Jason Kupferberg: Thank you.
Operator: Your next question comes from the line of Mike Ng with Goldman Sachs. Your line is open.
Mike Ng: Hey, good morning. Thanks for the question. Just two for me. First, I was just wondering if you could just talk a little bit more about the drags on the smaller part of the–from the smaller part of the portfolio on transaction margin dollars. When does that kind of work itself out of the system? Then related to transaction margin dollar growth, you talked about balance-funded Venmo transactions contributing to growth in the quarter. Can you expand a little bit on that – you know, do you see that scaling over the next couple of years, and what are the opportunities to improve card attach for Venmo users? Thank you.
Jamie Miller: Good morning Mike. On the smaller parts of the portfolio, I guess what I’d say at a macro level, we had seen a pretty significant drag on that last year. It is coming through this year at a smaller rate. I mean, part of these are products we deprecated, some of these are, frankly, acquisitions that we just haven’t invested in, and as Alex mentioned, we are going through a process of really looking hard at these. Candidly, some are just in decline, but the declines are smaller, and some we’re investing in or making decisions to really put more in maintenance mode, which is really shifting the profile going forward, but it will be smaller this year and it will take a few years for that to burn off.
Alex Chriss: Yes, let me talk about up level and talk about Venmo for a minute and the opportunity there. Again, on the positive side, we have the leading P2P platform with incredible customer base with disposable income 22% higher than the U.S. average, 60 million monthly active users and 90 million 12-month actives, so this is an incredible platform for us to work at. As we’ve talked about in previous calls, and I’ll reiterate here, I’m dissatisfied in how we’ve really thought about monetizing the platform and really thought about delivering in many ways just customer experiences that they’re looking for. Customers at Venmo are looking for dollars and looking for an alternative to traditional mechanisms when dollars are flowing in, and they want to be able to use Venmo for all of their expenses.
Just to put some numbers behind it, there’s $18 billion of net new funds that flow into the platform on Venmo every single month. Eighty percent of those dollars leave within 10 days – that is just unacceptable, and so our ability to provide the products and services that our customers need when those dollars come in, whether that’s improving debit card penetration which you’ve heard is a focus, and you’ve heard we already in some of our on-boarding flows are starting to make significant improvements on, or providing other opportunities for money in or money out opportunities, and access to capital for our Venmo users. This is just a clear opportunity and a clear focus area for us. Again, early days. The team is focused on it. Hopefully you hear sort of a reinvigoration in my voice of what Venmo can be and the opportunity ahead of us, but very, very excited about where we’re taking it.
Operator: Your next question comes from the line of Bryan Keane with Deutsche Bank. Your line is open.
Bryan Keane: Hi, good morning. Solid first quarter results here. My question is still more on the big picture. You know, the naysayers on PayPal would say the company is structurally challenged with the rise of payment methods like Apple Pay. Alex, I know you’ve been at PayPal now for a little over six months. What do you think the naysayers are missing on the competitive advantages PayPal still has in the market, in particular to grow branded?
Alex Chriss: Thank you Bryan, thank for the question. A couple of thoughts here that I think people are maybe not appreciating enough. The first is 60% of the market is still what I would consider to be non-consumption. Sixty percent of the market still does not use any mark, so that’s what we’re playing for. We have the best brand, we have the best products and services and the best ability to be able to deliver, and with products like Fast Lane not only delivering a re-boarding opportunity for our customers, but that stat that I put in earlier around 40% of unrecognized customers coming through and taking a Fast Lane experience now gives us an opportunity to be able to re-market to them and turn them into PayPal customers.
Step one, 60% of the market is non-consumption, and I think we’ve got a leading opportunity there. On the other 40%, we’re still the leading player, and to be again transparent, and I’ve said this before, we have not delivered the innovation and the experience that I would expect and that our customers expect. We are doing that now – an improvement in the app, an improvement in the branded experience, reducing latency by 50%, investing in password-less opportunities and passkeys will improve the conversion rate and improve the experience, and then creating value-added opportunities and an increased value proposition for our consumers with rewards, I think we’re the only player out there at the scale that we have to provide that end-to-end experience.
