Good morning, afternoon, evening. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the PayPal Holdings Earnings Conference Call for the First Quarter 2022. [Operator Instructions]. I would now like to introduce your host for today's call, Ms.

Gabrielle Rabinovitch, Senior Vice President, Corporate Finance and Investor Relations. Please go ahead..

Thank you, Chris. Good afternoon, and thank you for joining us. Welcome to PayPal's earnings conference call for the first quarter of 2022. Joining me today on the call are Dan Schulman, our President and CEO; and John Rainey, our Chief Financial Officer and EVP, Global Customer Operations.

We're providing a slide presentation to accompany our commentary. This conference call is also being webcast, and both the presentation and call are available on our Investor Relations website. In discussing our company's performance, we will refer to some non-GAAP measures.

You can find the reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the presentation accompanying this conference call. Management will make forward-looking statements that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties.

These statements include our guidance for the second quarter and full year 2022 and our medium-term outlook. Our actual results may differ materially from these statements.

You can find more information about risks, uncertainties and other factors that could affect our results in our most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC and available on our Investor Relations website. You should not place undue reliance on any forward-looking statements.

All information in this presentation is as of today's date, April 27, 2022. We expressly disclaim any obligation to update this information. With that, let me turn the call over to Dan..

Thanks, Gabrielle, and thanks, everyone, for joining us. We obviously have a lot to cover today. But before I begin my formal remarks, I want to start by saying how dismayed we are at the atrocities happening in Ukraine.

Early on, we suspended our transactional services in Russia and worked quickly to enable PayPal's send and receive services in Ukraine. Since then, our platform has enabled approximately $100 million to be sent to Ukrainian citizens and refugees.

In addition, thanks to the generosity of our community, nearly $0.5 billion has been sent over our platform to leading nonprofit organizations supporting Ukraine. It is in times like these that we are most reminded of the essential role our platform and services provide to those most in need.

This afternoon, in the interest of time, I'm going to briefly cover our first quarter results, before I provide a strategic update and discuss our outlook for the quarter and year ahead. We have provided additional coverage of our Q1 results in our investor update presentation.

As all of you know, after almost 7 years at PayPal, John Rainey will be leaving the company to join the leadership team at Walmart. I'm happy for John. And I'm not surprised that the Fortune 1 company has recognized all that John has done to help build PayPal into what it is today.

John, I'm going to miss you, and I wish you the very best of success and happiness in your next chapter. I also want to say that I'm thrilled that the Board has appointed Gabrielle Rabinovitch as Interim CFO. The 3 of us are here together, and we will be handling Q&A as a team.

I want to begin my prepared remarks by acknowledging that our shareholders expect more from us than our track record over the past several quarters has delivered. And I take full accountability for that.

Navigating through the pandemic and an uncertain macroeconomic environment with resulting shifts in consumer behavior has made visibility more challenging. But we need to do better, and you will hear more from us today about delivering on our commitments. Before we talk more about our go-forward focus, let me touch on our Q1 results.

I'm pleased to report we delivered solid results that exceeded our guidance on revenue and earnings. The first quarter of 2021 was the strongest in our history, with 31% spot revenue growth and 84% non-GAAP EPS growth. And despite lapping this growth, revenues increased 7% to $6.48 billion and increased 15%, excluding eBay. U.S.

revenues grew 20%, and international revenue decreased 5%. Ex eBay, international revenue grew 5%, which was on top of 47% growth in Q1 last year. Volume-based expenses increased 25% and represent 49% of revenue versus 42% of revenue last year.

This uptick of approximately 700 basis points resulted from increased funding costs driven primarily by volume mix and lapping the release of $84 million of credit reserves. Nontransaction-related expenses grew 8% in the quarter and represented 30% of revenue, which was flat to last year.

Investments in technology and development were offset by leverage in our other nontransaction operating expenses. We delivered non-GAAP EPS of $0.88 in the quarter, absorbing an incremental $0.03 of earnings pressure due to our suspension of transactional services in Russia.

We also generated more than $1 billion in free cash flow and returned $1.5 billion in capital to stockholders through share repurchases. As I shared last quarter, we are increasing our emphasis on incremental engagement across our existing customer base while continuing to add higher-value accounts.

