The Essential PayPal (Tracker)

In a year full of twists and turns, eBay may have managed to snag the “payments’ ecosystem’s “biggest surprise award” last year with its apparent about face and decision to split in two and form two independent companies: eBay and PayPal. On the road to its IPO, PayPal is putting some big numbers on the leader board – reporting $8 billion in revenue in 2014 and over 4 billion transactions processed. Worldwide, PayPal is in over 200 countries and supports 25 currencies and its 165 million shoppers can buy with PayPal on an increasingly large number of websites. With 165 million active users worldwide, if it were a nation, it would be the eighth largest country on earth.

It also has a robust vision for what’s next. PayPal’s next evolution, President Dan Schulman told the assembled at a company event last week, is to take full advantage of its 16 years of experience as only a digital commerce platform to become a flexible and nimble digital operating system that enables a variety of financial and payments activities for consumers and businesses.

“We have over 16,000 people in the company [and] the only thing we focus on is digital and mobile payments. That’s it. We’re not doing this for anything else, we’re doing this to be the best digital payments platform in the world,” Schulman noted.

Never let it be said that PayPal lacks for ambition.

So as PayPal spends the next few months on the road to its independence, we thought it would be worth taking stock of the PayPal Ecosystem in a Tracker so that you can keep up with the comings and goings as PayPal’s next chapter unfolds.

This tracker will provide updates on what’s shaking with (among other things):
Consumers
While measuring active users in the millions is the goal of most contemporary mobile wallets, PayPal measures its active user base in the hundreds of millions. And, PayPal’s ambition going forward is to allow customers to pay with whatever they want – credit card, debit, ACH, private label card, etc – from whatever device they are holding from just about any place on earth.

“We want to be able to make consumers use any form factor they want. If a consumer wants to use an Android phone, Apple tablet and Windows OS at home, they should be able to have a common app and operational experiences among all of them,” Schulman noted during last week’s event.

He further noted in a conversation with USA Today: “In the next three to five years, you’ll see a fundamental change in the way payments are done,” Schulman recently told USA Today. “You’ll see the traditional online [payments] world begin to blur with the offline world.”

From the customer point of view – PayPal aims to be the service that works – in the same way – no matter where the consumer is or what they are using to buy or pay for something.

Merchant Services
PayPal also wants to be more than a “button on the screen” and instead provide merchants with a new ability to really ride the coming tsunami of change in commerce.

PayPal recently announced a partnership with QuickBooks that created a mobile application called Sync. Sync, as its name suggests, automates the entry of data from PayPal transactions into QuickBooks. All PayPal transactions, taxes, fees and discounts are automatically imported into Intuit-owned QuickBooks Online without manual entry.

PayPal also announced the acquisition of Paydiant – a white-label, cloud-based mobile wallet platform for retailers, banks and payment processors. And in the process, PayPal also dropped one big hint that PayPal is ready to do more than just enable mobile commerce through the PayPal digital wallet. “We want to make sure we enable mobile commerce across a wide variety of platforms, including the PayPal wallet as well as merchant, or FI (financial institution) wallets,” PayPal’s GM of Retail Brad Brodigan told MPD CEO Karen Webster shortly after the news was announced.

Mobile
Though the operating perception of PayPal is as a payment platform for desktop computing – the reality has seen PayPal’s traffic shifting increasingly to mobile – Shulman noted last week that in the last year ⅓ of all traffic came via mobile device – and it was widely expected that in the not too distant future the majority of traffic could start being funneled through devices instead of desktops.

To top that next wave, PayPal recently announced One Touch for Web. Similar to the mobile version of the product that PayPal introduced last year that works in native mobile apps – One Touch for Web allows consumers to pay without user IDs or passwords (after the first login) on websites – be they mobile or desktop.

“We have seen such fantastic results in One Touch, that we realized we needed to figure out how we take it to the Web for both the mobile Web and desktop Web so people can have the same great experience of all those places that they are already having a great native mobile experience,” PayPal Senior Vice President Bill Ready (and former Braintree CEO) told Webster shortly before the news was announced. “Honestly, we think rolling out PayPal Web will be the biggest upgrade to eCommerce since PayPal launched 15 years ago.”

PayPal also announced a new partnership with eCommerce firm Bigcommerce to extend OneTouch services to devices that do not have the PayPal app installed.

Credit Services
As the online marketplace is changing  and PayPal is taking an increased interest in the “too many people that live on the margins of our system” and how  “technology has the potential to move those people into the mainstream,” has seen an extentsion of its credit product – formerly known as BillMeLater (now just PayPal Credit).

