What changed in this filing

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Item 1A. Risk Factors

2022-02-03 compared with 2021-02-05 · 213 added, 187 removed, 246 unchanged (62% of the section changed)

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If any of the following risks actually occur, our business, financial condition, results of operations, and future prospects could be materially and adversely affected.

CORONAVIRUS PANDEMIC RISKS

The novel coronavirus (“COVID-19”) pandemic could materially and adversely affect our business, financial condition, and results of operations.

There are no comparable recent events that provide guidance as to the effect that the spread of COVID-19 as a global pandemic may have.

The ultimate extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict, and subject to change, including, but not limited to, the duration, scope, severity, and geographic spread of the outbreak, its impact on the global economy, actions taken to contain or limit the impact of COVID-19, such as the availability of an effective vaccine or treatment, geographic variation in how countries and states are handling the pandemic, and how quickly and to what extent normal economic and operating conditions may potentially resume.

The COVID-19 pandemic has adversely impacted and is likely to further adversely impact the operations of our customers, suppliers, vendors and other business partners, and may adversely impact our results of operations in the future.

Cross-border and domestic commerce may be adversely impacted by measures taken by government authorities and businesses globally to contain and limit the outbreak’s spread, including travel restrictions, border closures, quarantines, shelter in place and lock down orders, mask and social distancing requirements, and business limitations and shutdowns.

To the extent that such mitigation measures remain in place or are reinstated for significant periods of time, they may adversely affect our business, financial condition, and results of operations.

Actions that we have taken or may take in the future intended to assist customers impacted by COVID-19 may negatively impact our results of operations.

In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to:

• Merchants selling goods or services in advance of the date of their delivery (e.g., travel and events verticals) or experiencing bankruptcy, insolvency, business failure, or other business interruption, which could result in our becoming liable to the buyers of such goods or services through our buyer protection program or through chargebacks on payment cards used by customers to fund their payments;

• Merchants who utilize PayPal branded merchant credit products such as PayPal Working Capital and PayPal Business Loan products or consumers who utilize PayPal branded consumer credit products defaulting on their payment obligations;

• Increased cybersecurity and payment fraud risk related to COVID-19, as cybercriminals attempt to profit from the disruption in light of increased online banking, e-commerce, and other online activity;

• Challenges to the availability and reliability of our products and services resulting from changes to our normal operations, including due to one or more clusters of COVID-19 cases occurring at our (or our service providers’) sites or mandatory local lock-down requirements, which may impact our employees, our level of customer service, and/or the systems or employees of our customers and business partners;

• An increased volume of customer requests for support and regulatory requests for information and support or additional regulatory requirements, which could require additional resources and costs to address.

Additionally, COVID-19 has negatively impacted the financial viability and operations of merchants in certain verticals (such as travel and events) and, as a result, allowances for transaction and credit losses may not accurately reflect the amount of losses that PayPal may be exposed to by these merchants.

Further, we may not have the ability to accurately forecast the magnitude of such losses or any additional merchant segments that could be adversely impacted by COVID-19.

Our business has benefited from the shift from in-store shopping and traditional payment methods towards e-commerce and digital payments, including a significant increase in net new active accounts and payments volume.

To the extent that customer preferences revert to pre-COVID-19 behaviors as mitigation measures to limit the spread of COVID-19 are lifted or relaxed and an effective vaccine or treatments for COVID-19 becomes available, our business, financial condition, and results of operations could be adversely impacted.

The significant increase in the number of our employees who are working remotely as a result of the pandemic, and an extended period of remote work arrangements and subsequent reintroduction into the workplace could introduce operational risk, increase cybersecurity risk, strain our business continuity plans, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business.

Additionally, COVID-19 could require new or modified processes, procedures, and controls to respond to changes in our business environment.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.

There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.

The impacts of COVID-19, individually or collectively, could have a material adverse impact on our business, financial condition, and results of operations and have the effect of heightening or exacerbating many of the other risks described in this “Risk Factors” section.

CYBERSECURITY AND TECHNOLOGY RISKS

Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition.

The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal data), disable or degrade service, or sabotage systems are constantly evolving, and often are not recognized or detected until after they have been launched against a target.

Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems or facilities through various means, including, but not limited to, hacking into our systems or facilities or those of our customers, partners, or vendors, and attempting to fraudulently induce users of our systems (including employees and customers) into disclosing user names, passwords, payment card information, or other sensitive information.

The techniques used to attempt to obtain unauthorized or illegal access to systems and information (including customers’ personal data), disable or degrade service, exploit vulnerabilities, or sabotage systems are constantly evolving, and in some circumstances may not be recognized or detected until after they have been launched against a target.

This information may in turn be used to access our customers’ personal or proprietary information and payment card data that are stored on or accessible through our information technology systems and those of third parties with whom we partner.

Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyberextortion, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology and infrastructure and those of third parties with whom we partner could compromise the confidentiality, availability, and integrity of the data in our systems.

Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyberextortion, distributed denial-of-service attacks, ransomware, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology and infrastructure and those of third parties with whom we partner could compromise the confidentiality, availability, and integrity of the data in our systems.

We have experienced from time to time, and may experience in the future, breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities.

We believe that PayPal is a particularly attractive target due to our name and brand recognition and the widespread adoption and use of our products and services.

We believe that PayPal is a particularly attractive target for cybercriminals due to our name, brand recognition, types of data (including payments-related data) that customers provide to us, and the widespread adoption and use of our products and services.

Any cyberattacks or data security breaches affecting the information technology or infrastructure of companies we acquire or of our customers, partners, or vendors (including data center and cloud computing providers) could have similar negative effects.

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Under payment card network rules and our contracts with our payment processors, if there is a breach of payment card information that we store, or that is stored by our direct payment card processing vendors, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses.

Cybersecurity breaches and security vulnerabilities could subject us to significant costs and liabilities, result in improper disclosure of data and violations of applicable privacy and other laws, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the operation of our business, or result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to or claims by them.

While we maintain insurance policies, our coverage may be insufficient to compensate us for all losses caused by security breaches.

Cybersecurity breaches and other exploited security vulnerabilities could subject us to significant costs and liabilities, result in improper disclosure of data and violations of applicable privacy and other laws, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the operation of our business, result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to or claims by them, or expose us to regulatory penalties and fines.

While we maintain insurance policies intended to offset the financial impact we may experience from these risks, our coverage may be insufficient to compensate us for all losses caused by security breaches and other damage to or unavailability of our systems.

Business interruptions or systems failures may impair the availability of our websites, applications, products or services, or otherwise harm our business.

Our systems and operations and those of our service providers and partners have experienced from time to time, and may experience in the future, business interruptions or degradation because of distributed denial-of-service and other cyberattacks, insider threats, hardware and software defects or malfunctions, human error, earthquakes, hurricanes, floods, fires, and other natural disasters, public health crises (including pandemics), power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events.

Our corporate headquarters are located in the Silicon Valley, a seismically active region in California.

The frequency and intensity of weather events related to climate change are increasing, which could increase the likelihood and severity of such disasters as well as related damage and business interruption.

