PayPal’s journey into efficiency yields early success in Q1

Article by Grace Broadbent | May 10, 2023

By the numbers: PayPal’s total payment volume (TPV) increased 12% year over year (YoY) in Q1 2023 and hit $354.5 billion, a slight slowdown from the 15% YoY jump during the same period in 2022, per its earnings release.

The volume came from 5.8 billion transactions, up 13% YoY. This averaged to 53.1 transactions per active account.
Net revenues grew 10% YoY to reach $7.04 billion, compared with 8% growth a year ago.

How we got here: At the start of Q1, PayPal laid off 7% of its staff—about 2,000 workers—to cut costs and focus resources on core growth segments. PayPal is “just at the beginning [of] a multiyear efficiency journey,” CEO Dan Schulman said during the earnings call.

Here are three growth areas it’s prioritizing:

Buy now, pay later. PayPal’s BNPL program has become one of its most popular services. Schulman claimed it has “among the highest authorization rates and lowest loss rates in the industry.”

Available at roughly 3 million merchants, 32 million consumers have used it since its inception in 2020.
BNPL TPV jumped 70% YoY to reach $6 billion in Q1.
And it helps grow overall volume: Consumers spend 30% more on branded checkout when using BNPL.

Interoperability. PayPal is adding interoperability to its wallets to increase their utility and encourage use.

Venmo recently added crypto transfers to other users and external wallets. PayPal launched this feature last year.
And through a partnership with Visa+, PayPal will let Venmo and PayPal users to transact with one another later this year.

Braintree. Braintree contributed greatly to PayPal’s transaction growth in Q1 and will be a vital part of PayPal’s business.

PayPal is expanding Braintree internationally to drive higher margins.
It’s also focused on growing processing volume and winning over new clients. One recent win for Braintree is its tie-up with Live Nation Entertainment, which owns Ticketmaster, one of the world’s largest ticketing platforms.

The big takeaway: PayPal’s refocused strategy should help it to maintain revenue growth moving forward. But it’s making a lot of changes while facing macroeconomic headwinds, and it needs to be smart about how it navigates this period and what it decides to divest from.