PayPal’s Q4 earnings: Cost restructuring will fuel product innovation in 2023

By the numbers: PayPal’s total payment volume (TPV) increased 9% year over year (YoY) in Q4 2022 and hit $357.4 billion, slowing from a 23% YoY jump during the same period in 2021, per its earnings release.

PayPal exceeded 6 billion quarterly transactions for the first time. Transactions per active account—which PayPal uses as an engagement metric—grew 13% YoY, up from Q4 2021’s 11%.

Net revenues jumped 9% YoY to $7.4 billion. Revenues increased 17% YoY during the same period last year.

How we got here: CEO Dan Schulman—who will retire at the end of 2023—highlighted a few factors that fueled Q4 TPV and revenue growth during the firm’s earnings call.

• PayPal’s buy now, pay later (BNPL) program spurred strong checkout volume and TPV increases. It’s offered nearly 200 million loans to almost 30 million customers globally since launching in 2020. The program is available at about 300,000 merchants worldwide.
• Transaction volume was mostly driven by Venmo and Braintree, PayPal’s payment gateway geared toward larger merchants.
• Higher interest income from customer store balances and strong uptake in both consumer and merchant credit products also contributed to revenue growth.

What’s next? PayPal will focus less on growing customer accounts—one of its previous core goals—and more on cost restructuring so it can allocate more funds toward high-growth initiatives. Other fintechs, like Affirm, are adopting similar strategies.

• PayPal will let go of about 2,000 employees, or roughly 7% of its global workforce, this month. This will help the company save about $600 million, on top of the $1.3 billion in savings it’s already achieved, Schulman said during the earnings call.
• It will invest these savings in “high-conviction” projects like passwordless checkout, one-click in-app experiences, and supporting advanced checkout flows with data and AI capabilities.
• PayPal wants to build out its digital wallet and strengthen its peer-to-peer (P2P) payments value proposition by streamlining customer onboarding and reducing payment declines. It will also expand its unbranded checkout offerings, like the PayPal Commerce Platform.

Related content: Check out our PayPal report to learn about the key factors influencing the firm’s growth.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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