PayPal is investing in AI to increase efficiency, improve consumer experience, reduce the time to bring products to market and develop proprietary AI models to drive business growth.
The payments processor has experienced early success in working with AI and has launched more than 300 experiments with the tech in the first half of the year, Chief Executive Dan Schulman said during the company’s second-quarter earnings call Wednesday.
“Our initial experiences with AI and continuing advances in our processes, infrastructure and product quality, enable us to see a future where we do things better, faster and cheaper,” Schulman said. “AI is going to be a thing that not only drives productivity improvements for us but, really importantly, value proposition improvements for us.”
Internally, the company is working on an AI-driven PayPal assistant to fight fraud and provide financial assistance to users, Schulman said. PayPal envisions “that a version of this [AI-driven assistant] will be part of our consumer app” and plans to introduce it later this year, Schulman said.
The company has ramped up hiring for AI and machine learning roles to reduce time to market for products and increase efficiency, Schulman said.
“We are seeing 20% to 40% increases in engineering productivity,” he said. “Just imagine that in terms of how much more product we can get into the market and how efficiently we can do that.”
THE BIG PICTURE: Like PayPal, large financial institutions such as Citizens Bank, NatWest, Barclays, and JPMorgan are using AI to drive efficiency in operations. Citibank is also increasing its investment in automation and expects that “those types of investments will yield benefits in our cost structure,” Citi Chief Financial Officer Mark Mason said during the bank’s Q2 earnings call last month.
BY THE NUMBERS: In Q2, PayPal reported;
- Net revenue of $7.3 billion, an increase of 7% YoY;
- Technology and development spend reduced to $584 million, down by 7% YoY;
- Total payment volume of $376.5 billion, an increase of 11% YoY;
- 431 million total active accounts, compared to 429 million in Q2 2022; and
- Cross-border trade total payment volume stood at $47 billion, up by 3% YoY, according to the earnings report.
WHAT THEY ARE SAYING: According to Zack’s Equity Research, compared with its competitors, PayPal’s “partnerships across multiple original equipment manufacturers, technology companies, mobile carriers, retailers and financial institutions” have put the company in a favorable position to capitalize on AI.
FLASHBACK: Last month, PayPal deepened its relationship with Microsoft as the payments company announced that its buy now, pay later service will be integrated into the Microsoft Store.
In April, Visa teamed up with PayPal and Venmo for its new Visa+ service to allow customers to move money between more person-to-person digital payment apps.
MARKET REACTION: PayPal’s shares stood at $64.5, down 11% on Thursday trading at 3:30 p.m.
FUTURE LOOK: Schulman has been looking for his successor as he plans to step down into a board member role by yearend.
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