In Q1, we added 2.4 million net new active accounts in the quarter, bringing our total active base to 429 million. Our transactions per active account grew 11% to 47. We continue to be pleased with our Buy Now, Pay Later franchise, which is seeing persistent market share gains.

We did $3.6 billion in volume in Q1, up 256%, with over 18 million consumer accounts choosing this funding option since launch. And we are seeing increased merchant penetration and upstream presentment, which will allow us to continue to deliver strong results. In Q1, Braintree outperformed again, with volumes growing 61%.

This growth comes with the success of key customers like Airbnb, Uber, DoorDash, Live Nation, vineyard vines and TikTok. Importantly, for many of these merchants, we are their exclusive or primary provider of unbranded processing. In addition, Venmo delivered strong revenue performance in Q1, with growth of approximately 60%.

Volume grew 12% to $58 billion, on top of 63% growth a year ago. Venmo now has more than 85 million accounts in the U.S. And our goal in the coming year is to drive more commerce transactions on Venmo while continuing to be a leading P2P platform.

We are making progress in driving more Pay with Venmo transactions, business profiles and off-line purchases with the Venmo debit and credit cards. And our integration plans with Amazon are progressing, with the back half of the year as our current launch time frame.

Across both PayPal and Venmo, we are working hard to have our digital wallets at the center of our consumers' daily financial lives. Our redesigned PayPal digital wallet app is now installed by over 50% of our base, and our app users are engaging with more features and driving incremental average revenue per account as a result.

Customers who use our digital wallet transact 25% more at checkout than users that are not using the app. And over 70% of our Buy Now, Pay Later users engage through our digital wallet.

We have nearly completed the rollout of our savings product, and we will be introducing additional financial services and commerce functionality in the coming quarters. Our digital wallet ARPA is 2x that of a customer who only uses checkout, and the churn rate for digital wallet users is 25% less than the rest of our base.

We are focused on increasing adoption of our digital wallet and believe it is one of our most meaningful opportunities to drive growth. In addition, working with partners has been and continues to be an important ingredient to our success. We recently renewed and expanded our strategic partnerships with American Express and Citibank.

Our strong and growing relationships with these important partners and others highlight our commitment to offering our customers choice in how they pay by enabling seamless FI integrations into our products and services. I would like to now discuss our outlook for Q2 and the year.

While we are pleased that we delivered Q1 with a beat on revenue and EPS, 2022 remains another challenging year to forecast. In laying out our 2022 outlook several months ago, we noted that if macro pressures persisted, we would trend towards the lower end of our range.

And if we saw structural improvement, it would push us upwards towards the upper bound. It is clear that relative to early February, the macro environment has deteriorated. Russia, Ukraine and China are contributing to increased global uncertainty and incremental inflationary and supply chain pressures.

And more specific to PayPal, forecasting normalized consumer e-commerce spending, as we come out of the pandemic, is exceedingly complex. As a result, we believe it is prudent to lower our 2022 guidance and reevaluate our medium-term outlook.

For the second quarter, we expect revenue growth of approximately 9% and non-GAAP EPS to be approximately $0.86. We expect a bit more than $200 million of impact from eBay in Q2. And we have tough comps as eBay revenue grew -- as eBay -- ex eBay revenue, excuse me, grew 32% in the second quarter last year.

We also had reserve releases of $156 million in Q2 2021, which creates an approximate $0.11 headwind to earnings growth. For the year, we now expect 11% to 13% revenue growth and non-GAAP EPS to be in the range of $3.81 to $3.93. Ex eBay, this represents revenue growth of approximately 15% to 17%.

In addition, at the midpoint of our range, this equates to back-half revenue growth of 15.5%. Our revised EPS guidance reflects the flow-through implications of our revenue expectations and volume mix. We are now forecasting 10 million net new active accounts for the year.

We expect to add positive NNAs to our platform every quarter this year, with Q2 representing the low point. I want to share additional context about the work we are doing to increase our operating leverage. Pre-pandemic, we were in the process of simplifying our operating model and enhancing our operating efficiency.

The pandemic forced us to put many of those initiatives on hold to simply scale the business and support the unprecedented growth on our platform. We are now coming back to this work with renewed focus, energy and purpose.