Our corporate headquarters are located in the San Francisco Bay Area, a seismically active region in California.

A catastrophic event that results in a disruption or failure of our systems or operations could result in significant losses and require substantial recovery time and significant expenditures to resume or maintain operations, which could have a material adverse impact on our business, financial condition, and results of operations.

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As a provider of payments solutions, we are subject to heightened scrutiny by regulators that may require specific business continuity, resiliency and disaster recovery plans, and rigorous testing of such plans, which may be costly and time-consuming to implement, and may divert our resources from other business priorities.

We have experienced, and expect to continue to experience system failures, denial-of-service attacks, and other events or conditions from time to time that interrupt the availability, or reduce or adversely affect the speed or functionality, of our products and services.

We have experienced, and expect to continue to experience, system failures, cyberattacks, unplanned outages, and other events or conditions from time to time that have and may interrupt the availability, or reduce or adversely affect the speed or functionality, of our products and services.

These events have resulted and likely will continue to result in loss of revenue.

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Frequent or persistent interruptions in our services could permanently harm our relationship with our customers and partners and our reputation.

Moreover, if any system failure or similar event results in damages to our customers or their business partners, these customers or partners could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described in this “Risk Factors” section under the caption “ Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition .”

Our Payments Platform has experienced and may in the future experience intermittent unavailability.

We have undertaken and continue to undertake certain system upgrades and re-platforming efforts designed to improve our reliability, resiliency, and speed.

These efforts are costly and time-consuming, involve significant technical risk, and may divert our resources from new features and products, and there can be no guarantee that these efforts will succeed.

Moreover, if any system failure or similar event results in damage to our customers or their business partners, they could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described in this “Risk Factors” section under the caption “ Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition .”

We have undertaken and continue to undertake certain system upgrades and re-platforming efforts designed to improve the availability, reliability, resiliency, and speed of our platform.

Frequent or persistent site interruptions could lead to regulatory scrutiny, significant fines and penalties, and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses that we need to operate or prevent or delay us from obtaining additional licenses that may be required for our business.

We also rely on facilities, components, applications, and services supplied by third parties, including data center facilities and cloud storage services.

From time to time, such third parties have ceased to provide us with such facilities and services.

We also rely on facilities, components, applications, and services supplied by third parties, including data center facilities and cloud data storage and processing services.

From time to time, we have experienced interruptions in the provision of such facilities and services provided by these third parties.

If these third parties experience operational interference or disruptions (including a cybersecurity incident), breach their agreements with us, or fail to perform their obligations and meet our expectations, our operations could be disrupted or otherwise negatively affected, which could result in customer dissatisfaction, regulatory scrutiny, and damage to our reputation and brands, and materially and adversely affect our business.

While we maintain business interruption insurance, it may not be sufficient to reimburse us for losses caused by interruptions in our service as a result of systems failures and similar events.

While we maintain insurance policies intended to offset the financial impact we may experience from these risks, our coverage may be insufficient to compensate us for all losses caused by interruptions in our service as a result of systems failures and similar events.

In addition, any failure to successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies in a timely manner could have an adverse impact on our business, internal controls (including internal controls over financial reporting), results of operations, and financial condition.

If we cannot keep pace with rapid technological developments to provide new and innovative products and services, the use of our products and services and, consequently, our revenues, could decline.

Rapid, significant, and disruptive technological changes impact the industries in which we operate, for example, payment technologies (including real-time payments, payment card tokenization, virtual currencies, distributed ledger and blockchain technologies, and proximity payment technology such as NFC and other contactless payments);

internet browser technologies, that enable users to easily store their payment card information for use on any retail or e-commerce website;

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developments in technologies supporting our regulatory and compliance obligations;

and in-store, digital, mobile, and social commerce.

We expect new services and technologies to continue to emerge and evolve, and we cannot predict the effects of technological changes on our business.

and in-store, digital, and social commerce.

We expect new services and technologies to continue to emerge and evolve.

We cannot predict the effects of technological changes on our business, which technological developments or innovations will become widely adopted, and how those technologies may be regulated.

We rely in part on third parties, including some of our competitors, for the development of and access to new or evolving technologies.

These third parties may restrict or prevent our access to, or utilization of, those technologies, as well as their platforms or products.

We may not be able to accurately predict which technological developments or innovations will become widely adopted and how those technologies may be regulated.

We expect that new services and technologies applicable to the industries in which we operate will continue to emerge and may be superior to, or render obsolete, the technologies we currently use in our products and services.

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Our failure to comply with extensive, complex, overlapping, and frequently changing rules, regulations, and legal interpretations could materially harm our business.

Our business is subject to complex and changing laws, rules, regulations, policies, and legal interpretations in the markets in which we operate, including, but not limited to, those governing:

banking, credit, deposit taking, cross-border and domestic money transmission, prepaid access, foreign currency exchange, privacy and data protection, data governance, cybersecurity, banking secrecy, digital payments and cryptocurrency, payment services (including payment processing and settlement services), fraud detection, consumer protection, antitrust and competition, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.

Regulators globally have been establishing and increasing their regulatory authority, oversight, and enforcement in ways that impact our business.

As we introduce new products and services and expand into new markets, including through acquisitions, we may become subject to additional regulations, restrictions, and licensing requirements.

Our business is subject to complex and changing laws, rules, regulations, policies, and legal interpretations in the markets in which we offer services directly or through partners, including, but not limited to, those governing:

banking, credit, deposit taking, cross-border and domestic money transmission, prepaid access, foreign currency exchange, privacy, data protection, data governance, cybersecurity, banking secrecy, digital payments, cryptocurrency, payment services (including payment processing and settlement services), fraud detection, consumer protection, antitrust and competition, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.

Regulators globally have been establishing and increasing their regulatory authority, oversight, and enforcement in a manner that impacts our business.

As we introduce new products and services and expand into new markets, including through acquisitions, we expect to become subject to additional regulations, restrictions, and licensing requirements.

As we expand and localize our international activities, we expect that our obligations in the markets in which we operate will continue to increase.

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Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brands and business, and adversely affect our results of operations and financial condition.

The complexity of U.S.

federal and state and international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions.

We have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations, but there can be no assurance that our employees, contractors, and agents will not violate such laws and regulations.

The complexity of United States (“U.S.”) federal and state and international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions.

While we have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, and agents will not violate such laws and regulations.

Payments Regulation

In the U.S., PayPal, Inc.

(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 (as described further in “Item 1.

Business – Government Regulation” of this Form 10-K).

If we violate the laws or regulations covered under our licenses, we could be subject to liability and/or additional restrictions, forced to cease doing business with residents of certain states, forced to change our business practices, or required to obtain additional licenses or regulatory approvals, which could impose substantial costs.

If we violate the laws or regulations covered under our licenses, we could be subject to liability and/or additional restrictions, forced to cease doing business with residents of certain states or territories, forced to change our business practices, or required to obtain additional licenses or regulatory approvals, which could impose substantial costs and harm our business.

While we currently allow our customers to send payments from approximately 200 markets, we allow customers in only approximately half of those markets (including the U.S.) to also receive payments, in some cases with significant restrictions on the manner in which customers can hold balances or withdraw funds.

