Navigating Risks in the Digital Payment Landscape

This is Dom Cooke and today we’re breaking down PayPal. PayPal has been at the forefront of digital payments since the early days of the internet. Founded by Peter Thiel, Elon Musk and others, who have since become household names, PayPal is a payments marketplace that facilitates transactions between merchants and consumers. It found product market fit as the trusted way to send money over the internet, was quickly acquired by eBay, and had its second founding moment in 2015 when it was spun off into a public company again. The platform serves 435 million consumers and merchants and processed $1.4 trillion of payments last year.

To break down the business, I’m joined by Elliot Turner, managing partner and CIO at RGA Investment Advisors. We discuss the acquisitive history behind this business, how their portfolio of brands like Braintree, Venmo, and Honey operate within the ecosystem, and why VISA threatened to go nuclear on PayPal. Please enjoy this business breakdown of PayPal.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. 

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Show Notes

(00:02:40) - (First question) Important milestones leading to the genesis of PayPal

(00:08:18) - eBay's acquisition of PayPal and the subsequent separation

(00:12:13) - The size and scope of PayPal today

(00:15:08) - Where PayPal fits within the overall payments ecosystem

(00:18:33) - The various transaction types involved in their business economics

(00:22:03) - How PayPal protects its users against fraudulent behavior

(00:24:37) - PayPal’s business strategy of getting people comfortable with using digital money

(00:27:31) - The value that driving customer engagement has on the bottom line

(00:31:41) - How PayPal utilizes cash within its ecosystem

(00:33:15) - Why Braintree has been such a success, and who they compete with

(00:38:50) - How PayPal revenue is split into cash flow and profits

(00:42:40) - What enables PayPal to maintain such a large advantage over its competitors 

(00:46:03) - Identifying PayPal’s main competitors and partners

(00:48:30) - The dynamics of PayPal's relationship with Apple

(00:50:44) - How acquisition and R&D fosters their growth and innovation  

(00:55:12) - Strategic changes adopted by PayPal to recover from the COVID period

(00:56:42) - Speculation on who could replace Dan Schulman as PayPal’s CEO

(00:58:52) - His thoughts on potential growth opportunities for PayPal’s next CEO

(01:01:40) - Potential risks that PayPal may encounter in the future

(01:04:10) - Lessons learned from studying PayPal