While we are focused on incorporating more discipline into our operating model and driving operating leverage in our business, we are simultaneously investing to grow. We see opportunities to accelerate our growth and customer engagement.

We believe our portfolio of digital payment assets is unmatched in breadth and depth, which creates a powerful competitive advantage for us. To extend this advantage and advance our leadership position, our focus on streamlining and improving the way we work is critical and will allow us to achieve more efficient growth.

Overall, these efforts will yield significant savings, allowing us to continue to reinvest in the business and drive profitable growth. For the year, we now expect to generate more than $5 billion in free cash flow.

In addition, we still plan to balance capital allocation between investing organically in our business, share repurchase and inorganic growth. That said, to be clear, transformative acquisitions are not on our growth agenda at this time.

We currently expect that any activity for the foreseeable future will be focused on straightforward deals that have clear and unassailable alignment with our skills and capabilities. Finally, I would like to discuss our medium-term outlook that was provided at our Investor Day in February of 2021.

We have reassessed the feasibility of achieving our revenue and earnings targets. These targets relied on several baseline assumptions, relating to both e-commerce penetration and macroeconomic factors that are no longer on the trajectory that we forecasted. As a result, we're withdrawing our medium-term outlook.

We will continue to guide revenue and earnings on both a quarter and full year basis and continue to update you on how we are thinking about our business over the long term. Make no mistake, we have strong conviction in the growth potential of our business and our ability to sustainably create value for our shareholders.

However, we recognize the need to level-set expectations in what remains a dynamic environment. We know the scale of our 2-sided platform is truly differentiated and gives us strong competitive advantage. We believe the secular tailwinds from the digitization of payments and e-commerce growth are persistent.

And we believe that we are uniquely positioned to bring more merchants and consumers together globally than any other company and help them connect and transact safely. We continue to have many opportunities in front of us, given the scale of our 2-sided network and the ongoing growth in digitized payments.

We will advance our leadership in checkout, continue our work to become the preeminent digital wallet and bring PayPal's tools to more in-person context, all the while investing in our foundational technologies. Hundreds of millions of consumers and tens of millions of merchants value our comprehensive set of products and services.

And we are investing resources to both improve our existing products and innovate for the future with capabilities, including enhanced loyalty programs, package tracking and returns management.

With branded checkout and full-stack processing as the foundational elements of our platform and competitive advantage, the opportunities ahead are significant. And we believe PayPal is well positioned to play a leading role in driving the future of digital payments and commerce.

We believe we will continue to grow revenue faster than the rate of e-commerce growth and increase our market share in digital payments.

At the same time, we will continue to focus on improving operating leverage to support sustained value creation, accelerating the velocity of getting product into the hands of our customers and driving greater organizational effectiveness by simplifying processes and increasing accountability.

We look forward to sharing our progress with you as the year unfolds. And with that, let me turn the call back to the operator for your questions..

[Operator Instructions]. Your first question comes from the line of Lisa Ellis of MoffettNathanson..

And good to hear your voices. John, we will miss you, of course. Dan, this one's for you, maybe just building on how you just closed the formal remarks.

Reflecting back on the challenges over these past 6 to 8 months, what, in your view, are the top 3 or 4 things that PayPal really needs to do differently going forward to turn around the trajectory of the business?.

Yes. It's good to hear your voice as well, Lisa. I feel the same way about John. So look, it's been a difficult several quarters for us in accurately forecasting on what our business would look like.

I will say that, over the past 5 years, we very consistently gained market share as true also in Q1, if you look across the different products and capabilities we offer. And so I think we need to, one, kind of rethink, and we've tried to start to do this year, our philosophy and methodology around forecasting. And we'll talk probably about that later.

I'm sure there will be conversations about that. Second, I think there are less things we need to do extremely well.

And so we are really going to be focusing on checkout, and we can talk about that in more detail later in the call, but we have a number of initiatives on advancing our position in checkout and also thinking about next-generation checkout as well. And we also need to double-down on the digital wallet.

We clearly believe that's where the future of the industry is going. It's the future of PayPal. It is the heart of what we are trying to do from an engagement perspective. And so those are the 2 things that we really need to double-down on.