These limitations may adversely affect our ability to grow our business in these markets.

We principally provide our services to customers in the European Union (“EU”) and the United Kingdom (“U.K.”) through PayPal (Europe) S.à r.l.

et Cie, S.C.A (“PayPal (Europe)”), our wholly-owned subsidiary that is licensed and subject to regulation as a credit institution in Luxembourg.

PayPal (Europe) is potentially subject to significant fines or other enforcement action if it violates applicable requirements imposed on Luxembourg credit institutions.

Additionally, compliance with EU laws and regulations could become more costly and operationally difficult to manage due to potentially inconsistent interpretations and domestic regulations by EU member countries.

European Directives, such as the Revised Payment Services Directive (“PSD2”) enabling payment and account information sharing by regulated payment providers, could subject us to data security and other legal and financial risks.

If the business activities of PayPal (Europe) exceed certain thresholds, or if the European Central Bank (“ECB”) determines, PayPal (Europe) may be deemed a significant supervised entity and certain activity of PayPal (Europe) could become directly supervised by the ECB, rather than by the CSSF (the Luxembourg regulator), which

could subject us to additional requirements and would likely increase compliance costs.

These limitations may adversely affect our ability to grow our business.

We principally provide our services to customers in the European Economic Area (“EEA”) and the United Kingdom (“U.K.”) through PayPal (Europe), our wholly-owned subsidiary that is licensed and subject to regulation as a credit institution in Luxembourg.

PayPal (Europe) is potentially subject to significant fines or other enforcement action if it violates applicable requirements.

Additionally, compliance with applicable laws and regulations could become more costly and operationally difficult to manage due to potentially inconsistent interpretations and domestic regulations by various countries in the region.

European regulation, such as the Revised Payment Services Directive (“PSD2”) enabling payment and account information sharing by regulated payment providers, could subject us to data security and other legal and financial risks.

If the business activities of PayPal (Europe) exceed certain thresholds, or if the European Central Bank (“ECB”) determines, PayPal (Europe) may be deemed a significant supervised entity and certain activity of PayPal (Europe) would become directly supervised by the ECB, rather than by the Luxembourg Commission de Surveillance du Secteur Financier, which could subject us to additional requirements and would likely increase compliance costs.

In many of the other markets outside the U.S.

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As a result, PayPal Pte.

is not able to offer outbound remittance payments from Singapore.

is not able to offer outbound remittance payments to PayPal customers from Singapore.

In many of the markets (other than Singapore) served by PayPal Pte.

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The Payment Services Act came into effect in Singapore in January 2020.

has submitted an application for a Major Payment Institution license to the MAS to continue to provide payments services.

It will continue to operate within a statutory transition period while the application is pending.

has submitted an application for a Major Payment Institution license to the MAS to continue to provide payments services, and is operating under an exemption from holding a license within a statutory transition period while the application is pending.

Once PayPal Pte.

obtains its license, we will be required to comply with new regulatory requirements, which will result in increased operational complexity and costs for our Singapore and international operations.

In the additional markets in which we do business, we provide our services to customers through a local subsidiary subject to local regulatory supervision or oversight and we may be subject to significant fines or other enforcement actions if we violate applicable requirements.

In addition, in certain markets outside of the U.S., we provide our services to customers through PayPal Pte.

or, if required by local regulations, a local branch of PayPal Pte.

or a local subsidiary subject to local regulatory supervision or oversight.

From time to time, we may also acquire entities subject to local payments regulatory supervision or oversight.

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The need to obtain or maintain licenses, certifications, or other regulatory approvals could impose substantial additional costs, delay or preclude planned transactions, product launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products and services, or prevent us from providing our products or services in a given market.

Cryptocurrency Regulation

Our current and planned cryptocurrency offerings could subject us to additional regulations, licensing requirements, or other obligations.

The rapidly evolving regulatory landscape with respect to cryptocurrency may subject us to inquiries or investigations from regulators and governmental authorities, require us to make product changes, restrict or discontinue product offerings, and implement additional and potentially costly controls.

If we fail to comply with regulations, requirements,

prohibitions or other obligations applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

In addition, financial and third party risks related to our cryptocurrency offerings, such as inappropriate access to or theft or destruction of cryptocurrency assets held by our custodian, insufficient insurance coverage by the custodian to reimburse us for all such losses, the custodian’s failure to maintain effective controls over the custody and settlement services provided to us, the custodian’s inability to purchase or liquidate cryptocurrency holdings, and defaults on financial or performance obligations by counterparty financial institutions, could materially and adversely affect our financial performance and significantly harm our business.

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 (“CFPB”) and other applicable laws and regulations.

Changes to state laws and regulatory interpretation may require us to make product changes, incur substantial additional costs, or cease lending in a particular state.

We could be subject to fines, other enforcement action, and litigation if we are found to violate any aspects of installment loan regulations.

We hold a number of U.S.

state lending licenses for our U.S.

consumer short-term installment loan product, which is subject to federal and state laws governing consumer credit and debt collection.

While our non-U.S.

consumer short-term installment loan products which are available in the U.K., France, Germany, Spain, Italy and Australia are generally exempt from primary consumer credit legislation, certain consumer lending laws, consumer protection or banking transparency regulations continue to apply to these products.

Increased global regulatory focus on short-term installment products and consumer credit more broadly could result in laws or regulations requiring changes to our policies, procedures, operations, and product offerings, and restrict or limit our ability to offer credit products.

We could be subject to fines, other enforcement action, and litigation if we are found to violate any aspects of applicable law or regulations.

Consumer Protection

Violations of federal and state consumer protection laws and regulations, including the Electronic Fund Transfer Act (“EFTA”) and Regulation E as implemented by the CFPB, could result in the assessment of significant actual damages or statutory damages or penalties (including treble damages in some instances) and plaintiffs’ attorneys’ fees.

Violations of federal and state consumer protection laws and regulations, including the Electronic Fund Transfer Act (“EFTA”) and Regulation E as implemented by the Consumer Financial Protection Bureau (“CFPB”), could result in the assessment of significant actual damages or statutory damages or penalties (including treble damages in some instances) and plaintiffs’ attorneys’ fees.

We are subject to, and have paid amounts in settlement of, lawsuits containing allegations that our business violated the EFTA and Regulation E or otherwise advance claims for relief relating to our business practices (e.g., that we improperly held consumer funds or otherwise improperly limited consumer accounts).

The CFPB issued a final rule on prepaid accounts that came into effect on April 1, 2019.

We have implemented certain changes to comply with the final rule and made substantial changes to the design of certain U.S.

consumer accounts and their operability, which could lead to unintended customer confusion and dissatisfaction, discourage customers from opening new accounts, require us to reallocate resources, and increase our costs, which could negatively affect our business.

PayPal principally offers its services in the European Economic Area (“EEA”) countries through a “passport” notification process through the Luxembourg regulator (in the case of PayPal (Europe)) to regulators in other EEA member states in accordance with EU regulations.

