Vindicia in the News

First thing’s first: PayPal’s stock dropped 17% after hours in the wake of its fourth-quarter earnings report — shows the vagaries of earnings forecasts, of Street expectations and of the windup of the payments services relationship with eBay.

PayPal, of course, is moving toward its own managed payments model and has the super app firmly in sight.

And in the earnings call on Tuesday (Feb. 1), CEO Dan Schulman said that the company’s top line in the first half of the current year would see a $600 million drag from the continued shift away from the eBay relationship. In terms of guidance, the company is projecting 6% growth in the first quarter, while the Street had expected about 11% growth.

Schulman said on the call that he would look forward to no longer having to account for the eBay pact, “and letting … our core results speak for themselves.”  In the quarter, eBay’s revenue contribution was 3%, where it had been 10% a year ago.

As for those core results, the company said that payments volume — in terms of payments processed — surged by 23% year on year, to $340 billion. PayPal said that during the quarter, TPV, excluding eBay, as noted in supplementals that accompanied earnings, was up 27% to $330 billion.

Venmo’s volume in the quarter was up 29% to $61 billion; for the year, Venmo volume gained 44% to $230 billion. P2P, which includes PayPal, Venmo and Xoom, was up 19% to $93 billion and was 27% of total payment volume.

The firm added 9.8 million net new accounts during the quarter, down from the 13.3 million added in the third quarter.  The company ended the year with 426 million active accounts.

Chief Financial Officer John Rainey said on the call that the company had a “slower than anticipated” finish to the year and came in below the 12.9 million net new active accounts that had been estimated in earlier guidance.

The company saw muted commerce growth due to supply challenges and a pullback in spending from lower-income customers.

The number of payment transactions per account stood at 5.3 in the latest quarter, up from 4.9 in the third quarter. During the full year, the company saw 50 million buy now, pay later (BNPL) transactions. Management said on the call that BNPL TPV in the fourth quarter was $3.2 billion, with a $13 billion run rate.

Cross-border trade was 14% of TPV in the quarter, growing 7% on an FX-neutral basis.

In terms of headline numbers, total revenues in the quarter was $6.9 billion, gaining 13% and largely meeting Street expectations.

Super App

The company’s super app efforts proceed apace, as management said that continuing trends include the  
“ascendancy of digital wallets and of financial super apps … at checkout.” PayPal takes the top share in those wallets, according to commentary on the call, and the company is seeing double the average revenue for active accounts when somebody uses the app; the propensity to churn is 25% lower; crypto use through the app is up 40%.

Read more: PayPal’s new super-app positioned to deliver next-level connected experience

Looking ahead, management said on the call that Venmo growth could top 50% as compared to 2021.

“Eventually you're going to see Venmo have a lot of the capabilities that the PayPal super has because that consumer base that loves Venmo wants to live more and more of their financial life on the app,” said Schulman.