I would say the third thing is we need to go back to where we were before we came into the pandemic, with a real focus on our operating model, making sure we simplify and streamline, putting more and more accountability into the hands of our product managers and driving really end-to-end accountability and ownership across the whole business.

And so there are clearly a lot of things we need to do. I feel like we're beginning to make good progress on some of the execution. Q1 was a piece of that and some of the metrics are -- we're seeing green shoots on that. But we've just got to stay focused and keep driving simplification and operating leverage in our model..

Your next question comes from the line of Tien-Tsin Huang of JPMorgan..

And may I also start by saying thank you to John and absolutely wish you nothing but the best. I'll ask on the outlook. I know Lisa asked a good question on what's going to change, but I'm just trying to better understand the full year vision to revenue and EPS and where you're landing now versus 90 days ago.

So it looks like the eBay assumption is the same.

So how much of the change is due to macro factors versus maybe you know a little bit more about the impacts of your strategy shift? And of course, how much did conservatism play a role, recognizing, as you said, visibility is tough and you have a CFO seat to fill, et cetera?.

Sure, Tien-Tsin. I'll start. And let me first say thank you for your comments. And I think Gabrielle will probably jump in on this as well. But I'll give a little bit of color to the way that we're thinking about guidance.

And so you'll recall, and Dan also referred to this in his prepared remarks, that at the last quarter, when we gave a revenue range of 15% to 17%, we very clearly said if things did not improve, we would be at the low end of that range.

And that's a different approach to the guidance that we have today, insofar as we are actually assuming that things get a little worse from here. It's been challenging forecasting sort of the return or the normalization of e-commerce trends post-pandemic.

And we've been chasing this for a little bit, and we don't want to continue to find ourselves in that situation. So if you sort of contrast where we are today with when we gave that guidance, not only have things not improved, I think very clearly, they've gotten worse. We've got a war that's broken out in Ukraine.

We've seen more supply chain issues that are acute in places like China. You've got even higher inflation now, which is, I think, disproportionately affecting our customer base that skews more towards discretionary spend versus nondiscretionary spend. All of these things affect the way that we're approaching the outlook for the year.

Gabrielle, do you want to add anything?.

Yes, sure. Thanks, John. So Tien-Tsin, in terms of sort of lowering the revenue outlook, in addition to what John mentioned around just the macro worsening and what that means for our overall growth expectations in our core markets, we also, to John's point, sort of took a look at what we're seeing on our own platform.

And that really relates to sort of e-commerce and consumer behavior. It does have that sort of macro intersection, but for us, because we have more of a discretionary platform, we do see a greater impact on the spend.

And so relative to how we started the year, e-commerce globally is slower than what we thought, and we're seeing that come through on our platform. And so we're reflecting that, and that's both in terms of just the spending patterns as well as off-line/online mix. So that's sort of how we're thinking about starting the year.

It's really not about our overall conviction in the secular tailwinds that support the business, but we want to be realistic about what we're seeing in-year and adjust that outlook for that.

The final contributor to it on the revenue side is really that we've recalibrated our expectations on some of our initiatives at PayPal based upon those lower global growth expectations. And so we wanted to have a consistency in that conservatism around what we think are sort of newer initiatives can deliver in-year given some of those macro impacts.

On the EPS side, it's really a flow-through of some of these things, but maybe just something I would call out is from a volume standpoint. We are seeing outsized performance from Braintree. So that unbranded processing mix does play a role in the overall profitability of the business. And so we're taking down EPS, in part, for that.

In addition to that, we're continuing to invest heavily in the areas that we think are important to drive that long-term profitable growth. And so that's what you're seeing sort of in terms of the overall impact to EPS.

One other call-out would just be suspending transaction services in Russia does have an EPS impact as well, and so we have adjusted our outlook for that..

Your next question comes from the line of Darrin Peller of Wolfe Research..

John, I also want to wish you the best.

And guys, when we look at -- yes, when we look at the guidance that you guys gave, and I know you withdrew the medium term, which I think a lot of investors expected at this point, but the exit year, if you could just help us understand the cadence of the year and then the exit growth rate implied by the new guide range and maybe a little more on the assumptions behind that exit rate..

