What changed in this filing

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Item 1. Business

2021-02-05 compared with 2020-02-06 · 172 added, 139 removed, 89 unchanged (78% of the section changed)

PayPal Holdings, Inc.

was incorporated in Delaware in January 2015 and is a leading technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide.

PayPal is committed to democratizing financial services and empowering people and businesses to join and thrive in the global economy.

Our goal is to enable our consumers and merchants to manage and move their money anywhere in the world, anytime, on any platform, and using any device.

Our combined payment solutions, including our PayPal, PayPal Credit, Braintree, Venmo, Xoom, and iZettle products and services, comprise our proprietary Payments Platform.

was incorporated in Delaware in January 2015 and is a leading technology platform and digital payments company that enables digital and mobile payments on behalf of merchants and consumers worldwide.

PayPal is committed to democratizing financial services to improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world.

Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world, anytime, on any platform, and using any device when sending payments or getting paid.

We also facilitate person-to-person (“P2P”) payments through our PayPal, Venmo, and Xoom products and services and simplify and personalize shopping experiences for our consumers through our Honey Platform.

Our combined payment solutions, including our core PayPal, PayPal Credit, Braintree, Venmo, Xoom, iZettle, and Hyperwallet products and services, comprise our proprietary Payments Platform.

Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” or “PayPal” refer to PayPal Holdings, Inc.

and its consolidated subsidiaries.

PayPal’s payment solutions enable our customers to send and receive payments.

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We provide proprietary payment solutions accepted by merchants that enable the completion of payments on our Payments Platform on behalf of our customers.

We offer our customers the flexibility to use their accounts to purchase and receive payment for goods and services, as well as the ability to transfer and withdraw funds.

We enable consumers to exchange funds more safely with merchants using a variety of funding sources, which may include a bank account, a PayPal account balance, a Venmo account balance, a PayPal Credit account, a credit or debit card, or other stored value products such as coupons, gift cards, and eligible credit card rewards.

The COVID-19 pandemic has impacted consumer behavior and has accelerated the shift from traditional in-store shopping toward e-commerce and buy online and pick up in store to the extent that merchants are adopting safer contactless payment solutions based on consumer demand for such options.

We offer our customers the flexibility to use their accounts to purchase and receive payments for goods and services, as well as the ability to transfer and withdraw funds.

We enable consumers to exchange funds more safely with merchants using a variety of funding sources, which may include a bank account, a PayPal Cash or Cash Plus account balance, a Venmo account balance, our credit products, a credit card, debit card, or other stored value products such as coupons, gift cards, and eligible credit card rewards.

Our PayPal, Venmo, and Xoom products also make it safer and simpler for friends and family to transfer funds to each other.

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We earn revenues primarily by charging fees for completing payment transactions for our customers and other payment-related services that are typically based on the volume of activity processed on our Payments Platform.

Generally we do not charge consumers to fund or draw from their accounts;

however, we generate revenue from consumers on fees charged for foreign currency exchange, and instant transfers from their PayPal or Venmo account to their debit card or bank account, as well as from interest and fees from our PayPal Credit product.

We also earn revenue by providing other value added services, which comprise revenue earned through partnerships, our PayPal merchant and consumer credit products, subscription fees, gateway services, and other services that we provide to our merchants and consumers.

Our gateway services, which include our Payflow Gateway service and Braintree Gateway service, provide the technology that links a merchant’s website to its processing network and merchant account and enables merchants to accept payments online with credit or debit cards.

Our ability to grow revenue is affected by, among other things, consumer spending patterns, merchant and consumer adoption of digital payment methods, the expansion of multiple commerce channels, the growth of mobile devices and merchant and consumer applications on those devices, the growth of consumers globally with internet and mobile access, the pace of transition from cash and checks to digital forms of payment, our share of the digital payments market, and our ability to innovate and introduce new products and services that merchants and consumers value.

Our strategy to drive growth in our business includes the following:

Growing our core business :

through expanding our global capabilities, customer base and scale, increasing our customers’ use of our products and services by better addressing their everyday needs related to accessing, managing, and moving money, and expanding the adoption of our solutions by merchants and consumers;

Expanding our value proposition for merchants and consumers :

by being technology and platform agnostic, partnering with our merchants to grow and expand their business online and in-store;

and providing consumers with simple, secure, and flexible ways to manage and move money across different markets, merchants, and platforms;

Forming strategic partnerships :

by building new strategic partnerships to provide better experiences for our customers, offering greater choice and flexibility, acquiring new customers, and reinforcing our role in the ecosystem;

Seeking new areas of growth :

organically and through acquisitions and strategic investments in our existing and new international markets around the world and focusing on innovation both in the digital and physical world.

We generally do not charge consumers to fund or draw from their accounts;

however, we generate revenue from consumers on fees charged for foreign currency conversion and instant transfers from their PayPal or Venmo account to their debit card or bank account, as well as from interest and fees from our credit products.

We also earn revenue by providing other value added services, which comprise revenue earned through partnerships, our merchant and consumer credit products, referral fees, subscription fees, gateway services, and other services that we provide to our merchants and consumers.

KEY PERFORMANCE METRICS

We measure the relevance of our products and services to our customers, and therefore the success of our business, through active accounts, payment transactions, and total payment volume:

Active Accounts :

An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our Payments Platform, not including gateway-exclusive transactions, within the past 12 months.

We measure the relevance of our products and services to our customers and the performance and success of our business through active accounts, payment transactions, and total payment volume:

An Active Account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our Payments Platform or through our Honey Platform, not including gateway-exclusive transactions, within the past 12 months.

A platform access partner is a third party whose customers are provided access to PayPal’s Payments Platform through such third-party’s login credentials.

