There’s no doubt that PayPal has the resources to expand its reach. “We were blessed when PayPal was spun off eBay,” Schulman says. “We had six billion dollars in cash and no debt.” The company pulls in about $8 billion yearly in revenues (mostly from small commissions on each transaction) and is now worth $40-$45 billion.
Speaking at the recently concluded Northside Festival in Williamsburg Brooklyn, a four-day gathering centered on tech, media and music, Schulman briskly laid out his vision for PayPal in a world increasingly dominated by digital commerce. He believes that his company is uniquely positioned to provide a platform for transactions between consumers and merchants in a Balkanized world of mobile payment systems. As it is, consumers are understandably confused by all the mobile payment systems tech companies have been rolling out over the last few years. There’s Google Wallet, Apple Pay, Square Cash, Stripe, Samsung Pay, and Venmo and countless others. But PayPal, practically a tech dinosaur at 17 years of age, doesn’t care which mobile system you’re using. “PayPal considers itself an unbranded platform,” Schulman says, pointing out that because his company is “agnostic for technology,” it works equally well with Apple, Android and Microsoft and other rivals as well as with wireless carriers. In that respect, PayPal is like Switzerland, happy to work with all comers without discrimination.
Mobile is also blurring the distinction between online and offline transactions, presenting PayPal with new opportunities — and new challenges. “You see an item online that you want to buy and then you use your phone to order it. Is that an online transaction or is it offline?” Most consumers — 75 percent of them — now use their mobile devices while they’re shopping in stores, according to InReality, a retail marketing and strategy firm.
The exponential growth of mobile use means that PayPal has had to engage more closely with the 40,000+ merchants around the world for which it processes transactions. “We used to be thought just as go-it-alone company,” Schulman says. “But this is no longer the case.” Where exactly the consumer connects with the merchant doesn’t make any difference to PayPal – whether it takes place in the store, on the merchant’s website or on its app. For PayPal to achieve its mission, Schulman says, it needs to give small businesses the tools, capabilities and working capital that will allow them to establish a “more intimate connection with the consumer.” PayPal will work with the merchant in promoting a special sale, for instance, or making it possible for consumers to order ahead and avoid the lines, something Starbuck’s is already doing. For small businesses, PayPal offers another advantage: because it handles such a high volume of transactions from consumers throughout the world on a daily basis, it has collected a rich trove of data that it can tap into that allows merchants to more efficiently reach consumers.
The 57-year old CEO isn’t new to the potential of mobile technology. In 2001, he was named the first CEO of Virgin Mobile, a position he held until 2009, before joining American Express which he left in 2014 to assume the helm of PayPal. At Virgin he supported an organization called StandUp for Kids, a nonprofit for homeless youth, a fact which might not be worth noting except that Schulman decided to find out what it was like to live on the streets himself – for 24 hours — to better understand the needs of the population the group was trying to help. All he took with him was a blanket – no watch, no money and no cash. “No one paid attention to me on the street,” he wrote for the New York Times in 2009, “I consider myself a good communicator and a good salesman. It took me five hours of begging to raise less than a dollar.”
Although PayPal remains a leader in processing financial transactions, Schulman acknowledges that it will never have a monopoly over the business. But he isn’t worried. “I think about competition the way I think about gravity” – in other words, it’s simply a fact of life. “Our real enemy is cash.” It’s true that more and more people don’t think twice about buying a cup of coffee with a credit or debit card or using an app on their phones. But there are still about two billion people who still rely exclusively on cash, often because they’re locked out of the financial system. Needless to say, using cash carries a lot of risks — it’s insecure, for one thing, and there’s always the potential for ‘leakage’ — cash that goes missing, whether intentionally or accidentally, as it changes hands. Millions of consumers are also being gouged because of unnecessary fees — up to 10 percent of their annual incomes. They see big chunks of their paychecks taken out by check-cashing establishments or get mired in debt because of usurious interest rates when they’re forced to resort to payday loans. Usually, it’s the people who can afford it the least who are the ones who suffer the most. But merely giving these people access to the financial system won’t be sufficient, Schulman argues. “It’s important to be educated about financial health, too.” That’s why PayPal’s CEO believes that the company has a responsibility not only to process transactions for their customers, but to educate them so that they know how to handle their money wisely so that they can save and invest for the future. PayPal has a great deal of catching up to do. Up to 65 percent of Americans live paycheck to paycheck and most families couldn’t scrape together $400 in the event of an emergency, according to recent studies.
Although PayPal is “borderless,” the company still has to contend with borders. (PayPal doesn’t operate in several countries including Afghanistan, North Korea, Iran, Iraq, Pakistan and South Sudan, mostly places where people still do most of their business in cash.) Of course, laws governing financial transactions inevitably differ from one country to another, but so do their cultures, and no company can be successful if it isn’t able to take these differences into account. “PayPal is sensitive to local environments.” What works for German consumers might not appeal to consumers in the UK or Russia.
But being sensitive to local environments isn’t the same as always accommodating corporate policy and values to them. North Carolina is a case in point. When Governor Pat McCrory signed into law House Bill 2 — the Public Facilities Privacy and Security Act — in April, barring people from using restrooms that don’t match the sex indicated on their birth certificates, PayPal responded by dropping plans to open an operational center in the state that would have employed 400.
“Our perspective is that there’s absolutely no room for discrimination in our country or around the world – it’s a value that is essential for people who work for PayPal and for our customers,” Schulman says. While the company’s move was widely applauded – several other major corporations have also cancelled projects in protest – Schulman admits that PayPal was also subjected to intense, sometimes vitriolic criticism. “I received personal threats against my life.” He accidentally showed one of these threats to his mother. She was aghast. (“My advice is to never show a threat against your life to your mother.”) He has no regrets about his decision, however. “I would do it again 100 out of a 100 times. We don’t only talk the talk. We need to walk the walk.”
