In early 2016, PayPal’s chief executive Dan Schulman decided he really needed to wrap his head around cryptocurrency.
Back then, a single bitcoin could be purchased for about $400, while PayPal was worth about $50bn, after splitting from its former parent eBay a few months earlier.
“When I came in [as CEO in 2014], I think a lot of people thought that PayPal had seen its best days,” says Schulman, who had previously held senior positions at AT&T, Priceline.com, Virgin Mobile and American Express. “The day I arrived was the day Apple Pay was announced — that was my ‘welcome to Silicon Valley’ gift. We had to redefine ourselves.”
Schulman wanted to transform PayPal from a simple checkout button to a “platform” that could be relied upon for digital payments of all kinds.
So in January 2016, he lured Wences Casares, co-founder of bitcoin wallet Xapo and an early crypto evangelist in Silicon Valley, on to PayPal’s board. It was the beginning of a long education in how to turn PayPal into a trusted guide for consumers and merchants through the confusing and often volatile world of cryptocurrency.
“Every time I thought I got it, I would go talk to Wences again, and then realise I didn’t get it completely,” Schulman recalls. “Most people think they get it and they really don’t. It’s very nuanced . . . I wanted to be sure that there was both scale and real functionality.”
Over the past five years, the price of bitcoin has increased more than 100 times over, to more than $40,000 today. PayPal’s market capitalisation, meanwhile, has risen sixfold to more than $300bn.
But Schulman maintains the price of bitcoin is the “least interesting thing” about crypto. He believes it is just one part of a necessary drive to make the financial system more efficient and inclusive.
“I do believe that governments, central banks are understanding that the world is moving towards digital payments, that you cannot manage monetary policy through the issuance of banknotes,” he says.
PayPal has been slower to embrace crypto than its sometime rival Square, which first allowed sellers to accept bitcoin payments in 2014 and whose founder Jack Dorsey has become a figurehead in the crypto community over the past couple of years.
Schulman may lack Dorsey’s crypto street cred, but he has the zeal of a convert. He wants PayPal to be ready to support central bank digital currencies (CBDCs), which he sees as “inevitable” after China began testing its “digital renminbi”. That means working “hand in hand” with regulators and government officials, and ensuring the “stability and integrity of the system at the highest levels”, he says.
The tacit contrast is with Facebook’s stalled cryptocurrency project, Libra. PayPal withdrew from the Libra Association in 2019 amid concerns that Facebook did not engage enough with regulators before its launch, contributing to a legal backlash that has kept the venture — now rebranded as Diem — stuck on the launch pad.
“That doesn’t mean we shouldn’t innovate,” he adds. “It just means we need to do it carefully.”
In the meantime, bitcoin’s price fluctuations do seem to make for a more engaging app. PayPal customers who hold cryptocurrencies tend to log in twice as often as they did before.
After adding support for buying, holding and selling cryptocurrency in the US last year, the feature will roll out for PayPal’s UK users starting this week.
American users can already use crypto as a funding source for their PayPal wallet, which Schulman hopes will shift digital coins away from being a speculative asset class and towards wider utility. Its 30m merchants can now accept bitcoin without having to worry about conversion fees or other complexities.
These crypto features are part of PayPal’s broader expansion into what Schulman pitches as a payments “super app” — including messaging, a savings account, bill payments and money transfer, and shopping features — slated for launch later this year. Schulman has said he wants to turn PayPal into an app that people use every day.
The inspiration, as for so many would-be super apps from Uber to Facebook, is WeChat, China’s do-it-all app. Few companies in the US or Europe have been able to replicate WeChat’s success in packing functions as varied as messaging, ecommerce and gaming into a single app. Schulman consulted Martin Lau, president of WeChat parent Tencent, as he formulated PayPal’s strategy.
PayPal was founded in 1998 — an eternity in internet years. While it may not have the halo of a racy fintech start-up such as Revolut or Klarna any more, Schulman says its longevity has allowed it to stockpile trust with consumers. “You’re not going to live your life in a super app if you don’t trust that brand,” he says. It has scale too, recently surpassing 400m active accounts and processing almost 5bn transactions a quarter.
The launch of the super app comes just as PayPal nears completion of the separation from eBay that Schulman was originally hired to manage.
The timing is coincidental, he says, but it underlines the changes that PayPal has undergone in the past seven years.
Three questions for Dan Schulman
Who is your leadership hero?
My dad [Mel Schulman, a chemical engineer and second world war veteran]. He always said: ‘You aren’t what you say you are, you are what you do — be as authentic as you can.’ Things change on the ground: whatever we talk about today, tomorrow will be different. But you and I are the same person.
What was the first leadership lesson you learnt?
My dad said something to me early on in my life: Real respect, real leadership comes from softer things like humility, listening to people, respect — that’s what inspires people. As I’ve gone from job to job, the most important thing is to figure out how to inspire.
If you were not a CEO, what would you be?
I would like to think I [would] have been in public service and would have focused on solving some of the many inequalities in our systems.
The split followed pressure from activist investor Carl Icahn, who had argued eBay’s slower growth was constraining PayPal’s potential as a standalone company. At the time of the demerger, eBay represented a quarter of PayPal’s revenues and a greater portion of its profits. Today it is 4 per cent of PayPal’s sales, after eBay implemented its own payment system.
Schulman and his opposite number at eBay, John Donahoe, now Nike’s CEO, drew up a five-year plan to “wean the two companies off each other”. “We had a Gantt chart that was two miles long,” he says. “It was crazy the number of details that we had to go through.”
As well as technical details such as separating their data centres and integrations across two vast websites, there were rules governing pricing, working with competitors and product road maps.
The transition has not been perfectly smooth — in PayPal’s most recent quarter, some investors were surprised that eBay had launched its own payments platform faster than expected. But Schulman says he and Donahoe, who remains PayPal’s chair, marvel at how well that original transition plan in 2014 has held up, as eBay has become “an important strategic customer of ours, but one of many”.
That sort of diplomacy will only become more important for PayPal as it navigates a world of overlapping customers and competitors, such as Apple, which allows PayPal to be used to make payments in the App Store and iTunes, but also competes with its own Apple Pay.
“My view of things is, business is personal. A lot of times people say, ‘it’s not you, it’s just business’, but I don’t buy it,” says Schulman. “People need to be able to look into your eyes and trust you.”
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