PayPal Shifts Its Comeback From Checkout to the Wallet

PayPal’s turnaround hinges on a digital rebuild that includes stabilizing the checkout button consumers know today while preparing for a commerce environment in which artificial intelligence agents, digital identity and financial services could change what that button needs to do.

During the company’s second-quarter earnings call Tuesday (July 28), PayPal CEO Enrique Lores laid out a multiyear plan that puts agentic payments and digital identity toward the farther end of the timetable. The immediate work is more concrete and includes improving checkout, rebuilding consumer engagement, expanding financial services and Venmo, modernizing technology, and cutting costs.

PayPal expects agentic payments and digital identity to become more significant beginning in 2028 and beyond. But AI already has a more prosaic assignment inside the company. PayPal is targeting at least $1.5 billion in gross run-rate savings over two to three years and has identified about $400 million of new run-rate savings by year-end, according to an earnings presentation.

The company is also removing three organizational layers. Management said it has reduced production times by embedding AI within the full software delivery cycles.

Much of the savings will be spent rather than simply dropped to the bottom line. Chief Financial and Operating Officer Jamie Miller said during the call that PayPal is focused on “removing duplication, bands and layers” before moving into later phases of the restructuring over the next 12 to 18 months. The company intends to reinvest much of those savings in technology, risk and products, including financial services and buy now, pay later (BNPL) across PayPal and Venmo.

That spending became an issue during the analyst Q&A, when management was asked why the latest investment program should work when previous strategies had not produced the expected results.

Lores pointed to a change in where PayPal is placing its bets.

“The big change is that we are really going to be focused on financial services and expanding into that market opportunity,” he said.

Financial services already account for close to 20% of transaction margin and are growing at a double-digit rate.

PayPal is also putting more resources behind Venmo and payment services while narrowing its consumer strategy toward the customers responsible for most of its volume. Miller said the resulting plan assumes continued growth from Venmo and payment services, a greater contribution from credit and “branded checkout having a more modest contribution.”

Checkout Remains the Test

Monthly active accounts increased 1% to 228 million, while transactions per active account excluding payments service provider activity increased 7%. Branded experiences, including online checkout, PayPal and Venmo debit and tap to pay, grew 6%, while debit card and tap-to-pay volume increased more than 60%.

Online branded checkout grew just 2% on a currency-neutral basis for the second consecutive quarter. Pay with Venmo grew 44% and BNPL 26%, helping offset the slower performance of the core checkout business.

PayPal is trying to change that performance partly by changing the checkout experience itself. Lores said 60% of merchants have moved to the company’s newer payment pages. During the Q&A, he also said PayPal needs to approach large merchants across product, marketing and service rather than selling individual capabilities in isolation.

The digital effort extends beyond the PayPal button. The company rebuilt the Venmo app to improve personalization and product discovery as it tries to broaden Venmo beyond P2P. Venmo debit monthly active accounts increased more than 50%, while customers using both Venmo debit and Pay with Venmo generated more than nine times the average revenue per account of P2P-only users.

Turnaround Meets Deal Speculation

The call also brought M&A speculation directly into the discussion, although neither management nor the analyst asking about it named Stripe.

Direct questions surfaced during the call as to how PayPal was balancing potential “deal activity” against execution of its turnaround and whether a possible change of control could affect merchant relationships. Lores declined to discuss the speculation.

“At this point, while we remain open, our focus is on executing our own strategic plan,” he said.

PayPal reported $486.4 billion in total payment volume, up 10%, or 9% currency-neutral, while revenue increased 5% to $8.68 billion. Management raised its full-year transaction margin dollar outlook to about $15.6 billion.

“We expect [the] third quarter to be relatively consistent branded checkout growth at about 2%,” Miller said.

Shares gained 3% at the start of trading Tuesday.