PayPals Dan Schulman on Seizing Opportunities in Digital Payments

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In early 2016, PayPal CEO Dan Schulman decided he really needed to wrap his head around cryptocurrency.

At the time, a single bitcoin could be bought for around $ 400, while PayPal was worth around $ 50 billion, after splitting from its former eBay parent company a few months earlier.

“When I walked in [as CEO in 2014], I think a lot of people thought PayPal had seen its best days, “says Schulman, who previously held senior positions at AT&T, Priceline.com, Virgin Mobile, and American Express.” The day I arrived was the day where Apple Pay was announced: that was my welcome gift to Silicon Valley. We had to redefine ourselves. “

Schulman wanted to transform PayPal from a simple payment button to a “platform” you can rely on for digital payments of all kinds.

Thus, in January 2016, he attracted Wences Casares, co-founder of the Xapo bitcoin wallet and one of the first cryptocurrency evangelists in Silicon Valley, to the board of directors of PayPal. It was the beginning of a long training on how to turn PayPal into a trusted guide for consumers and merchants through the confusing and often volatile world of cryptocurrencies.

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“Whenever I thought I understood it, I would go and talk to Wences again, and then I realized that I didn’t understand it completely,” recalls Schulman. “Most people think they understand this and actually don’t. It is very nuanced. . . I wanted to make sure there was both scalability and real functionality. “

Over the past five years, the price of bitcoin has risen more than 100 times to exceed $ 40,000 today. PayPal’s market capitalization, meanwhile, has increased sixfold to exceed $ 300 billion.

But Schulman argues that the price of bitcoin is the “least interesting thing” in cryptocurrencies. He believes it is only part of a push needed to make the financial system more efficient and inclusive.

“I think governments and central banks are understanding that the world is moving towards digital payments, that monetary policy cannot be managed through the issuance of banknotes,” he says.

PayPal has been slower to embrace cryptocurrencies than its rival Square, which first allowed sellers to accept bitcoin payments in 2014 and whose founder Jack Dorsey has become a prominent figure in the crypto community over the past two years. .

I believe that governments, central banks are understanding that the world is moving towards digital payments, that monetary policy cannot be managed by issuing banknotes.

Schulman may not have Dorsey’s street credentials, but he has the zeal of a convert. He wants PayPal to be ready to support central bank digital currencies (CBDCs), which it considers “inevitable” after China begins testing its “digital renminbi”. This means working “hand-in-hand” with regulators and government officials and ensuring the “stability and integrity of the system at the highest level,” he says.

The unspoken contrast is with Facebook’s stalled cryptocurrency project Libra. PayPal withdrew from the Libra Association in 2019 out of concern that Facebook had not engaged enough with regulators prior to its launch, contributing to a legal backlash that kept the firm – now renamed Diem – stuck on the launch pad.

“That doesn’t mean we shouldn’t innovate,” he adds. “It just means we have to do it carefully.”

Meanwhile, bitcoin price fluctuations seem to make the app more engaging. PayPal customers who hold cryptocurrencies tend to log in twice as often as before.

After adding support for buying, holding and selling cryptocurrencies in the US last year, the feature will roll out to PayPal users in the UK starting this week.

Dan Schulman, pictured outside the company headquarters in San Jose, California, proposes PayPal as a “super app” for payments © 2021 Winni Wintermeyer

American users can already use cryptocurrencies as a funding source for their PayPal wallet, which Schulman hopes will shift digital currencies from being a speculative asset class to wider utility. Its 30 million merchants can now accept bitcoins without having to worry about conversion fees or other complexities.

These cryptographic features are part of PayPal’s broader expansion into what Schulman calls a “super app” for payments, including messaging, a savings account, bill payments and money transfer and purchase functionality, which launch is expected by the end of the year. Schulman said he wants to turn PayPal into an app that people use every day.

The inspiration, as with many aspiring super apps from Uber to Facebook, is WeChat, the Chinese handyman app. Few companies in the US or Europe have been able to replicate WeChat’s success in bundling functions as varied as messaging, e-commerce, and gaming into one app. Schulman consulted Martin Lau, president of WeChat’s parent company, Tencent, as he formulated PayPal’s strategy.

PayPal was founded in 1998, an eternity in the years of the Internet. While it may no longer have the halo of a vibrant fintech start-up like Revolut or Klarna, Schulman says its longevity has allowed it to build trust with consumers. “You won’t live your life in a super app if you don’t trust that brand,” he says. It also has a scale, recently surpassing 400 million active accounts and processing nearly 5 billion transactions per quarter.

The launch of the super app comes just as PayPal approaches the completion of the separation from eBay that Schulman was originally hired to manage.

The timing is random, he says, but it highlights the changes PayPal has undergone over the past seven years.

Three questions for Dan Schulman

Who is your leadership hero?

My father [Mel Schulman, a chemical engineer and second world war veteran]. He always said: “You are not what you say you are, you are what you do: be as authentic as possible.” Things change on the pitch: whatever we talk about today, tomorrow will be different. But you and I are the same person.

What was the first leadership lesson you learned?

My father told me something at the beginning of my life: true respect, true leadership comes from softer things like humility, listening to people, respect – this is what inspires people. Since I’ve moved from job to job, the most important thing is to understand how to inspire.

If you weren’t a CEO, what would you be?

I’d like to think that I [would] they have been in public service and would have focused on resolving some of the many inequalities in our systems.

The split followed pressure from activist investor Carl Icahn, who had argued that eBay’s slower growth was limiting PayPal’s potential as a standalone company. At the time of the split, eBay accounted for a quarter of PayPal’s revenues and a major portion of its profits. Today it accounts for 4% of PayPal’s sales, after eBay implemented its own payment system.

Schulman and his eBay counterpart John Donahoe, now CEO of Nike, have come up with a five-year plan to “wean the two companies from each other.” “We had a two-mile long Gantt chart,” he says. “It was crazy how many details we had to go through.”

In addition to technical details like the separation of their data centers and integrations across two large websites, there were rules governing pricing, collaboration with competitors, and product road maps.

The transition wasn’t perfectly smooth – in PayPal’s final quarter, some investors were surprised that eBay launched its payment platform faster than expected. But Schulman says he and Donahoe, who remains PayPal’s president, marvel at how well that original transition plan held up in 2014, as eBay became “our major strategic customer, but one of many.”

That kind of diplomacy will only become more important to PayPal as it navigates a world of overlapping customers and competitors, like Apple, which allows PayPal to be used to make payments on the App Store and iTunes, but also competes with its own Apple Pay.

“My view of things is that business is personal. A lot of times people say ‘it’s not you, it’s just business’, but I’m not buying it, ”says Schulman. “People have to be able to look you in the eye and trust you.”

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