Regulators in these countries could notify us of local consumer protection laws that apply to our business, in addition to Luxembourg consumer protection laws, and could also seek to persuade the local regulator to order PayPal to conduct its activities in the local country directly or through a branch office.

In October 2021, the CFPB issued an order pursuant to its market-monitoring authority requiring us to provide extensive information on our payment products, including with respect to the collection, use of, and access to data and consumer protections, among other items.

In December 2021, the CFPB issued a separate order pursuant to its market-monitoring authority requiring us to provide information on our Buy Now, Pay Later offerings.

PayPal principally offers its services in the EEA countries through a “passport” notification process through PayPal Europe's Luxembourg regulator to regulators in other EEA member states in accordance with EU regulations, as well as in the UK through the Temporary Permissions Regime.

Regulators in these countries could notify us of and seek to enforce local consumer protection laws that apply to our business, in addition to Luxembourg consumer protection laws, and could also seek to persuade the local regulator to order PayPal to conduct its activities in the local country directly or through a branch office.

These or similar actions by these regulators could increase the cost of, or delay, our ability to expand our business in Europe.

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Regulators in the U.S.

and around the world continue to increase standards and expectations regarding anti-money laundering and counter-terrorist financing, and expand the scope of existing laws and regulations to emerging products and markets, which may require us to further revise or expand our compliance program globally and/or in specific jurisdictions, including the procedures we use to verify the identity of our customers and to monitor international and domestic transactions.

and around the world continue to increase standards and expectations regarding anti-money laundering and counter-terrorist financing, and to expand the scope of existing laws and regulations to emerging products and markets, which may require us to further revise or expand our compliance program globally and/or in specific jurisdictions, including the procedures we use to verify the identity of our customers and to monitor international and domestic transactions.

Such changes could have the effect of making compliance more costly and operationally difficult to manage, lead to increased friction for customers, and result in a decrease in business.

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In addition, we are required to comply with economic and trade sanctions administered by the U.S., the EU, relevant EU member states, and other jurisdictions in which we operate.

Non-compliance with anti-money laundering laws and regulations or economic and trade sanctions may subject us to significant fines, penalties, lawsuits, and enforcement actions, result in regulatory sanctions and additional compliance requirements, increase regulatory scrutiny of our business, restrict our operations, or damage our reputation and brands.

See “Note 13—Commitments and Contingencies” to our consolidated financial statements for disclosure relating to possible violations arising from our sanctions compliance program.

Privacy and Protection of Customer Data

The legal and regulatory environment relating to “privacy and data protection laws” (as defined in “Item 1.

Business— Government Regulation”) continues to develop and evolve in ways we cannot predict, including with respect to technologies such as cloud computing, artificial intelligence, cryptocurrency, and blockchain technology.

Any failure, or perceived failure, by us to comply with our privacy policies as communicated to users or with privacy and data protection laws could result in proceedings or actions against us by data protection authorities, government entities, or others.

Such proceedings or actions could subject us to significant fines, penalties, judgments, and negative publicity which may require us to change our business practices, increase the costs and complexity of compliance, and materially harm our business.

In addition, compliance with inconsistent privacy and data protection laws may restrict our ability to provide products and services to our customers.

For further information regarding data protection and information security, see “Item 1.

Business—Government Regulation”.

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

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 invalidated the Privacy Shield regime and raised several questions regarding the efficacy of SCCs focusing on whether data transfers under SCCs are consistent with the EU privacy principles.

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.

We are subject to regulatory activity and legal proceedings under antitrust and competition laws.

The legal and regulatory environment relating to privacy and data protection laws continues to develop and evolve in ways we cannot predict, including with respect to technologies such as cloud computing, artificial intelligence, cryptocurrency, and blockchain technology.

Any failure, or perceived failure, by us to comply with our privacy policies as communicated to customers or with privacy and data protection laws could result in proceedings or actions against us by data protection authorities, government entities, or others.

Such proceedings or actions could subject us to significant fines, penalties, judgments, and negative publicity, require us to change our business practices, increase the costs and complexity of compliance, result in reputational harm, and materially harm our business.

In addition, compliance with inconsistent privacy and data protection laws may restrict or limit our ability to provide products and services to our customers.

PayPal relies on a variety of compliance methods to transfer personal data of EEA individuals to the U.S., including Binding Corporate Rules for internal transfers of certain types of personal data and Standard Contractual Clauses (“SCCs”) as approved by the European Commission for transfers to and from third parties.

In June 2021, the European Commission imposed new SCC requirements which impose certain contract and operational requirements on PayPal, its merchants, and vendors in order to adhere to certain affirmative duties, including requirements related to government access transparency, enhanced data subject rights, and broader third party assessments to ensure safeguards necessary to protect personal data exported from PayPal’s EEA customers and/or employees to countries outside the EEA.

To the extent PayPal relies on SCCs, such engagements will require new contractual arrangements under the updated requirements to avoid limitations on PayPal’s ability to process EEA data in countries outside of the EEA.

In the wake of the California Consumer Privacy Act passed in 2018, multiple U.S.

states have adopted or proposed similar legislation to protect consumers in their states.

California passed the Consumer Privacy Rights Act of 2020, and Virginia and Colorado have passed similar privacy and data protection laws.

The continued increase in state-level privacy laws is likely to result in a disparate array of privacy rules with unaligned or conflicting provisions, accountability requirements, individual rights, and state enforcement powers and may subject us to increased regulatory scrutiny and business costs, and lead to unintended consumer confusion.

We are subject to regulatory scrutiny and may be subject to legal proceedings under antitrust and competition laws.

We are subject to scrutiny by various government agencies regarding antitrust and competition laws and regulations in the U.S.

and internationally, including in connection with proposed business combinations, acquisitions, and investments.

and internationally, including in connection with proposed or implemented business combinations, acquisitions, investments, partnerships, commercial agreements and business practices.

Some jurisdictions also provide private rights of action for competitors or consumers to assert claims of anticompetitive conduct.

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Any claims or investigations, even if without merit, may be very expensive to defend or respond to, involve negative publicity, and substantial diversion of management time and effort, and could result in reputational harm, significant judgments, fines and remedial actions against us, or require us to change our business practices, make product or operational changes, or delay or preclude planned transactions, product launches or improvements.

We are regularly subject to general litigation, regulatory actions, and government inquiries.

We are regularly subject to claims, individual and class action lawsuits, government and regulatory investigations, inquiries, actions or requests, and other proceedings alleging violations of laws, rules, and regulations with respect to competition, antitrust, intellectual property, privacy, data protection, information security, anti-money laundering, counter-terrorist financing, sanctions, anti-corruption, consumer protection, fraud, accessibility, securities, tax, labor and employment, commercial

disputes, services, charitable fundraising, contract disputes, escheatment of unclaimed or abandoned property, product liability, the matters described in “Note 13—Commitments and Contingencies—Litigation and Regulatory Matters—General Matters” to our consolidated financial statements, and other matters.

The number and significance of these disputes and inquiries may increase as our business expands in scale, scope, and geographic reach, including through acquisitions of businesses and technology, and our products and services increase in scale and complexity.

