PayPal Holdings Inc. plans to continue expanding its foothold in the $110 trillion addressable market the payment processor operates in, executives said May 24.
A week after agreeing to the largest deal in its history, PayPal executives detailed plans to pursue several deals valued between $1 billion and $3 billion in each of the next several years. The company, which expects to have about $15 billion in cash on its balance sheet by the end of the year, may look specifically at markets including India, Indonesia, Brazil, Mexico and possibly China for future growth.
"There's a whole next generation of markets we intend to enter," PayPal President and CEO Daniel Schulman said during the company's investor day. "It's important to understand that unlike most other digital wallets out there, we are the only ones that control the end-to-end process."
PayPal's push to solidify its end-to-end process was a driving force behind the company's $2.2 billion agreement to acquire Swedish financial technology company iZettle AB. The deal is expected to solidify PayPal's merchant business, a market dominated in the U.S. by rival company Square Inc. Once completed, the iZettle deal will allow PayPal to extend its presence across Europe and Latin America, where iZettle services nearly half a million merchants with its payment processing tools designed for small businesses.
With the acquisition, PayPal plans to cross-sell its products to iZettle merchants and vice versa, said John Rainey, PayPal's CFO and executive vice president for global customer operations. The company expects iZettle to be profitable by 2020, Rainey said. However, the deal is expected to be about 1 cent dilutive to the company's full-year 2018 non-GAAP EPS and about 6 cents to 8 cents dilutive to the company's full-year 2019 non-GAAP EPS.
Analysts previously were unclear on whether PayPal will immediately extend iZettle into new markets. But the company's executives said that is exactly what they plan to do, on top of PayPal's own efforts to expand globally.
"We want to grow [iZettle]. We want to expand the markets it is in," said Schulman, who added that PayPal has about a 1% market share in the total global addressable market. "We are a company that regulators from around the world see as a responsible organization."
During the investor day, PayPal also unveiled that it is expanding its partnership with Google Inc. so that consumers can pay using PayPal across Google's suite of products. In April 2017, PayPal entered a partnership with Google allowing U.S. consumers to use PayPal as a payment method in Android Pay for in-store, in-app and online purchases. The latest development will allow consumers to pay with PayPal across Google's products including Google Play, Gmail and YouTube, PayPal COO and Executive Vice President Bill Ready said.
PayPal is also developing a Venmo debit card, a project Ready said the company will release more details on "soon."
The company has also targeted credit card reward points as an area for future growth. PayPal plans to begin allowing certain cardholders to pay for purchases with credit card reward points at the more than 19 million merchants that use PayPal's products. The initiative will provide consumers with "a liquid place to use those points," said Jim Magats, vice president and head of payments, product and engineering.
PayPal is working to enact the program for Citigroup Inc., Discover Financial Services and JPMorgan Chase & Co. by the end of 2018 and Barclays PLC in 2019.
"PayPal has the unique power to be the connective tissue that ties all these [payment experiences] together," Magats said.