A market is a geographic area or political jurisdiction, such as a country, territory, or protectorate, in which we offer some or all of our products and services.

A country, territory, or protectorate is identified by a distinct set of laws and regulations.

Number of Payment Transactions :

Number of payment transactions is the total number of payments, net of payment reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

Total Payment Volume (“TPV”) :

TPV is the value of payments, net of reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

Number of Payment Transactions are the total number of payments, net of payment reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

Total Payment Volume (“TPV”) is the value of payments, net of payment reversals, successfully completed on our Payments Platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

OUR STRENGTHS

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We believe that our competitive strengths include the following:

Two-sided Platform— our platform connecting merchants and consumers enables PayPal to offer unique end-to-end product experiences while gaining valuable insights into customer behavior through our data.

Our platform provides for digital, mobile, and in-store transactions while being both technology and platform agnostic.

• Two-sided network — our Payments Platform connecting merchants and consumers enables PayPal to offer unique end-to-end product experiences while gaining valuable insights into customer behavior.

Our Payments Platform provides for digital, mobile, and in-store (at the point of sale) transactions while being both technology and platform agnostic.

• Scale — our global scale allows us to drive organic growth.

As of December 31, 2020, we had 377 million active accounts, consisting of 348 million consumer active accounts and 29 million merchant active accounts in more than 200 markets around the world.

A market is a geographic area or political jurisdiction, such as a country, territory, or protectorate, in which we offer some or all of our products and services.

A country, territory, or protectorate is identified by a distinct set of laws and regulations.

In 2020, we processed $936 billion of TPV.

Brands— we have built well-recognized and trusted brands.

• Brands — we have built and strengthened well-recognized and trusted brands, including PayPal, Braintree, Venmo, Xoom, Hyperwallet, iZettle, and Honey.

Our marketing efforts across multiple demographic groups play an important role in building brand visibility, usage, and overall preference among customers.

Risk Management— our risk management system and use of tokenization are designed to help keep customer information secure, and to help ensure we process legitimate transactions around the world, while identifying and minimizing illegal, high-risk, or fraudulent transactions.

• Risk and Compliance Management — our enterprise risk and compliance management program and use of tokenization are designed to help keep customer information secure, and to help ensure we process legitimate transactions around the world, while identifying and minimizing illegal, high-risk, or fraudulent transactions.

• Regulatory — we believe that our regulatory licenses, which enable us to operate in markets around the world, are a distinct advantage and help support business growth.

Our Payments Platform utilizes a combination of proprietary and third-party technologies and services intended to efficiently and securely facilitate transactions between millions of merchants and consumers worldwide across different channels, markets, and networks.

Our Payments Platform connects with financial service providers around the world and allows consumers to make purchases using a wide range of payment methods, regardless of where a merchant is located.

Consumers who use our Payments Platform can send payments in more than 200 markets around the world and in more than 100 currencies, withdraw funds to their bank accounts in 56 currencies and hold balances in their PayPal accounts in 25 currencies.

A transaction on our Payments Platform can involve multiple participants in addition to us, including a merchant, a consumer, and the consumer’s funding source provider.

We have developed intuitive user interfaces, customer tools, transaction completion database, and network applications on our Payments Platform that help our customers utilize our suite of products and services.

Our Payments Platform, open application programming interfaces, and developer tools are designed to enable developers to innovate with ease and offer robust applications to our global ecosystem of merchants and consumers, while at the same time maintaining the security of our customers’ financial information.

The technology infrastructure supporting our Payments Platform simplifies the storage and processing of large amounts of data and facilitates the deployment and operation of large-scale global products and services in both our own data centers and cloud computing.

Our technology infrastructure is designed around industry best practices intended to reduce downtime in the event of outages or catastrophic occurrences.

Our Payments Platform incorporates multiple layers of protection for business continuity and system redundancy purposes and to help address cybersecurity risks.

We have a comprehensive cybersecurity program designed to protect our technology infrastructure and Payments Platform against these challenges, including regularly testing our systems to identify and address potential vulnerabilities.

We strive to continually improve our technology infrastructure and Payments Platform to enhance the customer experience and to increase efficiency, scalability, and security.

MERCHANT AND CONSUMER PAYMENT SOLUTIONS

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We partner with our merchants to help grow and expand their businesses by providing global reach and powering all aspects of digital checkout.

We offer alternative payment methods, including access to credit solutions, provide fraud prevention and risk management solutions, reducing losses through proprietary protection programs, and offer tools and insights for leveraging data analytics to attract new customers and improve sales conversion.

We employ a technology and platform agnostic approach intended to enable merchants of all sizes to provide digital checkout online, on mobile, and in-store (at the point of sale) across all platforms and devices and to securely and simply receive payments from their customers.

Merchants can onboard quickly with PayPal and are generally not required to invest in new or specialized hardware.

PayPal is also a popular form of payment solution for mobile commerce, and our business has grown with the increased adoption of mobile devices.

We believe our Braintree products strengthen our position in digital and mobile payments and extend our coverage to a new class of retailers and service providers that offer their services primarily through mobile applications.

Through a single Braintree integration, a merchant can begin accepting payments with credit or debit cards, PayPal, PayPal Credit, Google Pay, Apple Pay, Samsung Pay, and other payment solutions.

iZettle offers a card acceptance service that enables small businesses to accept credit and debit card payments, as well as a software solution to record, manage, and analyze sales.

iZettle provides in-store capabilities in twelve countries.

During 2019, we launched PayPal for Marketplaces, our global, end-to-end solution designed to satisfy the unique payment needs of platforms, marketplaces, and crowdfunding sites, which provides payment solutions for accepting and disbursing funds between consumers and businesses.