The legal proceedings are inherently uncertain, expensive and disruptive to our operations, and could result in substantial payments to satisfy judgments, fines, penalties or settlements, negative publicity, substantial diversion of management time and effort, reputational harm, criminal sanctions, orders that prevent us from offering certain products or services, requirements to change our business practices in costly ways, develop non-infringing or otherwise altered products or technologies, pay substantial royalty or licensing fees or delay or preclude planned transactions, product launches or improvements.

Determining legal reserves or possible losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes.

We are regularly subject to general litigation, regulatory scrutiny, and government inquiries.

We are regularly subject to claims, individual and class action lawsuits, arbitration proceedings, government and regulatory investigations, inquiries, actions or requests, and other proceedings alleging violations of laws, rules, and regulations with respect to competition, antitrust, intellectual property, privacy, data protection, information security, anti-money laundering, counter-terrorist financing, sanctions, anti-bribery, anti-corruption, consumer protection, fraud, accessibility, securities, tax, labor and employment, commercial disputes, services, charitable fundraising, contract disputes, escheatment of unclaimed or abandoned property, product liability, use of our services for illegal purposes, the matters described in “Note 13—Commitments and Contingencies—Litigation and Regulatory Matters—General Matters” to our consolidated financial statements, and other matters.

The number and significance of these disputes and inquiries has increased and is expected to continue to increase as our products, services, and business expand in complexity, scale, scope, and geographic reach, including through acquisitions of businesses and technology.

Investigations and legal proceedings are inherently uncertain, expensive and disruptive to our operations, and could result in substantial payments to satisfy judgments, fines, penalties or settlements, negative publicity, substantial diversion of management time and effort, reputational harm, criminal sanctions, or orders that prevent or limit us from offering certain products or services;

require us to change our business practices in costly ways, develop non-infringing or otherwise altered products or technologies, or pay substantial royalty or licensing fees;

or delay or preclude planned transactions, product launches or improvements.

Determining legal reserves or possible losses from such

matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes.

We may be exposed to losses in excess of the amount recorded, and such amounts could be material.

If any of our estimates and assumptions change or prove to have been incorrect, it could have a material adverse effect on our business, financial position, results of operations, or cash flows.

If any of our estimates and assumptions change or prove to have been incorrect, this could have a material adverse effect on our business, financial position, results of operations, or cash flows.

Third parties may allege that we are infringing their patents and other intellectual property rights.

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At any given time, we are typically a defendant in a number of patent lawsuits and subject to intellectual property infringement claims.

Intellectual property infringement claims against us may result from, among other things, our expansion into new business areas, including through acquisitions of businesses and technology, the expansion in scope and complexity of our products and services and their convergence with technologies not previously associated with areas related to our business, products, and services.

The ultimate outcome of any allegation or claim is often uncertain and any such claim, with or without merit, may be time-consuming, result in costly litigation, divert management’s time and attention from our business, and require us to, among other things, redesign or stop providing our products or services, pay substantial amounts to settle claims or lawsuits, satisfy judgments, or pay substantial royalty or licensing fees.

Intellectual property infringement claims against us may result from, among other things, our expansion into new business areas, including through acquisitions of businesses and technology, and new or expanded products and services and their convergence with technologies not previously associated with areas related to our business, products, and services.

The ultimate outcome of any allegation or claim is often uncertain and any such claim, with or without merit, may be time-consuming, result in costly litigation, divert management’s time and attention from our business, result in reputational harm, and require us to, among other things, redesign or stop providing our products or services, pay substantial amounts to settle claims or lawsuits, satisfy judgments, or pay substantial royalty or licensing fees.

We may be unable to adequately protect or enforce our intellectual property rights.

The protection of our intellectual property, including our trademarks, patents, copyrights, domain names, trade dress, and trade secrets, is important to the success of our business.

The protection of our intellectual property, including our trademarks, copyrights, domain names, trade dress, patents and trade secrets, is important to the success of our business.

Effective intellectual property protection may not be available in every jurisdiction in which we offer our products and services.

Although we have generally taken measures to protect our intellectual property rights, there can be no assurance that we will be successful in protecting or enforcing our rights in every jurisdiction, or that our contractual arrangements will prevent or deter third parties from infringing or misappropriating our intellectual property, and third parties may independently develop equivalent or superior intellectual property rights.

We may be required to expend significant time and expense to prevent infringement and enforce our rights, and we may not be able to discover or determine the extent of any unauthorized use of our proprietary rights.

Although we have generally taken measures to protect our intellectual property rights, there can be no assurance that we will be successful in protecting or enforcing our rights in every jurisdiction, or that our contractual arrangements will prevent or deter third parties from infringing or misappropriating our intellectual property, or that third parties may independently develop equivalent or superior intellectual property rights.

We may be required to expend significant time and resources to prevent third party infringement and enforce our rights, and we may not be able to discover or determine the extent of any unauthorized use of our proprietary rights.

If we are unable to prevent third parties from using or offering technologies that infringe our patent or trade secret rights, the uniqueness and value of our products and services could be adversely affected.

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BUSINESS AND OPERATIONS RISKS

The continuing effects of the novel coronavirus (“COVID-19”) pandemic could materially and adversely affect our business, financial condition, and results of operations.

The ultimate extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict, and subject to change, including, but not limited to, the duration, scope, severity, proliferation of variants and increase in the transmissibility of the virus, its impact on the global economy, actions taken to contain or limit the impact of COVID-19, such as the availability of an effective vaccine or treatment, geographic variation in how countries and states are handling the pandemic, and how quickly and to what extent normal economic and operating conditions may potentially resume.

Cross-border and domestic commerce may be adversely impacted by measures taken by government authorities and businesses globally to contain and limit the spread of COVID-19, including travel restrictions, border closures, quarantines, shelter in place and lock down orders, mask and social distancing requirements, and business limitations and shutdowns.

To the extent that such mitigation measures remain in place or are reinstated for significant periods of time, they may adversely affect our business, financial condition, and results of operations.

Actions that we have taken or may take in the future intended to assist customers impacted by COVID-19 may negatively impact our results of operations.

In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to:

increased liability under our buyer protection program or chargebacks on payment cards resulting from merchants’ selling goods or services in advance of the delivery date or experiencing bankruptcy, insolvency or other business interruption;

customer defaults on

payment obligations under PayPal branded credit products;

increased cybersecurity and payment fraud risk;

challenges to the availability and reliability of our products and services;

and supply chain disruptions impacting our business.

While our business has benefited from the shift from in-store shopping and traditional payment methods towards e-commerce and digital payments, to the extent that customer preferences revert to pre-COVID-19 behaviors as the pandemic-related restrictions lessen, our business, financial condition, and results of operations would be adversely impacted.

Additionally, COVID-19 could require new or modified processes, procedures, and controls to respond to changes in our business environment.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.

There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.

We face substantial and increasingly intense competition worldwide in the global payments industry.

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

Many areas in which we compete evolve rapidly with innovative and disruptive technologies, shifting user preferences and needs, price sensitivity of merchants and consumers, and frequent introductions of new products and services.

