PayPal (PYPL) – Innovation Day – January 27, 2024
PayPal’s new CEO Alex Chriss took to the stage this week to talk through PayPal product innovation. The chat was organized into 6 announcements. I posted this to Twitter this week, so if you read it feel free to skip the section. It will sound repetitive. Here were the highlights:
New PayPal Checkout
PayPal is accelerating efforts to go password-less. It’s pushing harder to remove as much friction and as many clicks as it can from checkout. That’s the only way to stand out within the commoditized sector. Data entry requirements and latency mean lower conversion. PayPal’s new checkout flow allows for profiles to log-in with just a face or a fingerprint. After that, they can enjoy one-click checkout and 50% lower time to completion. This brings PayPal’s checkout ease up to par with others in the space. It needed to get to single click. Now that it’s in line with others, its large brand trust advantage over the pack can actually be more effectively enjoyed. I don’t care if I trust you more if you make me jump through hoops to checkout. If you don’t make me jump through those hoops, brand trust suddenly becomes the deciding factor.
The old PayPal team took years to implement new checkout flows. They structured the flows in ways that required manual, painful, custom builds for all large merchants. It rolled out these builds a few at a time each quarter. That’s just way too slow, and the speed of this news is a sign that the dawdling is over.
Fastlane by PayPal
PayPal is also revamping guest checkout through a new product called “Fastlane.” To me, this sounds like an iteration of Single Sign On (SSO). When a customer uses PayPal, the company will be able to recognize the buyer upon returning to ANY of its other tens of millions of merchants. Info can now be saved for future usage at any other PayPal merchant with a single click of a button to opt in.
It will not require another log-in or verification as it will know who you are. This will remove manual data entry requirements for guest checkout and eliminate the need to maintain disparate merchant accounts. It will reduce the costly 50% abandoned cart rate that e-commerce as a whole deals with. This is the company finally leveraging the unique benefits of its massive merchant network. It can allow this network to offer the convenience of rapid checkout without needing to already have that customer in their ecosystem. That matters especially for the little guys and gives PayPal a sizable edge in guest checkout convenience (Shopify has the same product). Notably, Fastlane is cutting guest checkout time for PayPal customers by 40%. BigCommerce is now using Fastlane and is enjoying significant conversion advantages early on. It calls this product the best on the market.
Smart Receipts & The Advanced Offers Platform
Why not turn receipts into a marketing engine? That’s the plan for PayPal. PayPal’s customer receipts now come with compelling cash back offers for customers. Importantly, PayPal uses its deep customer data profiles (and dataset representing 25% of e-commerce) to ensure these offers are hyper-relevant. Merchants only pay for conversion, not impressions, to allow businesses to turn first time shoppers into fiercely loyal customers. This also means that merchants don’t need large marketing budgets to enjoy the powerful customer acquisition lever. They pay as they earn. Early on, these “smart receipts” have a 45% email open rate, which is quite good.
Along the lines of using its vast 1st party dataset offering unique value (noticing a theme?), it will roll out the “PayPal Advanced Offers Platform” in the coming months. This will allow merchants to openly utilize PayPal’s massive customer base to target promotions and offers more precisely. Importantly, only customers who have opted into data sharing are eligible for data usage. That’s pretty much required at this point in Europe. Anything PayPal can do to create value from its scale is good news for shareholders. It not only means happier customers, but more differentiation vs. smaller competition. Milk the scale advantage… then milk it some more.
New Consumer App
PayPal is leaning heavily into customer savings amid the high inflation environment. It’s adding access to hundreds of cash back offers from large brands (some pictured below). These offers can be accessed with a single click and auto-implemented on a merchant’s site when checking out through PayPal. This program is called the “PayPal Cash Pass.” The service intelligently surfaces deals based on broad customer data profiles (like with the other announcements) to bolster relevance. This can be used in tandem with its 3% cashback debit card for even more customer value; those rewards can also be easily placed in its high yield savings account for 4.3% annual yield.
Venmo Business Profile Upgrade
Venmo is by far the most active social feed in financial services. PayPal has not been taking advantage of the easy, hyper-targeted marketing lever that this gigantic, engaged user base should represent. It allows merchants to use business profiles to make payment easier, but hasn’t done much else to harvest the app’s value. It’s upgrading Venmo Business Profiles to do just that. These profiles now have an easier subscription process. Friends can see what merchant you shopped at (with your permission) and can actually subscribe to any merchant that looks interesting from that page. It’s one thing to tell someone that “this business is cool;” voting with a wallet is more powerful. This makes that wallet voting more visible on Venmo.
PayPal is also allowing Business Profiles to use Venmo for the growth engine it should have always been. They can use PayPal’s vast dataset (again… key theme) to identify local, highly relevant customers to tailor promotions to. This can happen on a customer-by-customer basis. So? Better merchant visibility paired with a more actionable means to incentivize customer purchasing. That combo should morph Venmo into the local commerce player that it needs to become… finally. Venmo is vastly under-monetized and this should help.
30,000 Ft view
Some are going to poke fun at this event. They’re going to say it doesn’t “shock the world” like CEO Alex Chriss told us to expect (he didn’t). I’d respond by telling them to actually listen to Chriss’s CNBC interview from last week. While shock the world was aggressive language, it was in reference to the years ahead… not today. Today represents step one. It represents a foundation and a depiction of focus for PayPal’s future roadmap. While nothing in here is all that sexy, it’s all needed. It finally mines the value that PayPal’s gigantic two-sided network can provide. It effectively fills large product gaps on the branded side and leverages the ability to offer network-level innovation that smaller players cannot possibly match. It focuses on what PayPal does best and rightfully ignores all of the other product distractions from the free money era. Today is a baby step… but it is a baby step in the right direction. Now go execute.