," he joked.
Schulman emphasized to his team that the “new PayPal” had to distinguish noise from reality, and not get distracted by things that weren’t core to the company’s mission: democratizing access to money. And be focused on execution, not just the development of innovative ideas – and dig deep into business plans on a regular basis so as to remain competitive and profit maximizing.
But, most importantly, Schulman emphasized, he challenged his team to find the relevant gaps in the market and fill them with solutions that added value – gaps informed by a heavy dose of data to make sense of all of the things that were being tossed into that kitchen sink.
The output of all of that, Schulman says, has been a series of “rich conversations” with a variety of stakeholders who might not have been so eager to sit across the table from them once upon a time. Conversations with card networks, merchants, issuers, tech companies and carriers around the world to explore how they, together, can play a larger role in the digital payments ecosystem in ways it has never been able to experience before.
"PayPal today is about helping our [14 million] merchants take advantage of [mobile-initiated] value proposition changes, not just form factor changes."
But what about those three big elephants in the room, Webster pointed out: data, who owns the customer and tender steering?
Part of the "New PayPal that's coming to town," Schulman said, is a PayPal that isn't "precious about data at all."
“We want to use data to help manage risk, to provide fraud monitoring, but we want to push data back to the issuer, the merchant, the consumer. It’s their data for them to use. For us to hold on to it, there’s no competitive advantage,” Schulman asserted.
He was also quite clear that the merchant’s customer is the merchant’s customer — PayPal is simply enabling a transaction to happen in more digital environments and geographies and across any technology that the merchant may want to enable. Being friendlier to merchants, Schulman said, has helped PayPal “mold itself” to better fit into the overall ecosystem, giving them a better chance to partner more, reach more consumers and be part of the “robust value add for all ends of the [commerce] equation.”
As for tender steering? That was then and what’s now is a business model shift that gives consumers the freedom of choice to pay with what payment method they choose. "No merchant wants to force consumer how to pay … so why would we make merchants make them and customers pay certain way," Schulman remarked.
When taken all together, merchants have told him, what PayPal offers “is powerful value proposition.” He added that “the response has been great."
Well, maybe there’s actually a fourth elephant in the room, Webster posited: in-store payments.
Webster asked Schulman whether there's been too much focus industry-wide and even at PayPal on solving for in-store shopping when the bigger problem is mobile and online.
After all, she pointed out, there's plenty of consumers browsing on mobile devices. But buying? That's a different story.
"The problem is that in-store is a form factor change and that’s not really all that compelling. It isn’t hard to pull out a credit card and swipe it. I do think that merchants do want to think about more ways to engage with their consumers," Schulman said.
And if you ask Schulman, that all points toward one thing that merchants should be focused on: apps within the store environment.
Schulman emphasized that PayPal wants to help merchants avoid getting “stuck in one solution, without lots of value add.” He fully believes that merchants will create their apps – and he wants PayPal to be the “full merchant services solution” that provides them with an unbranded platform that powers those apps. A solution that’s also technology agnostic, processing any form of payment using any technology – QR code, NFC or whatever comes along. Merchants get to design the experience their way, while PayPal provides the "underground plumbing for that proposition," Schulman explained.
"As a platform provider we need to accept that POS is going to be a hodgepodge of technologies for a long time to come. We don't want to bet on a single POS provider," Schulman said.
As for the apps, Schulman said what he's encountering is that bigger merchants are gravitating toward their own apps since they believe they know their customers better than anyone else. But what is needed, he notes, is consistency of experience — with value added on top. At the moment, that consistency is drastically lacking online.
"We can’t change consumer behavior with form factors," he said. “But what we can do is change behavior by making it easy for a consumer to use their mobile devices to shop and pay using the payment method of their choice at any merchant across the world.”
Managing Money Outside The Financial Fold
The concept of financial inclusion — a topic Schulman is outwardly passionate about, and a solution he firmly believes will leverage technology to create inclusion — came up at the tail end of his conversation with Webster.
"I don’t think so much of it as financial inclusion, as I do about it as financial health. A lot of people define financial inclusion as connectivity into the financial system. What I really think about is how we can use about mobile phones and software to take the 2 billion people that are at the edges of the financial system and bring them into the financial system in a way that blows apart the financial paradigm that makes it expensive to be poor," Schulman said.
"Ridiculously expensive," he emphasized. "We should be able to do that. We should be able to use data and info to provide services — like a three-digit FICO score."
And that's where he believes the industry needs to "lean in."
"Managing and moving money should be a right for every citizen. It shouldn’t just be a privilege for the affluent. We have the opportunity to do something, and I think it’s our obligation to try and go do so," Schulman concluded.
While wrapping up their conversation, Webster posed one final question to Schulman: So, what keeps you up at night?
Well, for Schulman, it’s both internal and external factors. The very “full roadmap to execute against … keeping focused and executing all of that.”
“The chessboard moves very quickly,” Schulman said. “Externally, there’s a lot of noise too. You have to separate noise from reality. There are always things that come up and you can’t get distracted by them.”
That’s no easy feat in the fast-paced digital payments ecosystem.