We also offer gateway services which provide the payment gateway technology that links a merchant’s website to its processing network and enable merchants to accept payments online with credit or debit cards.

Our acquisition of a controlling equity interest in Guofubao Information Technology Co.

(GoPay), Ltd (“GoPay”), a holder of payment business licenses in China, enables us to partner with Chinese financial institutions and technology platforms to provide a more comprehensive set of payment solutions to merchants and consumers, both in China and globally.

We offer access to credit products for certain small and medium-sized merchants through our PayPal Working Capital and PayPal Business Loan products, which we collectively refer to as our business financing offerings.

We offer alternative payment methods, including access to credit solutions, provide fraud prevention and risk management solutions, reduce losses through proprietary protection programs, and offer tools and insights for leveraging data analytics to attract new customers and improve sales conversion.

We employ a technology and platform agnostic approach intended to enable merchants of all sizes to quickly and easily provide digital checkout online, on mobile devices, and in-store across all platforms and devices and to securely and simply receive payments from their customers.

PayPal’s Payments Platform enables merchants to accept all types of online and offline payments, including those made with the PayPal and Venmo wallets, credit cards and debit cards, Apple Pay, Samsung Pay, and Google Pay, as well as other popular local payment methods.

Our diversified product suite is tailored to meet the needs of merchants regardless of their size or business complexity.

We have expanded our merchant value proposition to enable payment acceptance at the point of sale through our PayPal and Venmo digital wallets, our iZettle point of sale solutions, and our quick response (“QR”) code-based solutions.

We aim to offer a seamless, omni-channel solution that helps merchants manage and grow their business.

Our Honey Platform and PayPal consumer credit offerings, including installment payment products, enable merchants to drive increased conversion through higher consumer engagement.

Our PayPal Working Capital product allows businesses to borrow a certain percentage of their annual payment volume processed by PayPal for a fixed fee.

Our PayPal Business Loan product provides businesses with short-term financing for a fixed fee based on an evaluation of both the applying business as well as the business owner.

We believe that our business financing offerings allow us to deepen our engagement with our existing small and medium-sized merchants and expand services to new merchants by providing access to capital that may not be available effectively or efficiently from traditional banks or other lending providers.

We believe that our merchant lending offerings allow us to deepen our engagement with our existing small and medium-sized merchants and expand services to new merchants by providing access to capital that may not be available effectively or efficiently from traditional banks or other lending providers.

Our acquisition of a controlling equity interest in Guofubao Information Technology Co.

We generate revenues from merchants primarily by charging fees for completing their payment transactions and other payment-related services.

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We focus on providing affordable consumer products intended to democratize the management and movement of money.

We provide consumers with a digital wallet which enables them to send payments to merchants more safely using a variety of funding sources, which may include a bank account, a PayPal account balance, a Venmo account balance, a PayPal Credit account, a credit or debit card, or other stored value products such as coupons, gift cards, and eligible credit card rewards.

We also offer consumers person-to-person (“P2P”) payment solutions through our PayPal, Venmo, and Xoom products.

PayPal continues to be a key driver of our total P2P volumes, enabling both domestic and international P2P transfers across our Payments Platform.

We provide consumers with a digital wallet that enables them to send payments to merchants more safely using a variety of funding sources, which may include a bank account, a PayPal Cash or Cash Plus account balance, a Venmo account balance, our consumer credit products, a credit card, debit card, or other stored value products such as coupons, gift cards, and eligible credit card rewards.

We also offer consumers P2P payment solutions through our PayPal, Venmo, and Xoom products and services.

We enable both domestic and international P2P transfers across our Payments Platform.

Our Venmo app in the U.S.

is a leading mobile application used to move money between our customers and to make purchases at approved merchants.

is a leading mobile application used to move money between our customers and to make purchases at select merchants.

Xoom is an international money transfer service that enables our customers to send money and prepaid mobile phone reloads to, and pay bills for, people around the world in a secure, fast, and cost-effective way.

P2P is a significant customer acquisition channel that facilitates organic growth by enabling potential PayPal users to establish active accounts with us at the time they make or receive a P2P payment.

We offer our PayPal Credit product to consumers in certain markets as a potential funding source at checkout.

We also simplify and personalize shopping experiences for our consumers through our Honey Platform by offering tools for product discovery, price-tracking, and offers, which enhances consumer engagement and conversion and sales for our merchants.

We offer our PayPal Credit products to consumers in certain markets as a potential funding source at checkout.

Once a consumer is approved for credit, PayPal Credit is made available as a funding source for that account holder.

PayPal branded consumer credit program is offered exclusively through Synchrony Bank.

We believe that our consumer credit products allow us to increase engagement with consumers and merchants on our two-sided network and differentiate us from other payment processors by helping merchants drive incremental sales.

We generate revenue from consumers on fees charged for foreign currency exchange, optional instant transfers from their PayPal or Venmo account to their debit card or bank account, and on interest and fees from our PayPal Credit product.

PayPal- and Venmo-branded consumer credit program is offered primarily through Synchrony Bank.

In addition, we have expanded our consumer credit offerings to include installment payment products in the U.S., U.K., France, and Germany.

We believe that our consumer credit products allow us to increase engagement with consumers and merchants on our two-sided network.

We generate revenue from consumers on fees charged for foreign currency conversion, optional instant transfers from their PayPal or Venmo account to their debit card or bank account, interest and fees from our PayPal Credit products, and other miscellaneous fees.

PROTECTING MERCHANTS AND CONSUMERS

Protecting merchants and consumers on our Payments Platform from financial and fraud loss is imperative to successfully competing in the payments industry and sustainably growing our business.

