On 27th September 2023, Paypal will enter a new era.
Alex Chriss, who has recently led the QuickBooks division of US-based software company, Intuit, will become PayPal’s president and CEO, replacing incumbent Dan Schulman.
Chris joins the payment provider during a significant lowpoint in its market strategy and day to day operations, signalled by a lay-off of around 2,000 employees back in April and a 16% year-on-year stock plummet.
So what is the current state of Paypal’s operations? Why do the board of directors believe Chriss is the man to turn it around? And what is the company’s future?
Grow don’t show
To put it bluntly, Alex Chriss will walk into a building if not already on fire, then soon to be, on 27th September.
The principal issue raised time and again by observers of PayPal’s business is profitable growth. Growth without returns is a weak margin and that makes for unhappy investors.
Take its Q2 performance for 2023; 11% total payment volume growth, 7% revenue growth and 8% within branded checkout; great numbers across the board. But these translated into just a 1% uptick in gross profit, meaning its margins are too small between what it spends and what it returns to investors.
Some analysts believe the low-margin situation is as a result of the company’s stable of underperforming payment services.
Venmo, for example, has a complicated long-term strategy that hinges on the integration of payments through social media and the sharing of user’s spending habits. It’s far from taking off just yet and questions will continue to be asked as to whether it is viable to remain committed to the brand and its vision if margins remain low.
What’s more, the transaction volume growth is great but there is more competition now too.
Block’s Cash App and Apple Pay are hitting consecutively higher adoption rates. Deutsche Bank analyst, Bryan Keane, noted in April this year:
“While PayPal continues to be the dominant mobile payment service with 71% of respondents having used the service in the past 12 months, Cash App and Apple Pay both saw large increases in adoption over the past year reaching 46% and 31% adoption, respectively, up from 31% and 23%, respectively, last year.”
There is definitely a post-pandemic hangover for PayPal too.
Revenue shot up from $17.8bn in 2019 to more than $25 billion in 2021 and shares of the company rocketed as consumers spent from their homes but the slow burn back to retail has instigated a cool-off.
Why Chriss, why?
Upon announcing the appointment, PayPal’s board chair, John Donahoe, said: “The Board search committee worked diligently and thoroughly to find the right candidate to take PayPal into its next stage of growth and expansion, and we are confident Alex is that person.”
It’s reasonable to expect Chriss to carry an impressive CV, and he does. His 19 years at Inuit saw him serve as executive vice president and general manager of the Small Business and Self-Employed Group, growing customers and revenues by over 20% year over year, according to PayPal.
He also oversaw Intuit’s $12bn acquisition of email marketing platform, Mailchimp, in 2021.
But it is really Chriss’ expertise in the small business sector that PayPal saw their next leader as they cast a longing eye towards the world of crypto.
Last year, the platform opened the ability for users to receive and send several popular crypto tokens including bitcoin and ether.
More recently, the company announced its own US dollar-backed stablecoin called PayPal USD, allowing people to make person-to-person payments and transfer the currency between PayPal and other outside wallets. PYUSD lives on the Ethereum blockchain and is issued by Paxos Trust Company, a financial tech company specialising in blockchain.
Just as the stablecoin went to market, so too did a new PayPal Cryptocurrencies Hub, allowing users to manage their crypto not unlike a private bank, but one where they have more autonomy over the movement of their money and use it for anything from peer-to-peer transactions to using PayPal at online casI’m inos.
This, it would seem, aligns well with Chriss’ experience as well as PayPal’s strategy for the direction of their business.
Omid Malekan, an adjunct professor at Columbia Business School, told CNBC that because of how PayPal currently makes its fees, charging vendors for transactions, the move to undo that revenue stream by using blockchain is a vote of confidence in the technology.
“One way to look at all of this is that PayPal believes, in the future, public blockchains will play a big role in its traditional business of payments and it’s just trying to evolve and keep up with cutting edge technology,” he said.
But it’ll take more than just a crypto push to get PayPal back in black.
Around Dan Schulman, the outgoing chief executive and president, a strong culture was built. An impressive businessman himself, founding CEO of Virgin Mobile and formative CEO of Priceline, Schulman brought PayPal into its market-leading position between 2014 and 2021.
Chriss will need to form his own brand equal to, or greater than, Schulman’s to inspire great work.
“Coming from the outside, whatever your credentials or accomplishments, you are going to face fear-based skepticism,” Peerage Capital founder and entrepreneur Miles Nadal recently told Yahoo! News. “No matter how urgent the need for change, people fear it. That’s further amplified by an outside appointment that sends the signal there is an appetite for change at the highest levels of the organisation.”
As Alex Chriss sets his eyes on his future at PayPal and Dan Schulman departs, one imagines a scene from a Hollywood film symbolising the changing of the guard.
The scale of the challenge lying in wait for Chriss is significant; a systematic and surgical undoing of the processes and structures the company has fallen upon for years.
Time will tell if PayPal’s crypto bet pays off and in the event it fails, how Chriss finds the next avenue to growth potential for a payments giant with all the reputation but dwindling investor confidence.
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