Many of the areas in which we compete evolve rapidly with innovative and disruptive technologies, shifting user preferences and needs, price sensitivity of merchants and consumers, and frequent introductions of new products and services.

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

We compete with a wide range of businesses.

Some of our current and potential competitors are larger operationally and/or financially 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, which may provide them significant competitive advantages.

Some competitors may also be

subject to less burdensome regulatory requirements or may be smaller or younger companies that may be more agile and effective in responding quickly to user needs, technological innovations, and legal and regulatory changes.

These competitors may devote greater resources to the development, promotion, and sale of products and services, and/or offer lower prices or more effectively offer their own innovative programs, products, and services.

We compete with a wide range of businesses in every aspect of our business.

Some of our current and potential competitors are 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.

Our competitors may devote greater resources to the development, promotion, and sale of products and services, and/or offer lower prices or more effectively offer their own innovative programs, products, and services.

We often partner with many of these businesses and we consider the ability to continue establishing these partnerships to be important to our business.

Competition for relationships with these partners is intense, and there can be no assurance that we will be able to continue to establish, grow, or maintain these partner relationships.

If we are not able to differentiate our products and services from those of our competitors, drive value for our customers, or effectively and efficiently align our resources with our goals and objectives, we may not be able to compete effectively.

Business—Competition” of this Form 10-K for further discussion of the competitive environment in the markets where we operate.

Changes to payment card networks or bank fees, rules, or practices could harm our business.

To process certain transactions, we must comply with applicable payment card network, bank or other network (collectively, “network”) rules.

The rules govern all aspects of a transaction, including fees and other practices.

To process certain transactions, we must comply with applicable payment card, bank or other network (collectively, “network”) rules.

The rules govern all aspects of a transaction on the networks, including fees and other practices.

From time to time, the networks have increased the fees and assessments that they charge for transactions that access their networks.

Certain of the networks have also imposed special fees or assessments for transactions that are executed through a digital wallet such as the one that PayPal offers.

Certain networks have also imposed special fees or assessments for transactions that are executed through a digital wallet such as the one that PayPal offers.

Our payment processors may have the right to pass any increases in fees and assessments on to us as well as increase their own fees for processing.

Any increase in interchange fees, special fees, or assessments for transactions that we pay to our payment processors or the networks could make our pricing less competitive, increase our operating costs, and reduce our operating income, which could materially harm our business, financial condition, and results of operations.

Any increase in interchange fees, special fees, or assessments for transactions that we pay to the networks or our payment processors could make our pricing less competitive, increase our operating costs, and reduce our operating income, which could materially harm our business, financial condition, and results of operations.

In some jurisdictions, government regulations have required the payment card networks to reduce or cap interchange fees.

Any changes in interchange fee rates or limitations, or their applicability to PayPal, could adversely affect our competitive position against traditional payment card service providers and the revenue we earn from our branded card programs, require us to change our business practices and harm our business.

Any changes in interchange fee rates or limitations, or their applicability to PayPal, could adversely affect our competitive position against payment card service providers and the revenue we earn from our branded card programs, require us to change our business practices, and harm our business.

We may also be subject to fines assessed by the networks resulting from any rule violations by us or our merchants.

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Such allegations may result in significant fines and penalties or require changes in our business practices that may be costly and adversely affect our business.

The network rules may also increase the cost of, impose restrictions on, or otherwise impact the development of, our retail point-of-sale solutions, which may negatively affect their deployment and adoption.

The network rules may also increase the cost of, impose restrictions on, or otherwise impact the development of, our products which may negatively affect their deployment and adoption.

The networks could adopt new operating rules or interpret or re-interpret existing rules that we or our payment processors might find difficult or even impossible to follow, or costly to implement, which could require us to make significant changes to our products.

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An increase in the portion of our payment volume funded using payment cards or in fees associated with our funding mix, or other events or developments that make it more difficult or costly for us to fund transactions with lower-cost funding options, could materially and adversely affect our financial performance and significantly harm our business.

Our ability to receive the benefit of our merchant lending offerings may be subject to challenge.

Merchant loans and advances under our U.S.

Our ability to receive the benefit of U.S.

merchant financing offerings may be subject to challenge.

Merchant loans under our U.S.

PayPal Working Capital (“PPWC”) and PayPal Business Loan (“PPBL”) products are provided by a state chartered industrial bank under a program agreement with us, and we acquire the receivables generated by those loans after origination.

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Midland Funding, LLC case decided in the U.S.

Court of Appeals for the Second Circuit, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule clarifying that loans originated by state-chartered banks remain valid throughout the lifetime of the loan, reflecting a similar rule finalized by the Office of the Comptroller of Currency (“OCC”) in May 2020.

The final rule reaffirms and codifies in regulation the so-called “valid-when-made doctrine,” which provides that the interest rate for a loan is determined when the

loan is made and will not be affected by subsequent events such as sale, assignment, or other transfer.

Court of Appeals for the Second Circuit, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule clarifying that loans originated by state-chartered non-member banks remain valid throughout the lifetime of the loan, reflecting a similar rule finalized by the Office of the Comptroller of Currency (“OCC”) in May 2020.

The final rule reaffirms and codifies in regulation the so-called “valid-when-made doctrine,” which provides that the interest rate for a loan is determined when the loan is made and will not be affected by subsequent events such as sale, assignment, or other transfer.

A number of state attorneys general have challenged these FDIC and OCC rules, and there remains some uncertainty whether non-bank entities purchasing loan receivables originated by FDIC-insured, state chartered industrial banks may rely on federal preemption of state usury laws and other state laws.

An adverse outcome of these or similar challenges, or changes to applicable laws and regulations, could materially impact our U.S.

An adverse outcome of these or similar challenges, or changes to applicable laws and regulations or regulatory policy, could materially impact our U.S.

PPWC and PPBL products and our business.

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The credit decision-making process for our consumer credit products uses proprietary methodologies and credit algorithms and other analytical techniques designed to analyze the credit risk of specific consumers based on, among other factors, their past purchase and transaction history with PayPal or Venmo and their credit scores.

Similarly, proprietary risk models and other indicators are applied to assess merchants who desire to use our merchant lending offerings to help predict their ability to repay.

Similarly, proprietary risk models and other indicators are applied to assess merchants who desire to use our merchant financing offerings to help predict their ability to repay.

These risk models may not accurately predict the creditworthiness of a consumer or merchant due to inaccurate assumptions, including those related to the particular consumer or merchant, market conditions, economic environment, or limited transaction history or other data.

The accuracy of these risk models and the ability to manage credit risk related to our credit products may also be affected by legal or regulatory requirements, changes in consumer behavior, changes in the economic environment, issuing bank policies, and other factors.

We generally rely on third-party chartered financial institutions to provide PayPal and Venmo branded consumer credit and merchant lending offerings to our U.S.

We generally rely on third-party chartered financial institutions to provide PayPal and Venmo branded consumer credit and merchant financing offerings to our U.S.

As a service provider to these third-party chartered financial institutions, which are federally supervised U.S.

financial institutions, we are subject from time to time to examination by their federal banking regulators.