Protecting merchants and consumers on our Payments Platform from financial and fraud loss is imperative to successfully competing and sustainably growing our business.

Fraudulent activities, such as account takeover, identity theft (including stolen financial information), and counterparty malicious activities, represent a significant risk to merchants and consumers, as well as their payment partners.

We provide merchants and consumers with protection programs on most purchase transactions completed on our Payments Platform, excluding gateway-exclusive transactions or situations where our customer agreements specifically do not provide for protections.

We believe that these programs, which protect both merchants and consumers from financial loss resulting from fraud and counterparty non-performance, are generally much broader than similar protections provided by other participants in the payments industry.

We provide merchants and consumers with protection programs for certain purchase transactions completed on our Payments Platform.

We believe that these programs, which help protect both merchants and consumers from financial loss resulting from fraud and counterparty non-performance, are generally broader than similar protections provided by other participants in the payments industry.

As a result, merchants may incur losses for chargebacks and other claims on certain transactions when using other payments providers that the merchants would not incur if they used our payments services.

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We believe that this protection is generally consistent with, or better than, that offered by other payments providers.

These programs are designed to promote confidence on both the part of consumers, who will only be required to pay if they receive their purchased item or service in the condition significantly as described, and merchants, who will receive payment for the product or service they deliver to the customer.

Our ability to protect both merchants and consumers is based largely on our proprietary, end-to-end Payments Platform and our ability to leverage the data from both sides of transactions on our two-sided network specifically from buyers and sellers and from senders and receivers of payments.

We believe mobile devices will continue to play a significant and increasing role in commerce, including by creating the opportunities to make our ecosystem safer.

For example, PayPal uses data from mobile devices and growing protection for the mobile operating environment to reduce financial and fraud risk to merchants and consumers.

These programs are designed to promote confidence on both the part of consumers, who will only be required to pay if they receive their purchased item in the condition significantly as described, and merchants, who will receive payment for the product they deliver to the customer.

Our ability to protect both merchants and consumers is based largely on our proprietary, end-to-end Payments Platform and our ability to utilize the data from both sides of transactions on our two-sided network, specifically from buyers and sellers and from senders and receivers of payments.

We believe mobile devices will continue to play a significant and increasing role in commerce, including by creating the opportunities to make the payments ecosystem safer.

For example, PayPal uses data from mobile devices to help reduce financial and fraud risk to merchants and consumers.

Our ongoing investment in systems and processes designed to enhance the safety and security of our products reflects our goal of having PayPal recognized as one of the world’s most trusted payments brands.

The global payments industry is highly competitive, rapidly changing, highly innovative, and increasingly subject to regulatory scrutiny and oversight.

We compete against a wide range of businesses, including those that are larger than we are, have greater name recognition, longer operating histories, or a dominant or more secure position, or offer other products and services to consumers and merchants that we do not offer, as well as smaller or younger companies that may be more agile in responding quickly to regulatory and technological changes.

Many of the areas in which we compete evolve rapidly with changing and disruptive technologies, shifting user needs, and frequent introductions of new products and services.

Competition also may intensify as businesses enter into business combinations and partnerships, and established companies in other segments expand to become competitive with different aspects of our business.

We compete primarily on the basis of the following:

ability to attract, retain, and engage both merchants and consumers on our Payments Platform;

ability to demonstrate to merchants that they may achieve incremental sales by using and offering our services to consumers;

consumer confidence in the safety and security of transactions on our Payments Platform, including the ability for consumers to use our products and services without sharing their financial information with the merchant or any other party they are paying;

simplicity and transparency of our fee structure;

ability to develop products and services across multiple commerce channels, including e-commerce, mobile, and payments at the point of sale;

trust in our dispute resolution and buyer and seller protection programs;

customer service experience;

brand recognition and preference;

website, mobile platform, and application onboarding, ease-of-use, speed, availability, and dependability;

ability of our Payments Platform to support across technologies and payment methods;

system reliability and data security;

ability to assist merchants in complying with payments-related laws and regulations;

ease and quality of integration into third-party mobile applications and operating systems;

quality of developer tools, such as our application programming interfaces and software development kits.

The global payments industry is highly competitive, continuously changing, highly innovative, and increasingly subject to regulatory scrutiny and oversight.

We compete against a wide range of businesses.

Some of our current and potential competitors may be larger than we are, have larger customer bases, greater brand recognition, longer operating histories, a dominant or more secure position, broader geographic scope, volume, scale, resources, and market share than we do, or offer products and services that we do not offer.

Other competitors are smaller or younger companies that may be more agile in responding quickly to regulatory and technological changes.

Many of the areas in which we compete evolve rapidly with innovative and disruptive technologies, emerging competitors, business alliances, shifting consumer habits and user needs, price sensitivity on the part of merchants and consumers, and frequent introductions of new products and services.

We differentiate ourselves to merchants through our ability to innovate and develop products and services that offer new payment experiences for our merchants, demonstrate that they may achieve incremental sales by using and offering our services to consumers, support transactions on our Payments Platform across varied technologies and payment methods, through the simplicity and transparency of our fee structure, and our seller protection programs.

In addition, we differentiate ourselves to consumers through the ability to use our products and services across multiple commerce channels, including e-commerce, mobile, and payments at the point of sale, and without sharing their financial information with the merchant or any other party they are paying;

our customer service, dispute resolution, and buyer protection programs;

and our ability to simplify and personalize shopping experiences.

We believe that we compare favorably to our competitors with respect to these factors and we invest resources towards improving our products and services, offering choice in payment options, providing excellent customer service, and building brands that merchants and consumers trust.

Our business faces competition from a wide range of businesses and from all forms of physical and electronic payments.

