PayPal Holdings increased its technology and development spend year over year as the company reduced its headcount in January. 

WHY IT MATTERS: PayPal, one of many tech companies worried about economic uncertainty like Stripe and Amazon, reduced its headcount by 7% — 2,000 employees — the company announced last month. PayPal did not specify the areas of business the employees worked in. 

“We have identified an incremental $600 million of cost savings on top of the $1.3 billion of cost savings previously identified,” Dan Schulman, PayPal president and chief executive, said during the Q4 earnings call Thursday.

THE BIG PICTURE: The company’s technology and development spend rose 3% YoY to $822 million as it looks to “enhance its digital wallet value proposition” and “focus on the end-to-end customer experience,” Schulman said. PayPal was looking into using advanced AI to provide customers with more informed financial decisions, he added. 

The e-commerce giant owns payment companies such as peer-to-peer platform Venmo, mobile and web payment company Braintree, and money transfer platform Xoom.

BY THE NUMBERS: PayPal reported for Q4: 

• Operating expenses rose 4% YoY to $6.1 billion; 
• Net revenues increased 6% YoY to $7.4 billion; and 
• Restructuring and other charges stemming from employee severance surged to $25 million from $2 million in 2021. 

NOTEWORTHY: Schulman — who has been CEO of PayPal since 2014 will retire at the end of the year and is looking to the company’s board for a new CEO. 

FLASHBACK: The company introduced buy-now, pay-later services (BNPL) in 2020 and in June 2022 began offering installment loans to customers making larger purchases. The company is currently facing competition in the BNPL space from Revolut, which unveiled a one-click purchase capability in September. 

BNPL services are used by 300,000 merchants on their product pages, Schulman said during the call. 

FUTURE LOOK: PayPal’s restructuring is preparing it for several upgrades in checkout and peer-to-peer payment services, Schulman said. 

“We are confident that our 2023 cost structure enables us to continue to fully invest in our high-conviction growth initiatives,” he said. “We are putting significant resources behind the modernization of our checkout experience in order to defend and grow our market share in our branded checkout business. … We have an impressive pipeline of opportunity for 2023.” 

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