In the event of any termination or interruption in a partner bank’s ability or willingness to lend, our ability to offer consumer credit and merchant credit products could be interrupted or limited, which could materially and adversely affect our business.

In the event of any termination or interruption in a partner bank’s ability or willingness to lend, our ability to offer consumer credit and merchant financing products could be interrupted or limited, which could materially and adversely affect our business.

We may be unable to reach a similar arrangement with another chartered financial institution on favorable terms or at all.

Obtaining licenses to originate such loans would be a costly, time-consuming and uncertain process, and would subject us to additional laws and regulatory requirements, which could significantly increase our costs and compliance obligations and require us to change our business practices.

We are subject to the risk that account holders who use our credit products will default on their payment obligations, creating the risk of potential charge-offs or negatively impacting our revenue share arrangement with Synchrony Bank.

obligations and require us to change our business practices.

We are subject to the risk that account holders who use our credit products will default on their payment obligations, creating the risk of potential charge-offs or negative impact to revenue share arrangement with Synchrony Bank with respect to our U.S.

consumer credit product.

The non-payment rate among account holders may increase due to, among other factors, changes to underwriting standards, risk models not accurately predicting the creditworthiness of a user, worsening economic conditions, such as a recession or government austerity programs, increases in prevailing interest rates, and high unemployment rates.

Account holders who miss payments often fail to repay their loans, and account holders who file for protection under the bankruptcy laws generally do not repay their loans.

We currently purchase receivables related to our merchant lending offerings in the U.S.

We currently purchase receivables related to our PayPal branded merchant financing offerings in the U.S.

and extend credit for our consumer and merchants products outside the U.S.

through our international subsidiaries.

If we are unable to fund our credit business adequately or in a cost-effective manner, or if we are unable to efficiently manage the cash resources utilized for these purposes, the growth of our credit business could be negatively impacted.

If we are unable to fund our credit products, or the purchase of the receivables related to our merchant financing offerings in the U.S.

adequately or in a cost-effective manner, or if we are unable to efficiently manage the cash resources utilized for these purposes, the growth of our credit products could be negatively impacted.

For information on lending regulations that impact our business, see “ Our business is subject to extensive government regulation and oversight.

Our failure to comply with extensive, complex, overlapping, and frequently changing rules, regulations, and legal interpretations could materially harm our business — Lending Regulation ” in this risk factor section.

We rely on third parties in many aspects of our business, which creates additional risk.

We rely on third parties in many aspects of our business, including:

We rely on third parties in many aspects of our business, including, but not limited to:

networks, banks, payment processors, and payment gateways that link us to the payment card and bank clearing networks to process transactions;

unaffiliated third-party lenders to originate our U.S.

PayPal Credit, U.S.

merchant credit, and branded credit card products;

our branded debit card products;

credit products to consumers, U.S.

merchant financing, and branded credit card products;

PayPal-branded debit card products issued by an unaffiliated bank;

cryptocurrency custodial service providers;

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information technology, data center facilities and cloud computing).

These risks may include legal, regulatory, information security, reputational, operational, or any other risks inherent in engaging a third party.

These risks include legal, regulatory, information security, reputational, operational, or any other risks inherent in engaging and relying upon a third-party.

If we are unable to effectively manage our third-party relationships, these third parties are unable to meet their obligations to us, or we experience substantial disruptions in these relationships, our operations, results of operations, and financial results could be adversely impacted.

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In certain markets, cross-border trade represents our primary (and in some instances our only) presence.

Cross-border trade may be negatively impacted by various factors including foreign currency exchange rate fluctuations and the interpretation and application of laws of multiple jurisdictions in the context of cross-border trade and foreign exchange.

Any factors that increase the costs of cross-border trade for us or our customers or that restrict, delay, or make cross-border trade more difficult or impractical, such as trade policy or higher tariffs, could reduce our cross-border transactions and volume, negatively impact our revenues and profits, and harm our business.

Failure to deal effectively with fraud, fictitious transactions, bad transactions, and negative customer experiences would increase our loss rate and could negatively impact our business and severely diminish merchant and consumer confidence in and use of our services.

Our buyer and seller protection programs protect merchants and consumers from fraudulent transactions, and protect consumers if they do not receive the item ordered or if the item received is significantly different from its description.

We incur substantial losses from our buyer and seller protection programs as a result of claims from consumers.

We seek to recover losses from our buyer and seller protection programs from the merchant, but may not fully recover them if the merchant is unwilling or unable to pay or the transaction involves a fraudulent merchant.

In addition, in the event of the bankruptcy or other business interruption of a merchant that sells goods or services in advance of the date of their delivery or use (e.g., airline, cruise, or concert tickets, custom-made goods, and subscriptions), we could be liable to the buyers of such goods or services, including through our buyer protection program or through chargebacks on payment cards used by customers to fund their payments.

Allowances for transaction losses that we have established may be insufficient to cover incurred losses.

We also incur substantial losses from claims that the consumer did not authorize the purchase, fraud, erroneous transactions, and customers who have closed bank accounts or have insufficient funds in their bank accounts to satisfy payments.

In addition, consumers who pay through PayPal may have reimbursement rights from their payment card issuer, which in turn will seek recovery from us.

If losses incurred by us related to payment card transactions become excessive, we could lose the ability to accept payment cards for payment, which would negatively impact our business.

Measures to detect and reduce the risk of fraud require continuous improvement and may not be effective in detecting and preventing fraud, particularly new and continually evolving forms of fraud or in connection with new or expanded product offerings.

Cross-border trade may be negatively impacted by various factors including, but not limited to, foreign currency exchange rate fluctuations and the interpretation and application of laws of multiple jurisdictions in the context of cross-border trade and foreign exchange.

Any factors that increase the costs of cross-border trade for us or our customers or that restrict, delay, or make cross-border trade more difficult or impractical, such as trade policy, higher tariffs, or localization requirements, could reduce our cross-border transactions and volume, negatively impact our revenues and profits, and harm our business.

Failure to deal effectively with fraud, abusive behaviors, bad transactions, and negative customer experiences would increase our loss rate and could negatively impact our business and severely diminish merchant and consumer confidence in and use of our services.

Third parties have attempted, and we expect that they will likely continue to attempt, to abuse access to and misuse our payment services to commit fraud by, among other things, creating fictitious PayPal accounts using stolen or synthetic identities or personal information, making transactions with stolen financial instruments, abusing or misusing our services for financial gain, or fraudulently inducing users of our systems into engaging in bad transactions.

Due to the nature of PayPal’s digital payments services, third parties may seek to engage in abusive schemes or fraud attacks that are often difficult to detect and may be deployed at a scale that would otherwise not be possible in physical transactions.

Measures to detect and reduce the risk of fraud and abusive behavior are complex, require continuous improvement, and may not be effective in detecting and preventing

fraud, particularly new and continually evolving forms of fraud or in connection with new or expanded product offerings.

If these measures do not succeed, our business could be negatively impacted.

We also incur substantial losses from erroneous transactions and situations where funding instruments used for legitimate transactions are closed or have insufficient funds to satisfy payments, or the payment is made to an unintended recipient in error.