We face competition from banks and financial institutions, which provide traditional payment methods (particularly credit cards and debit cards (collectively, “payment cards”), electronic bank transfers, and credit), payment networks that facilitate payments for payment cards or proprietary retail networks, payment card processors, and “card on file” services.

We also face competition from providers offering a variety of payment products and services including tokenized and contactless payment cards, digital wallets and mobile payments solutions, credit, installment or other buy now pay later methods, real-time payment systems, P2P payments and money remittance services, card readers and other devices or technologies for payment at point of sale, virtual currencies and distributed ledger technologies, and tools that simplify and personalize shopping experiences for consumers and merchants.

Our products and services face competition from all forms of payments, which include paper-based payments (primarily cash and checks), credit cards, debit cards, electronic bank transfers, credit, installment methods, digital wallets and mobile payment solutions, contactless payments (including contactless cards, tokenized cards, near field communication (“NFC”) based solutions, and QR code-based solutions), and virtual currencies, such as cryptocurrencies and stablecoins.

In addition to the discussion in this section, see “Item 1A.

Risk Factors” under the caption “ We face substantial and increasingly intense competition worldwide in the global payments industry” for further discussion of the potential impact of competition on our business.

Our strategy to drive growth in our business includes the following:

• Growing our core business :

• Expanding our value proposition for merchants and consumers :

by being technology and platform agnostic, partnering with our merchants to grow and expand their business online and in-store, and providing consumers with simple, secure, and flexible ways to manage and move money across different markets, merchants, and platforms;

• Forming strategic partnerships :

by building new strategic partnerships to provide better experiences for our customers, offering greater choice and flexibility, acquiring new customers, and reinforcing our role in the payments ecosystem;

• Seeking new areas of growth :

organically and through acquisitions and strategic investments in our existing and new international markets around the world and focusing on innovation both in the digital and physical world.

In 2021, we intend to further enhance our PayPal and Venmo digital wallets to increase their functionality and drive higher engagement on our Payments Platform.

Our goal is to provide our consumers with a comprehensive set of services to manage their finances and enhance their ability to shop online and in person.

Consumers who use our Payments Platform can send payments in more than 200 markets around the world and in more than 100 currencies, withdraw funds to their bank accounts in 56 currencies, and hold balances in their PayPal accounts in 25 currencies.

A transaction on our Payments Platform can involve multiple participants in addition to us, including a merchant, a consumer, and the consumer’s funding source provider.

We have developed intuitive user interfaces, customer tools, transaction completion database, and network applications on our Payments Platform designed to enable our customers to utilize our suite of products and services.

Our technology infrastructure is designed around industry best practices intended to reduce downtime and help ensure the resiliency of our Payments Platform in the event of outages or catastrophic occurrences.

Our Payments Platform incorporates multiple layers of protection for business continuity and system redundancy purposes and to help mitigate cybersecurity risks.

We have a comprehensive cybersecurity program designed to protect our technology infrastructure and Payments Platform against cybersecurity threats, which includes regularly testing of our systems to identify and address potential vulnerabilities.

We strive to continually improve our technology infrastructure and Payments Platform to enhance the customer experience and to increase efficiency, scalability, and security.

For additional information regarding risks relating to our technology infrastructure and cybersecurity, see the information in “Item 1A.

Risk Factors” under the captions “ Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition ” and “ Business interruptions or systems failures may impair the availability of our websites, applications, products or services, or otherwise harm our business .”

RESEARCH AND DEVELOPMENT

Total research and development expense was $1.1 billion, $1.1 billion and $953 million in 2019 , 2018 and 2017 , respectively.

Total research and development expense was $1.4 billion in 2020 and $1.1 billion in both 2019 and 2018.

INTELLECTUAL PROPERTY

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We have registered our core brands as domain names and as trademarks in the U.S.

and a large number of other jurisdictions.

We also have in place an active program to continue to secure and enforce trademarks and domain names that corresponds to our brands in markets of interest.

and a large number of international jurisdictions.

We also have an active program to continue to secure and enforce trademarks and domain names that corresponds to our brands in markets of interest.

We have filed patent applications in the U.S.

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We have routinely entered into confidentiality and invention assignment agreements with our employees and contractors, and non-disclosure agreements with parties with whom we conduct business to control access to, and use and disclosure of, our proprietary information.

For additional information regarding some of the risks relating to our intellectual property, including costs of protecting our intellectual property, see the information in “Item 1A.

Risk Factors” under the captions “ We are subject to patent litigation ” and “ We may be unable to adequately protect or enforce our intellectual property rights, or third parties may allege that we are infringing their intellectual property rights .”

For additional information regarding risks relating to our intellectual property, see the information in “Item 1A.

Risk Factors” under the captions “ Third parties may allege that we are infringing their patents and other intellectual property rights" and “ We may be unable to adequately protect or enforce our intellectual property rights .”

GOVERNMENT REGULATION

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments industry.

That focus continues to become even more heightened as regulators on a global basis focus on such important issues as countering terrorist financing, anti-money laundering, privacy, cybersecurity, and consumer protection.

Some of the laws and regulations to which we are subject were enacted recently, and the laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation.

New or changing laws and regulations, including how such laws and regulations are interpreted and implemented, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition.

Therefore, we monitor these areas closely to design compliant solutions for our customers who depend on us.

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including countering terrorist financing, anti-money laundering, privacy, cybersecurity, and consumer protection.

The laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation.

New or changing laws and regulations, including changes to their interpretation or implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition.

We monitor these areas closely and are focused on designing compliant solutions for our customers.

Government regulation impacts key aspects of our business.