Yes. Sure, Darrin. I'll start off there and then see if Gabs or John want to add to it. So as I said in my remarks, what the back half implies with our 11% to 13% is a 15.5% revenue growth in the back half, so mid-teens, in general, with that. And then as we think about EPS, there are a number of onetime events on our EPS growth rates.

But when we think about kind of like what is an exit as we go into next year, just kind of on a normalized basis, it's probably in the mid-teens as well. And as we think about the medium term, the thing that I talked about in my script is that we've had a long track record of taking share and growing faster than e-commerce.

And so as you're thinking about kind of what does that medium term look like, it really depends on your view of kind of where e-commerce is going to come out.

We'll take a look, but there are a lot of shifting estimates right now, as John mentioned, coming out of the pandemic, now coming into a high inflation kind of a macroeconomic environment that's uncertain. And the magnitude of that uncertainty is wider.

We felt it was best to characterize kind of what the company expects to do over the medium term as opposed to put out any specific numbers..

I'll just add too, Darrin, that, look, no company wants to be in the position of pulling their medium-term guidance. But when you step back and you look at the set of assumptions on which we base that medium-term guidance, they're very, very different today.

That said, and perhaps I'm in a unique position to say this, that doesn't take away our conviction and the long-term value and the prospects for this business at all.

This -- there are a few companies of our size and scale in digital payments that have some of the unique attributes that we have around our cash flow generation, our revenue growth and the margin profile that we do. And so we're not immune to some of these economic vagaries that we're going through right now. But we've got to respond to that.

And -- but that should not take away from how you think about our business longer-term. And again, we are perhaps the purest play in digital payments, and we're going to continue to invest appropriately to make sure that we stay that way and stay a leader in digital payments going forward..

Yes. And if I can just jump on top of John's points. Like at some point, these trends tend to turn as well, but when that happens is unclear.

And so we know, as long as we continue to invest, to seize those growth opportunities, to ensure that our growth remains in excess of that of e-commerce, when these things do change, we'll be beneficiaries of that as well. So we just want to be heads down, focused on the things we control and execute really well against them..

Your next question comes from the line of Ramsey El-Assal of Barclays..

I wonder if you could give us an update on the kind of pivot to focusing more on customer engagement versus acquisition.

And I guess, specifically, do you have all the tools that you need now to sort of execute on this shift? Is there more development or M&A or incremental technology or resources that you're going to need to dedicate to the new strategy? Or are you kind of set where you are now to make it happen?.

Yes. It's at such a fast-moving environment that we operate in, with constant innovation, that we're never in a place where we're not going to need to continue to innovate and invest in the business. I think we've made some really important strides in the past year or so with the advent of our digital wallet.

We clearly think that the world is continuing to digitize. Yes, there's some normalization between online and off-line right now. But going forward, the world continues to digitize. And disparate parts of the economy are coming together, whether that be shopping, payments, basic financial services.

And so the wallet is going to be one of the key elements of how we drive customer engagement. And we're going to continue to evolve the wallet. It is v 1.0 right now. And there's going to be v 2.0 and v 3.0, and we've got a number of things on our road map that we really want to execute against this year.

But we're already beginning to see uptick in our engagement. For the second quarter in a row, we had 11% TPA. Ex eBay, actually, engagement went up 19% in the quarter. That's a pretty big move in terms of engagement. And you heard the stats that I talked about in my script in terms of the increases in ARPA, the decreases in churn.

And as you think about kind of our growth going forward, 30% of our customers generate 80% of the volume on our platform. We're clearly not a subscription business, we're a transaction-based business. And growing those transactions is a huge opportunity for us. We probably, today, have like 25% of the online financial transactions that a consumer does.

And so there's a ton of room for us to grow in that area. I would also say the surest way for us to grow net new actives going forward is to increase engagement.

Like when you're at 429 million active accounts, even with a consistent churn rate year-over-year, and by the way, we know, this year, our churn rate will be somewhat higher because we're letting these low engaged consumers churn off the platform because the ROI to keep them isn't worth it.

But the more we can keep people on the platform engaged, the more we'll grow our NNAs going forward. And so the 2 big things we're focused on, improving checkout, improving digital wallet, are the things that we'll probably be talking about for years to come actually.

