PayPal : At the crossroads of convenience and security

PayPal has been providing an alternative to traditional payment methods for over two decades now. The company has grown significantly since the days when it was best known as a way to make purchases on eBay, expanding to hundreds of countries around the world with millions of active customers. We asked Frank Keller, Vice President, Europe & Global Inside Sales of PayPal, to give us some insights on the future of the global payments space.

As the payments universe expands, customer experience is becoming a key competitive differentiator. How do you design new payments experiences?

"At PayPal, we have a customer-centric approach for designing and delivering new products. The product development journey is iterative and starts by identifying customer pain-points. We continuously meet with existing and potential customers to learn more about their behaviors, preferences and challenges."

"Once we have identified an issue or a customer pain-point, we focus on finding the right solution. We count on open stack shared services that are easy to integrate, reusable across different contexts and have global compatibility. For product design, our approach is to "design globally, optimize locally", which allows us to launch simultaneously in many markets."

"Our recent QR code payments launch in 28 markets around the globe is a good example of this approach. In a response to the COVID-19 pandemic and the increasing demand to buy and sell in a touch-free way, we introduced a QR code functionality to our app. This feature provides a quick and safe way to complete a transaction in-person utilizing PayPal and eliminating the need to handle cash."

A study conducted by American Express shows that while merchants look to enhance payment security, consumers desire to speed up the checkout experience across all payment channels, including online transactions. How do you address this battle between convenience and security?

"Security is a top priority for PayPal, as we are securing the world’s digital operating system for commerce. We are committed to continuously making significant investments in security to protect our complete ecosystem: consumers, merchants and employees. We process more than 33 million transactions per day and 22,000 USD in payments every second, which enables us to learn about our customers’ spending patterns, behavior, location and more. This data is used privately to verify customer identities implicitly, so they do not need to identify explicitly every time they transact. With that, we are giving our customers the confidence of security while shaving valuable seconds off purchase time. Data closes the loop between speed and safety: within a two-second transaction, PayPal will conduct hundreds or even thousands of risk checks."

With all the focus on the coming of age of Millennials, less attention has been given to Generation Z. Gen Z - those who were born between 1995 and 2015 - currently makes up 24% of the global population and is set to have significant spending power. What are your plans for reaching out to this financially powerful generation of young consumers?

"Today, mobile and app-based services that especially the younger generations are using on a daily basis, such as food delivery, public transport tickets or music streaming services, require secure online payments. Being available as a payment method for these new experiences, increases our visibility among younger consumers. Another key driver for digital natives across Europe is our peer-to-peer payment offer. The fact that you can use PayPal to send money to your friends and family has been a huge driver of new customers as well as keeping them engaged, especially in Europe. When it comes to addressing Gen Z via marketing, we focus on products and experiences that are relevant to this target group and communicate through channels that match their media consumption habits."

Will the Covid-19 crisis act as an accelerator for the end of cash? Which alternative payment modes are in the best position to take over?

"We have seen three big shifts coming out of the global pandemic: First, the world is moving from physical to digital. There has long been a distinct long-term trend towards digital payments, but the current environment has rapidly accelerated that movement."

"Second, we are seeing the face of retail fundamentally changing, moving more and more to online ecommerce at a much more rapid pace. The impact of COVID-19 has accelerated the shift from physical to online commerce by two to five years."

"Third, we are seeing the rise of digital payments. Digital payments have gone from a nice-to-have to a must-have. We are fortunate to be in a position where we can help our merchant customers move online and help our customers leverage digital payments in a safe way. As consumers and businesses are moving online, we have seen our customer base rise to more than 325 million customers, the average daily usage across our base is up well over 20% and the new cohorts of users are 30% more engaged than previous ones."

"People are embracing digital payments and we believe that this trend will only continue. Digital payments, whether online or in-store, will become an integral part of our daily lives, even when shelter-in-place restrictions lift. People do not want to handle money, touch screens or pick up pens to complete their in-store transactions. Given the demand for contactless and digital payments, we expect a continued rise in ecommerce activity. We recently rolled out an in-app QR code feature that allows consumers and businesses to conduct in-person transactions at a safe distance, touch-free, using PayPal. We expect to see more touch-free payments such as this to be used by retailers of all sizes."