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In the U.S., PayPal, Inc.

holds licenses to operate as a money transmitter (or its equivalent), which, among other things, subjects PayPal, Inc.

to reporting requirements, bonding requirements, limitations on the investment of customer funds, and inspection by state regulatory agencies.

(a wholly-owned subsidiary) holds licenses to operate as a money transmitter (or its equivalent) in the states where such licenses are required, as well as in the District of Columbia and certain territories.

These licenses include not only the PayPal branded products and services offered in these locations, but also our Venmo, Hyperwallet and Xoom products and services to the extent offered in these locations.

As a licensed money transmitter, PayPal is subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies.

In certain cases, these licenses also generally cover PayPal’s service enabling customers to buy, hold, and sell cryptocurrency directly from their PayPal account, which is currently available only in the U.S.

In the State of New York, PayPal has obtained a conditional virtual currency license from the New York Department of Financial Services to offer cryptocurrency services in the state in partnership with Paxos Trust Company.

Outside the U.S., we provide similar services customized for various countries and foreign jurisdictions through our foreign subsidiaries.

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entities are, or may be, supervised by a financial regulatory authority in the jurisdictions in which they operate.

Among other regulatory authorities, the Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”), the Australian Prudential Regulation Authority, the Monetary Authority of Singapore, the Reserve Bank of India, the Central Bank of Russia, the Central Bank of Brazil, and the People's Bank of China have asserted jurisdiction over some or all of our activities in their respective jurisdictions.

Among other regulatory authorities, the Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”), the Australian Prudential Regulation Authority, the People’s Bank of China, the Monetary Authority of Singapore, the Reserve Bank of India, the Central Bank of Russia, and the Central Bank of Brazil have asserted jurisdiction over some or all of our activities in their respective jurisdictions.

This list is not exhaustive, and there are numerous other regulatory agencies that have or may assert jurisdiction over our activities.

The laws and regulations applicable to the payments industry in any given jurisdiction are subject to interpretation and change.

In addition, financial services regulators in various jurisdictions, including the U.S.

and the European Union (“EU”), have implemented authentication requirements for banks and payment processors intended to reduce online fraud, which could impose significant costs, make it more difficult for new customers to join PayPal, and reduce the ease of use of our products.

Banking Agency Supervision .

We serve our customers in the European Union (“EU”) through PayPal (Europe) S.à.r.l.

We serve our customers in the EU through PayPal (Europe) S.à.r.l.

et Cie, SCA, a wholly-owned subsidiary that is licensed and subject to regulation as a bank in Luxembourg by the CSSF.

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In addition, based on our relationships with our partner financial institutions, we are, or may be, subject to indirect regulation and examination by these financial institutions’ regulators.

Lending Regulation .

PayPal’s U.S.

consumer short-term installment loan product is subject to state lending laws (some of which require licensure and/or state regulator notification), state collection laws, as well as compliance with the Equal Credit Opportunity Act and Regulation B as implemented by the Consumer Financial Protection Bureau (the “CFPB”) and other applicable laws and regulations.

Consumer Financial Protection Bureau .

The Consumer Financial Protection Bureau (the “CFPB”) has significant authority to regulate consumer financial products in the U.S., including consumer credit, deposits, payments, and similar products.

The CFPB has significant authority to regulate consumer financial products in the U.S., including consumer credit, deposits, payments, and similar products.

As a large market participant of remittance transfers, the CFPB has direct supervisory authority over our business.

The CFPB and other similar regulatory agencies in other jurisdictions may have broad consumer protection mandates that could result in the promulgation and interpretation of rules and regulations that may affect our business.

Anti-Money Laundering and Counter-Terrorist Financing.

The CFPB and similar regulatory agencies in other jurisdictions may have broad consumer protection mandates that could result in the promulgation and interpretation of rules and regulations that may affect our business.

Anti-Money Laundering, Counter-Terrorist Financing, and Sanctions.

PayPal is subject to anti-money laundering (“AML”) laws and regulations in the U.S.

and other jurisdictions, as well as laws designed to prevent the use of the financial systems to facilitate terrorist activities.

Our AML program is designed to prevent our payment network from being used to facilitate money laundering, terrorist financing, and other illicit activities, or to do business in countries or with persons and entities included on designated country or person lists promulgated by the U.S.

Our AML program is designed to prevent our Payments Platform from being used to facilitate money laundering, terrorist financing, and other illicit activities, or to do business in countries or with persons and entities included on designated country or person lists promulgated by the U.S.

Department of the Treasury’s Office of Foreign Assets Controls (“OFAC”) and equivalent authorities in other countries.

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Interchange fees associated with four-party payments systems are being reviewed or challenged in various jurisdictions.

For example, in the EU, the Multilateral Interchange Fee (“MIF”) Regulation caps interchange fees for credit and debit card payments and provides for business rules to be complied with by any company dealing with card transactions, including PayPal.

As a result, the fees that we collect in certain jurisdictions may become the subject of regulatory challenge.

Data Protection and Information Security.

Aspects of our operations or business are subject to privacy and data protection regulation in the U.S., the EU, Asia Pacific, and elsewhere.

For example, the EU adopted a comprehensive General Data Protection Regulation (the “GDPR”), which came into effect in May 2018.

We are subject to a number of laws, rules, directives, and regulations (“privacy and data protection laws”) relating to the collection, use, retention, security, processing, and transfer (collectively, “processing”) of personally identifiable information about our customers, our merchants’ customers, and employees (“personal data”) in the countries where we operate.

Our business relies on the processing of personal data in many jurisdictions and the movement of data across national borders.

As a result, much of the personal data that we process, which may include certain financial information associated with individuals, is subject to one or more privacy and data protection laws in one or more jurisdictions.

