BackIn 5-10 years, all shopping will be via mobiles: Daniel Schulman
PayPal's CEO designate talks about mobile payments, its scope in India, e-commerce and the firm's split with eBay
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New Delhi: Daniel Schulman, president and chief executive officer designate of the American electronics payment solutions company PayPal Inc. was in India last week to meet his engineering team here. It was Schulman’s first visit to the country after joining the company in December 2014.
In an interview with Mint, Schulman talked about the opportunities for PayPal after completing its spin-off from its parent eBay Inc., scaling up in the India market and building payment mechanisms through the mobile.
Edited excerpts:
What does the eBay-PayPal split mean for PayPal?
We are spinning it off 100% and the reason for doing that was that both the market for marketplaces like eBay and payments company like PayPal are kind of diverging a little bit. Marketplace has its set of competitors and PayPal has its set.
Payments industry is fascinating right now. It is changing so quickly as a result of mobile phones rising and the dominance of the Internet.
The difference between online and offline is blurring, and I think in the next 5-10 years, you will see point of sale terminals completely rewired around the mobile. You will not think about someone shopping online or offline…it’ll all be done through your mobile phones.
So, with all these changes, spinning off PayPal as an independent company seemed to be the right thing to do. It gave us the required focus and ability to think about our competitors and customers differently and also invest back in the business. PayPal is a strong business, it has a strong balance sheet and free cash flows; and it will help us take a look at where we want to independently invest.
Will you continue to grow independently? There have been speculations that Google or Apple might buy you?
We are splitting the company to grow our business and become a great independent company. There is so much opportunity right now and we are in two vibrant but smaller sectors.
Online marketplaces may be 10% of overall commerce and offline is digitizing rapidly and that’s a marketplace that is ten times the size of the online.
So, the ability for us to now move from being a major player in the online marketplace to be a major player in the overall commerce space is enormous. We are focused in growing our share in all this new addressable market. And we will take our new found independence to focus and our investments to bet on that. We see an independent growth opportunity for PayPal.
Does your strategy change for India now?
India is a very important part of PayPal already. Ten percent of our workforce is here and it’s the majority part of our engineering. We hire (software engineers) out of leading colleges here, we will continue to invest here and it will be a big part of PayPal going forward.
Secondly, we already do quite a bit of cross-border trade in India so you have small- and mid -size companies, some 150,000 of them, using PayPal today.
Almost a billion dollars of cross-border sales happen in the business to consumer space and one out of every three dollars closes through PayPal.
India has some 3.5 million-plus consumers who use PayPal to buy goods overseas and have them shipped here. I think as Indian merchants see the value of cross-border sale and the simplicity in which they can do so now, we can bring a huge scale to that market.
As we think about the future, one of the things we will do is to make sure PayPal becomes the central part of consumers’ lives, how we enable consumers to manage and move their money more efficiently, easily and less expensively than some traditional ways. We are also looking at markets that are rapidly moving towards financial inclusion goals, and obviously, India and the government is at the forefront of trying to promote technology to drive financial inclusion.
I think PayPal has the potential to be a part of that.
Currently you are working only with small merchants. Can we expect you to tie up with large merchants?
As we spin off the business, we are looking at the opportunities for further expansion. India is a vibrant economy and the rise of mobile phones is astronomical.
It is a mobile-first society and the infrastructure around it is developing rapidly and a lot of that leads them to the platforms that PayPal is developing.
We are trying to create payment mechanisms on a mobile-first basis. As you move into mobile phones, the screen is smaller, the information you need to fill out is very difficult and the conversion rate from shopping to buying is lower than on larger screens.
So, we have developed value propositions around one-touch type of capabilities which increase conversion rates.
There are regulatory and infrastructure challenges in India when it comes to online payments. How difficult is it to work here?
India is among the leaders in thinking about how technology can solve some of the problems about financial inclusion. But if you think that financial inclusion as a problem has a solution rooted in technology, it’s obviously not the only thing.
There has to be a private-public partnership that helps in driving financial inclusion. But it should not be that the less money you have, the more with caution you move it…that is just not right. With technology it shouldn’t be the case. We should be able to democratize the management of money through technology and that is the goal that we have and governments all across the world have; and India will need governments to lead that charge.
You have not applied for a mobile wallet licence, are you planning to do that?
Right now, we want to focus on what we currently have. We currently enable the Indian people to buy and sell cross-border trade. Once we make a decision of what more we want to offer we will figure out what the licensing requirements are, and that is if we need more than what we have.
India is largely a cash-driven market with very low penetration of cards, while most of your offerings in the country are around online payments. How do you plan to deal with that?
We are still developing our India strategy but in general, across the world, the ability to digitize money is accelerating.
Today, you are able to put money on a digital platform by just a tap on your phone, and from that digital wallet which can be put in your phone, you are able to do online or offline shopping. I think mobile platform is going to hasten the digitization.
But do remember that cash has been around for 2,000 years in some form or the other; so that’s not going to be the demise of cash. But I do think mobile is the catalyst that is going to move the digitization of money and it will take some time.
These things are less revolutionary and more evolutionary but there is no question that this is the catalyst that starts the evolution.
What kind of competition do you see from Apple Pay and companies like Square?
We are market leaders in digital payments…. We did $8 billion of revenue last year and our guidance for this year is to grow at 15-18%. We only focus on payments while Apple has other businesses too. We have about 16,000 people, and thousands of engineers just focused on innovation and staying ahead in the game. We have about 8,000 people in customer service because payments is a very different business and you want to call someone if your payment does not go through.
We do close to four billion transactions and because we have that much data, we can fine tune our risk algorithms, which helps us stop fraud transactions.
You are associated with Google Play in the US where people can use PayPal to buy anything within the Google store. Will we see you do that in India anytime soon?
We have a very close relationship with Google. We extend our offerings to all the markets that we expand into.
How is your relationship with RBI considering you had a difficult time with the regulator back in 2011 when they restricted you from doing business in India.
The relationship has improved dramatically.
We try and strengthen that in whatever way possible and we feel good about that relationship now. We have worked hard to build that relationship and we will continue to strengthen it.
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