+ Higher payment volumes. In 3Q23, PayPal’s total payment volume (TPV) surged by 15% YoY to US$388bn, driven by resilient consumer spending on its platforms (Braintree, PayPal branded checkout, and Venmo) amid moderating inflation. In 3Q23, PayPal delivered 32% YoY growth in unbranded processing volumes (Braintree), while branded checkout volumes grew by 6% YoY. Venmo’s TPV grew 7% YoY to US$68bn. We believe that the addition of Venmo as a payment option on Amazon’s check-out page will likely accelerate PayPal’s overall payment volumes.
+ Boost in transactions per active account. The number of transactions per active account rose 13% YoY to 57x in 3Q23 from 50x in 3Q22. This is a sizable increase given PayPal’s strategic decision to focus on driving higher engagement within existing active accounts instead of adding new accounts. PayPal is boosting customer engagements by adding new features like passkeys to allow frictionless payments, Tap to Pay on iPhone, and cryptocurrency buying and selling.
– Drop in active accounts; gross margins remain under pressure. PayPal ended 3Q23 with 428mn active accounts, down 1% YoY. Management highlighted that this was mainly due to efforts to churn out lower-quality customers, particularly in Latin America and Southeast Asia. In addition, the gross margin fell to 45% in 3Q23 from 51% in 3Q22 due to strength in its lower-margin unbranded checkout solutions like Braintree.