In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with which we have commercial relationships.

The EU has adopted a comprehensive General Data Protection Regulation (the “GDPR”), which came into effect in May 2018.

GDPR expanded the scope of the EU data protection law to foreign companies processing personal data of European Economic Area (“EEA”) individuals and imposed a stricter data protection compliance regime.

In the U.S., we are subject to privacy and information safeguarding requirements under the Gramm-Leach-Bliley Act and the California Consumer Privacy Act that require similar privacy protections afforded by the GDPR, as well as the maintenance of a written, comprehensive information security program.

In the U.S., we are subject to privacy and information safeguarding requirements under the Gramm-Leach-Bliley Act as well as the California Consumer Privacy Act, which requires privacy protections comparable to those afforded by the GDPR, as well as the maintenance of a written, comprehensive information security program.

In Europe, the operations of our Luxembourg bank are subject to confidentiality and information safeguarding requirements under the Luxembourg Banking Act.

Regulatory authorities around the world are considering numerous legislative and regulatory proposals concerning privacy and data protection that may contain additional privacy and data protection obligations.

PayPal relies on a variety of compliance methods to transfer personal data of EEA individuals to the U.S., including reliance on Binding Corporate Rules (“BCRs”) for internal transfers of certain types of personal data and Standard Contractual Clauses (“SCCs”).

PayPal must also ensure that third parties processing personal data of PayPal’s EEA customers and/or employees outside of the EEA have compliant transfer mechanisms.

In July 2020, the European Court of Justice (“ECJ”) invalidated the U.S.-EU Privacy Shield - safe harbor framework that was previously relied upon by some PayPal vendors, and PayPal entered into SCCs with those third parties.

PayPal did not certify under the Privacy Shield regime and continues to use SCCs and BCRs as the primary cross border data transfer mechanisms.

However, the ECJ ruling made clear that these transfer mechanisms will be subject to additional scrutiny as well.

To the extent PayPal relies on SCCs, or any third party relies on the Privacy Shield regime for the compliant transfer of personal data, PayPal’s ability to process EEA personal data to such parties could be jeopardized.

Regulatory scrutiny of privacy, data protection, cybersecurity practices, and the processing of personal data is increasing around the world.

Regulatory authorities are continuously considering numerous legislative and regulatory proposals and interpretive guidelines that may contain additional privacy and data protection obligations.

In addition, the interpretation and application of these privacy and data protection laws in the U.S., Europe, and elsewhere are often uncertain and in a state of flux.

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Foreign Corrupt Practices Act and the U.K.

Bribery Act, and similar anti-corruption laws in the jurisdictions in which we operate.

Bribery Act, and similar laws in the jurisdictions in which we operate.

Anti-corruption laws generally prohibit offering, promising, giving, accepting, or authorizing others to provide anything of value, either directly or indirectly, to or from a government official or private party in order to influence official action or otherwise gain an unfair business advantage, such as to obtain or retain business.

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Additional Regulatory Developments.

Various regulatory agencies continue to examine a wide variety of issues, including virtual currencies, identity theft, account management guidelines, privacy, disclosure rules, cybersecurity, and marketing, that may impact PayPal’s business.

For an additional discussion on governmental regulation affecting our business, please see the risk factors related to regulation of our payments business and regulation in the areas of consumer privacy, data use, and/or security in “Item 1A.

Risk Factors ” under the caption “ Risk Factors That May Affect Our Business, Results of Operations, and Financial Condition ” and “Item 3.

Legal Proceedings” included elsewhere in this Annual Report on Form 10-K.

The Company does not experience meaningful seasonality with respect to net revenues.

No individual quarter in 2019 , 2018 or 2017 accounted for more than 30% of annual net revenue.

As of December 31, 2019 , we employed approximately 23,200 people globally, of whom approximately 11,200 were located in the U.S.

We consider our relationship with our employees to be good.

Separation from eBay Inc.

PayPal Holdings, Inc.

was incorporated in Delaware in January 2015 for the purpose of owning and operating eBay’s Payments business in connection with the separation and distribution described below.

eBay completed the transfer of substantially all of the assets, liabilities, and operations of eBay’s Payments business to PayPal in June 2015.

Prior to the contribution of the Payments business, PayPal Holdings, Inc.

had no operations.

On July 17, 2015 (the “distribution date”), PayPal became an independent publicly traded company through the pro rata distribution by eBay of 100% of the outstanding common stock of PayPal to eBay stockholders (which we refer to as the “separation” or the “distribution”).

Each eBay stockholder of record as of the close of business on July 8, 2015 received one share of PayPal common stock for every share of eBay common stock held on the record date.

Approximately 1.2 billion shares of PayPal common stock were distributed on July 17, 2015 to eBay stockholders.

PayPal’s common stock began “regular way” trading under the ticker symbol “PYPL” on the NASDAQ Global Select Market on July 20, 2015.

Various regulatory agencies continue to examine and implement laws governing a wide variety of issues, including virtual currencies, identity theft, account management guidelines, disclosure rules, cybersecurity, and marketing, which may impact PayPal’s business.

For an additional discussion on governmental regulation affecting our business, please see “Item 1A.

Risk Factors ” and “Item 3.

Legal Proceedings” included in this Form 10-K.

HUMAN CAPITAL

Global Talent Management

At PayPal, we consider the management of our global talent (human capital) to be essential to the ongoing success of our business.

As of December 31, 2020, we employed approximately 26,500 people globally, representing approximately 150 nationalities, located in more than 30 countries, including approximately 12,300 located in the U.S.

Attracting, recruiting, developing, and retaining diverse talent enables us to provide our customers with products and services that help them to thrive in the global economy, and serve our stakeholders.