Again, we provide everything for our customers – it’s rewards, it’s buy now, pay later, it’s a debit experience, and back to what I mentioned earlier on the call, with an omnichannel play now, PayPal can be the solution that you can use anytime, anywhere, so our ability to now start to play in an offline world and take the same brand and the same experience to every purchase, I think is something that, again, gets me excited, but we’ve got to prove it and we’ve got to continue to execute and create great experiences in the market for our customers.
Bryan Keane: That’s great. I just had one follow-up. We are getting a few questions on the pending CFPB regulation on late fees. Any impact on PayPal from CFPB caps on late fees?
Jamie Miller: Yes Mike, so first, while PayPal is not directly impacted by that regulation, we are indirectly impacted through our revenue share with our consumer credit partner. There’s a lot of uncertainty right now around both timing and the implementation of that, and as I mentioned before, our guide excludes the impact of that, just given the uncertainty. The industry expects that if implemented, the impacts would be largely offset over time, and we have been very focused on mitigation, we have actions underway, but really in any scenario it takes time for those offsets to fully set in. But I guess what I’d say in terms of impact is the date that’s being debated right now is a May 14 implementation date, and if that were to be implemented, it would be approximately a three percentage point impact to EPS growth for the year, but that is before mitigation, so by 2025 we would expect roughly half of that impact to be offset and then more over time.
Bryan Keane: Thank you.
Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.
James Faucette: Thanks very much. I wanted to go back to Fast Lane, and Alex, you made the comments around making Fast Lane available to all merchants so that they can derive the benefits of it. How should we think about that in terms of what needs to be done, timeline for progression, etc.? It sounds like you’re going to start moving beyond at least those initial merchants that are using it now, but just trying to think about how that ultimately could end up with most of the first–the merchants who are by Braintree and then ultimately the users who are by PayPal more broadly.
Alex Chriss: Yes, thanks James. Here is the best way to think about it. First and foremost, we have to have the best innovation in the market. It was important for us to get some early customers up and running and using it, and the data continues to hold and certainly delight these merchants. Look – in this world, they all talk to each other, and so the ability for our merchants to now be rabid fans of the checkout conversion improvement that they’re seeing through Fast Lane is a great proof point for us as we now start to scale it and, again, think about price to value. The second leg will be, okay, now that we’ve proven this out and we’ve started to really–I mean, just to be clear, we’re talking about driving conversion rates for some of the largest merchants in the world, we need to make sure that this was proven and that it works before we rolled this out at scale.
There’s a lot on the line to be able to nail this, which is why we’re moving at a measured pace and ensuring that in Q1 and Q2, we’ve really proven it out. The conversations we’re having at our C360 conference right now, the conversations we’re having with some of our PPCP platforms that are now rolling it out to small businesses, is okay, what is the way that as we get to the second half of the year, we can really enable these merchants to have this up and running so that they can win the shopping season and the holiday season in the back half of the year. That’s how we’re thinking about it. Merchant demand is very encouraging, as you would imagine when you have a product that improves conversion rate and provides a double-digit lift in guest checkout conversion – that’s a game-changer, and so demand is high.
We want to make sure that we have as low friction an on-boarding experience as possible, which is why we wanted to make sure that the ability for folks to upgrade to the new integrations would make sense and be easy for them, and we wanted to make sure that customers could on-board. The plan is back half of the year, get as many merchants on so that they can win the holiday season. This will still take time – not everyone will get on for this holiday season, and we expect that will continue into 2025, but at some point there will be a tipping point if I think about over the next year or two years, where we are going to expect all of our merchants to be on the latest and greatest integration, which includes Fast Lane, and we will the move to deprecate our old integrations.
That’s going to be an important milestone for us as we take what is really 15 years of legacy integrations and consolidate them on a more modern stack and a more modern integration for our customers. That allows us to continue to build innovation, continue to drive the best experiences for merchants, for customers, and obviously the best transaction margin results for the company as well.
James Faucette: That’s great, appreciate the color there, Alex. Then you mentioned you were getting a little bit of improvement in Venmo transaction margin. How much of that is coming from increased acceptance of Venmo brought as a payment option versus finding ways to reduce costs in transacting Venmo and P2P transaction, etc.? I’m just trying to understand what the drivers there are and what the potential could be.