Anything you would add?.

Your next question comes from the line of Jason Kupferberg with Bank of America..

I wanted to shift over to Venmo for a minute, if I could. I know that volume growth started the year at 12%. Clearly, there was a tough comp there. I'm just wondering whether or not any of the new IRS rules around reporting of these transactions is having any impact there, how you expect Venmo volume growth to evolve during the course of the year.

I know you started really strong on the revenue side, with Venmo at 60% in Q1.

So fair to assume you still expect 50%-plus revenue growth from Venmo this year?.

Yes, Jason, I think we continue to expect the 50% revenue growth for Venmo this year. To your question on sort of the IRS change, I would say, very early in the year, we did see some impact from that. We've worked a ton on customer comprehension and education. So we think that's basically behind us, just in terms of what the impact could be.

But we also are up against really tough comps. And so last year's Q1 was 63% growth for Venmo, this year, 12%. The business has scaled to the point that it's actually meaningfully larger than what our U.S. business was coming out of separation.

And so at this point, we continue to expect strong growth, but it's going to be a mix of commerce volumes and revenue as well as the P2P piece.

Dan, anything to add?.

I would just say they've got a strong road map ahead of them, putting in business profiles, transitioning that almost into storefronts, enabling charities to be a part -- listed on Venmo, the full debit card refreshed, revamping P2P, even improving searchability and other things around that.

So they've got a -- and then, of course, launching Amazon in the back half of the year. So they've got a pretty full road map. And I think Gab summarized all the other points perfectly..

Your next question comes from Bryan Keane with Deutsche Bank..

I wanted to ask about TPV. When I look at total payment volume in the quarter, I see the dichotomy between U.S. growth, up 21%, and international, only up 5%. So clearly, international is growing slower than the U.S. So wondering, when I look at the international market, what are some of the factors there that are influencing the growth rates.

Is it inflation? Is the Ukraine situation bleeding into other parts of Europe? Is there any share loss? Any color on that would be great..

Yes, sure. Thanks for the question, Bryan. I think the 2 main drivers really are, in first instance, actually very challenging comps. We're up against very, very tough comps from last year. So Q1 of last year, international revenue growth, 38% in the quarter, and it was 47% ex eBay. So that alone is sort of one of the drivers this year.

The other big piece really is the eBay component. And so that too is playing a role. So on the revenue side, international revenue growth, ex eBay, was up 5%, relative to the negative side that you see. Probably also worth highlighting, that China and U.K.

continue to be tough markets for us, and that is both the eBay migration, but it really is also the macro. And so that's one where we're watching it really closely. We did see sort of China revenue down more than it was in Q4., U.K.

revenue down again more than it was in Q4, and so we'll continue to watch it closely, but that definitely does have a macro layer to it..

Got it. And good luck, John..

Thanks, Bryan..

Your next question comes from Mike Ng of Goldman Sachs..

I would like to ask about competition. Specifically, there have been some high-profile challenges reported for startups in the one-click checkout space.

Could you talk a little bit about some of the benefits of PayPal's scale that may create barriers to entry among new entrants and where you're most focused as it relates to competition, if not necessarily new competitors?.

Yes. Well, as you point out, look, checkout is our business. I mean you've got to be able to scale it. And it's got to be perfect. As you noted, retailers depend completely on a checkout provider. And if it doesn't go right, they can lose a tremendous amount of sales.

And so like the brand trust we have and our track record over time, our availability, our fraud and risk capabilities, have been honed over the last 10 or 15 years. Like on average, a retailer that does 100 transactions with PayPal, we approve 6 more than somebody else -- another checkout methodology. These make huge differences.

I would say, the other thing, of course, is that it is a network effects business. The larger the scale, the more attractive the network is. And when you do consumer surveys, 60% of consumers pick PayPal as their #1 choice to do an online transaction. The next closest digital wallet is 8%. So it's not even close.

PayPal customers are 2x more likely to shop when they see a PayPal button. And for smaller merchants, having the PayPal brand is essential because in today's age, you're seeing much more e-commerce sales that are outside of local territories. It's across state. It's across the country. It's across countries.