We are focused on supporting our employees across the full employee lifecycle from recruitment to onboarding to development, and have implemented programs designed to promote their total wellness, particularly during difficult times such as the COVID-19 pandemic.

For example, in 2020, we enhanced our Crisis Leave Program, provided flexible work arrangements, and adjusted our benefits to include additional mental health support.

Employee Engagement

We use employee feedback to directly inform the ongoing development of our employee programs.

In addition to administering an annual survey to gather input from our global workforce, we conducted regular wellness surveys throughout the COVID-19 pandemic to get real-time feedback from our employees.

For our 2020 annual employee survey, we heard from 85% of our global employees.

Our engagement score, which reflects employees that would recommend PayPal to their peers and/or are happy at PayPal was 84%, representing a four percentage point increase compared to 2019.

In 2020, we continued to enhance our employee programs based on results from our 2019 survey and other employee input.

For example, we established in-person feedback sessions to improve efficiencies, enhanced employee communication strategies, and launched additional learning and development programs.

We also evaluate employee survey responses for feedback on other key components of our culture and programs.

The detailed scores are shared across the organization and analyzed to understand differences by geography, demographics, and job level, and to identify opportunities for further improvement.

Talent Acquisition and Development

As a leading technology platform and digital payments company, we compete for top global talent around the world.

We believe that a strong culture focused on employee experiences that enables advancement, learning, and individual career insights is essential to the successful acquisition, retention, and development of diverse talent.

To that end, we have implemented programs focused on inclusive hiring practices, enriched virtual new hire experiences, individual coaching, and mentorship programs, and provided ongoing learning opportunities, including unlimited access to LinkedIn Learning.

Employee Wellness

We remain focused on promoting the total wellness of our employees, including resources, programs and services to support our employees’ physical, mental, and financial wellness.

As part of our integrated approach to benefits, we have made strengthening employee financial wellness a strategic priority at PayPal.

In late 2019, we designed an inclusive program that raised wages (where appropriate), lowered the cost of U.S.

healthcare benefits for hourly-wage earners, offered new financial tools and resources, and granted equity or equity-based awards to all employees of the company, subject to legal limitations.

We continue to extend this initiative and recently added resources for employees to improve their cash flow through access to early earned wages and modified retirement programs in select global markets.

Diversity, Inclusion, Equity, and Belonging

Our focus on fostering diversity, inclusion, equity, and belonging (“DIEB”) is critical to our global talent strategy and pivotal to building a culture that embraces individual characteristics, values diversity, minimizes barriers, and enhances feelings of security and support across the workplace.

We are committed to equal pay for equal work, promoting enterprise-wide inclusive learning opportunities, and partnering with leading organizations to embed DIEB considerations into our talent strategy.

We empower eight employee resource groups to promote community and authenticity for employees that identify as Black, Latinx, women, interfaith, veterans, LGBTQ+, Asian, and disabled persons.

These groups drive ongoing employee engagement around the world for all employees, regardless of background, to support and champion their peers and related causes.

In 2020, we also announced a targeted commitment to support Black- and minority-owned businesses, and underrepresented communities and employees, including additional financial commitments to enhance our employee resource groups, cultivate diverse talent pipelines, and create inclusive onboarding and skill building opportunities.

As part of our annual environmental, social, and governance (“ESG”) reporting, we provide additional information on our global talent strategy, including detailed representation metrics, in our Global Impact Report available at https://investor.pypl.com/esg-strategy/default.aspx.

AVAILABLE INFORMATION

The address of our principal executive offices is PayPal Holdings, Inc., 2211 North First Street, San Jose, California 95131.

Our website is located at www.paypal.com, and our investor relations website is located at http://investor.paypal-corp.com.

From time to time, we may use our investor relations site and other online and social media channels, including our PayPal Stories Blog (https://www.paypal.com/stories/us), Twitter handles (@PayPal and @PayPalNews), LinkedIn page (https://www.linkedin.com/company/paypal), Facebook page (https://www.facebook.com/PayPalUSA/), YouTube channel (https://www.youtube.com/paypal), Dan Schulman’s LinkedIn profile (https://www.linkedin.com/in/dan-schulman/), John Rainey’s LinkedIn profile (www.linkedin.com/in/john-rainey-pypl), and Dan Schulman’s Facebook page (https://www.facebook.com/DanSchulmanPayPal/) to disclose material non-public information and comply with our disclosure obligations under Regulation Fair Disclosure (“FD”).

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge on our investor relations website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

The content of our websites and information we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only.

Our website is located at www.paypal.com, and our investor relations website is located at https://investor.pypl.com.

From time to time, we may use our investor relations site and other online and social media channels, including the PayPal Newsroom (https://newsroom.paypal-corp.com/), PayPal Stories Blog (https://www.paypal.com/stories/us), Twitter handles (@PayPal and @PayPalNews), LinkedIn page (https://www.linkedin.com/company/paypal), Facebook page (https://www.facebook.com/PayPalUSA/), YouTube channel (https://www.youtube.com/paypal), Dan Schulman’s LinkedIn profile (https://www.linkedin.com/in/dan-schulman/), John Rainey’s LinkedIn profile (www.linkedin.com/in/john-rainey-pypl), Dan Schulman’s Facebook page (https://www.facebook.com/DanSchulmanPayPal/), and Dan Schulman’s Instagram page (https://www.instagram.com/dan_schulman/) as a means of disclosing information about the Company and for complying with our disclosure obligations under Regulation Fair Disclosure (“FD”).

Our Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge on our investor relations website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

The content of our websites and information we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels is not incorporated by reference into this Form 10-K or in any other report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business