PayPal has also seen a ramp up in its business lending program PayPal Working Capital is now lending $2 million a day in the United States alone. In total, the 18-month-old small business loan program revealed this week that it has lent $500 million to 40,000 businesses across the globe.

Unlike credit cards or traditional bank loans, PayPal Working Capital loans are funded within minutes without a credit check. Eligible businesses must process payments using PayPal for at least three months and do more than $20,000 in PayPal sales over a 12-month period. Loans are repaid through a daily percentage of a borrower’s daily sales.

Cross-Border
Throughout the year we have been checking in with PayPal as part of our PayPal Around The World series –  to get a bigger picture view of how commerce functions from the U.K. to Australia to Turkey and beyond.

PayPal recently announced a new service whereby Egyptian users can not only receive payments from buyers in 203 markets, but can also transfer funds through a local Visa payment card and/or USA Bank account.

This move has enormous export potential, confirmed by a recent Ipsos research study about a surge in online and cross-border trading. Egyptian eCommerce is constantly increasing and is expected to reach $15 billion by 2015. PayPal Egypt expects the service to be of help in key economics sectors such as services and tourism.

“The strong, steady growth of PayPal’s customer base coupled with rising engagement reflects the growing popularity and relevance of the PayPal value proposition globally,” Schulman noted.

Regulation
Soon-to-be independent PayPal will of course be getting all sorts of attention from regulators – particularly those at the SEC – over the next few months as it ambles on toward independence.

Following an order from the Consumer Financial Protection Bureau announced last Tuesday (May 19), PayPal has agreed to pay $25 million related to what the CFPB characterized as deceptive credit accusations.

As part of a consent order from CFPB against PayPal, the payments company will refund $15 million to PayPal Credit customers and pay a $10 million fine in connection with alleged illegal business practices. A consent order is not an actual finding or ruling of unlawful activity. CFPB’s allegations and proposed remedy would have the force of law only if approved by the presiding judge for the U.S. District Court for the District of Maryland.

“Online shopping has become a way of life for many Americans and it’s important that they are treated fairly. The CFPB’s action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase,” the CFPB’s Executive Director Richard Cordray noted in a statement.

Security
It is an increasingly depressing reality of “the new normal” is that cybercrime is just a fact of life – at any given moment, there are two tiers of cybercriminals out to get the average consumer – hackers and fraudster.

“If you look at the criminal underworld, there is amazing specialization in these areas,” PayPal’s  VP of Consumer Risk Mike Vergara recently told MPD CEO Karen Webster. “Different people specialize in credential capturing and hacking – that might be through malware or through phishing campaigns. But what they do exclusively is capture data they shouldn’t have. They then sell those credentials to people who are better at monetizing through fraud.”

Security for both consumers and sellers is among PayPal’s essential value propositions – even when those parties are complete strangers to each other and separated by thousands of miles.

The company has also recently announced it intends to expand its global buyer protection into the type of intangible goods consumers can’t quite get their hands wrapped around.

As one of the leading ways to buy and sell digital goods and services around the world, we want to provide the same protection and peace of mind for digital goods that buyers have come to expect from our brand,” Chief Risk Officer Tomer Barel wrote in a blog post.

Road To IPO
Going forward, we know a little bit about the futures of the firms that will be the separate PayPal and eBay.

PayPal will trade as PYPL on the NASDAQ. (We at PYMNTS, love that its symbol, like ours, has no vowels.)

“I’m honored and thrilled that PayPal is returning to its roots as an independent company,” PayPal President and CEO designee Dan Schulman wrote on the company’s blog. “In the second half of 2015 we’ll once again be publicly traded on NASDAQ with our original stock ticker symbol PYPL. This is a meaningful symbol for the company because it represents our unbroken commitment to the spirit of the original vision that sparked the launch of PayPal 17 years ago.”

That announcement in the ending day of May followed some insights eBay CEO John Donahoe released on the forthcoming split in a conversation with Karen Webster in April.

“PayPal is free to serve any merchant it wants. PayPal is free to serve an Amazon or an Alibaba if it wants to, but it must provide most favored nation [pricing] status to eBay,” Donahoe told Webster – noting that PayPal is free and encouraged to design whatever wonders it wants – as long as it doesn’t cut eBay off from access to said wonders in favor of another marketplace.

Donahoe also noted the two firms will have a non-compete in place for five years after the split.

So that’s your first installment on PayPal as it goes down the road to IPO. And, keep checking the Tracker for all the latest and greatest.