And seeing that PayPal brand enables the consumer to feel confident that they've got protection and for a business to feel comfortable because we give them seller protections as well.

And so we have a ton of scale advantages and a ton of experience in high auth rates and low loss rates, which typically don't work hand in hand, but they do work that way with us. And look, we are not resting on any of those laurels by any stretch of imagination.

We are driving to improve basic hygiene, increased uptime and availability at 99.999% level, taking latency down to low single-digit seconds, simplifying our UX right now. Too often, there's a pop-up that occurs, and it takes you out of the web or the native app. And you don't want to go out and then back into that app.

So we want to drive in-context or in-line checkout. We know we can even make our integrations easier and simpler by moving more and more towards industry standard integrations. And we're going to optimize log-on through new identity techniques. And by the way, we are also thinking about the next generation of checkout.

The real issue for retailers is not so much can you make conversion better when a consumer gets to the product page or the checkout page, which, by the way, is important because every little bit actually matters to merchants, and we clearly lead in that area.

But the real issue is less than 5 out of 100 people who go to a merchant's website actually check out. So there's a ton of drop-off before a consumer gets to the product pages or to the checkout. And basically, nobody has the amount of data and information we have on customers.

We vault over 1 billion financial instruments on our platform, well more than that.

And being able to work with retailers and consumers, to surface who that consumer is, obviously with consent and all of that, so that a retailer can customize kind of to every customer coming on that have offers or deals or with a homepage they come to is a huge potential next-generation of checkout with a lot of interest from merchants.

And nobody can really do that better than we can because of our scale and the data we have. And so I think we got a lot of good advantages right now, but we are really thinking about how do we take it to the next level and how do we even reimagine checkout..

We have time for one last question from David Togut of Evercore..

All the best to you, John..

Thanks, David..

At the beginning of the pandemic, Dan, you clearly articulated a focus on unified commerce, in particular, a major rollout of QR codes at some of the biggest retailers in the country. And more recently, we've seen consumers return to the physical point-of-sale with increased vaccination rates.

Can you update us on how PayPal is positioned in unified commerce, and in particular, where you stand with the QR code rollout?.

Yes. Well, I think we said from the very beginning, it's proving to be very true, that in-person payments is going to be -- it's going to be a long shot for us going forward. There's no magic word to that. We are continuing to increase, every quarter, the number of retailers that offer our QR codes.

But changing consumer behavior to move to mobile and mobile checkout, it's going to take time. It clearly will happen over time, but it's going to take time. And so our view on this is that we really feel like putting quite a large emphasis on revamping our debit and credit card to tie in fully with our app, but enabling a consumer to shop seamlessly.

If it's in-store, they want to use a form factor they're familiar with, they can do that. But it ties completely into the app, fully integrated, a little like the Venmo credit card is into the Venmo app. We just launched this 3-2 card, 3% cash-back on any purchase on PayPal, 2% everywhere else, but it is a fully integrated experience.

And so, for instance, what might you be able to do with that. You might be able to go into a store, pay with your 3-2 card and then come into the app and do a Buy Now, Pay Later type of thing. So flexibility on choice of how you pay, not just doing it instantaneously.

You may want to split that way of paying for that through rewards points and fiat currency. And this, tying in of both using the mobile phone at point-of-sale, but also enabling people to use cards and tie that directly into our app, I think, is probably a good 1-2 punch as we think about moving into in-store.

Clearly, Buy Now, Pay Later is exploding everywhere. And we are really gaining good traction there, good traction on upstream presentment, and more and more people want to use that. And that plays, by the way, right into our advantages as well because we have 10 years of credit experience.

We think we have the lowest loss rates of the Buy Now, Pay Later industry, probably the highest approval rates because we know so many of the customers and a really powerful value proposition to merchants. And now, we can tie that both online and off-line, and that can be a pretty powerful combination. All right.

Well, thank you, everybody, for joining us. And John, we -- you heard it from everybody, but you'll hear it from us how much we will miss you as well. And....

Thank you. I will miss you all as well, too..

Yes. And we look forward to working with you, I'm sure, the projection, as well. Okay, everybody. Thanks very much for your time, and we look forward to talking to you soon. Take care. Bye, bye..

This concludes today's conference call. You may now disconnect..