Numerous and evolving fraud schemes and misuse of our payments service could subject us to significant costs and liabilities, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the operation of our business, and result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to or claims by them.

Our buyer and seller protection programs are intended to reduce the likelihood of losses for consumers and merchants from fraudulent transactions.

The buyer protection program also, protects consumers if they do not receive the item ordered or if the item received is significantly different from its description.

We incur substantial losses from our buyer and seller protection programs as a result of disputes filed by our customers.

We seek to recover losses from our buyer and seller protection programs from the merchant, but may not be able to fully recover them if the merchant is unwilling or unable to pay, the transaction involves a fraudulent merchant, or the merchant provides sufficient evidence that the item was delivered.

In addition, consumers who pay through PayPal or Venmo may have reimbursement rights from their payment card issuer, which in turn will seek recovery from us.

If losses incurred by us related to payment card transactions become excessive, we could lose the ability to accept payment cards for payment, which would negatively impact our business.

Regulators and card networks may also adapt error resolution and chargeback requirements to account for evolving forms of fraud, which could increase PayPal’s exposure to fraud losses and impact the scope of coverage of our buyer and seller protection programs.

Increases in our loss rate, including as a result of changes to the scope of transactions covered by our buyer and seller protection programs, could negatively impact our business.

See “Note 13—Commitments and Contingencies—Protection Programs” to our consolidated financial statements.

Use of our payments services for illegal purposes could harm our business.

Our payment system is susceptible to potentially illegal or improper uses, including money laundering, terrorist financing, sanctions evasion, illegal online gambling, fraudulent sales of goods or services, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted or trademarked goods (in particular, digital goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or the facilitation of other illegal or improper activity.

The use of our payment system for illegal or improper uses has subjected us, and may subject us in the future, to claims, individual and class action lawsuits, and government and regulatory requests, inquiries, or investigations that could result in liability and harm our reputation.

Failure to effectively monitor and evaluate the financial condition of our merchants may also expose PayPal to losses.

In the event of the bankruptcy, insolvency, business failure, or other business interruption of a merchant that sells goods or services in advance of the date of their delivery or use (e.g., airline, cruise, or concert tickets, custom-made goods, and subscriptions), we could be liable to the buyers of such goods or services, including through our buyer protection program or through chargebacks on payment cards used by customers to fund their payments.

Allowances for transaction losses that we have established may be insufficient to cover incurred losses.

Use of our payments services for illegal activities or improper purposes could harm our business.

Users have attempted, and may attempt in the future, to use our payments platform for illegal activities or improper uses, such as money laundering, terrorist financing, sanctions evasion, illegal online gambling, fraudulent sales of goods or services, illegal telemarketing activities, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted or trademarked goods (in particular, digital goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or the facilitation of other illegal or improper activity.

Moreover, certain activity that may be legal in one jurisdiction may be illegal in another jurisdiction, and a merchant may be found responsible for intentionally or inadvertently importing or exporting illegal goods, resulting in liability for us.

Owners of intellectual property rights or government authorities may seek to bring legal action against providers of payments solutions, including PayPal, that are peripherally involved in the sale of infringing or allegedly infringing items.

Any threatened or resulting claims could result in reputational harm, and any resulting liabilities, loss of transaction volume, or increased costs could harm our business.

While we invest in measures intended to prevent and detect illegal activities that may occur within our payments platform, these measures require continuous improvement and may not be effective in detecting and preventing illegal activity or improper uses.

Any illegal or improper uses of our payments platform by our users may subject us to claims, individual and class action lawsuits, and government and regulatory requests, inquiries, or investigations that could result in liability, restrict our operations, require us to change our business practices, harm our reputation, increase our costs, and negatively impact our business.

For example, government enforcement or regulatory authorities could seek to impose additional restrictions or liability on us arising from the use of our payments platform for illegal or improper activity, and our failure to detect or prevent such use.

Acquisitions, strategic investments, and other strategic transactions could result in operating difficulties and could harm our business.

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strategic investments;

and commercial and strategic partnerships (collectively, “strategic

transactions”).

and commercial and strategic partnerships (collectively, “strategic transactions”).

At any given time, we may be engaged in discussions or negotiations with respect to one or more strategic transactions, any of which could, individually or in the aggregate, be material to our financial condition and results of operations.

There can be no assurance that we will be successful in identifying, negotiating, and consummating favorable transaction opportunities.

Strategic transactions may involve additional significant challenges, uncertainties, and risks, including, but not limited to, challenges of integrating new employees, systems, technologies, and business cultures;

There can be no assurance that we will be successful in identifying, negotiating, consummating and integrating favorable transaction opportunities.

Strategic transactions may involve additional significant challenges, uncertainties, and risks, including, but not limited to, challenges of integrating new employees, products, systems, technologies, operations, and business cultures;

challenges associated with operating acquired businesses in markets in which we may have limited or no experience;

failure to develop the acquired business adequately;

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failure to identify, or our underestimation of, commitments, liabilities, deficiencies and other risks associated with acquired businesses or assets;

and potential exposure to new or increased regulatory oversight and uncertain or evolving legal, regulatory, and compliance requirements;

potential reputational risks that could arise from transactions with, or investments in, companies involved in new or developing businesses or industries, which may be subject to uncertain or evolving legal, regulatory, and compliance requirements;

potential exposure to new risks associated with acquired businesses and entities, including potential new or increased regulatory oversight and uncertain or evolving legal, regulatory, and compliance requirements;

potential reputational risks that could arise from transactions with, or investments in, companies, particularly those involved in new or developing businesses or industries, which may be subject to uncertain or evolving legal, regulatory, and compliance requirements;

failure of the transaction to advance our business strategy and of its anticipated benefits to materialize;

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Strategic investments in which we have a minority ownership stake inherently involve a lesser degree of influence over business operations.

In addition, we may be dependent on controlling shareholders, management, or other persons or entities who control them and who may have business interests, strategies, or goals that are inconsistent with ours.

Business decisions or other actions or omissions of the controlling shareholders, management, or other persons or entities who control companies in which we invest may adversely affect the value of our investment, result in litigation or regulatory action against us, and otherwise damage our reputation and brand.

We may be dependent on controlling shareholders, management, or other persons or entities who control them and who may have business interests, strategies, or goals that are inconsistent with ours.

Our international operations subject us to increased risks, which could harm our business.

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difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences and in light of varying laws, regulations, and customs;

difficulties in recruiting and retaining qualified company employees and maintaining our company culture;

differing employment practices and the existence of works councils;

difficulties in recruiting and retaining qualified employees and maintaining our company culture;

fluctuations in foreign currency exchange rates;

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compliance with U.S.

and foreign anti-corruption, anti-bribery, sanctions, anti-money laundering and counter-terrorist financing laws and regulations;

and foreign anti-bribery, anti-corruption, sanctions, anti-money laundering and counter-terrorist financing laws and regulations;

the interpretation and application of laws of multiple jurisdictions;

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Our international operations also may heighten many of the other risks described in this “Risk Factors” section.

Violations of the complex foreign and U.S.

laws, rules and regulations that may apply to our international operations may result in fines, criminal actions, or sanctions against us, our officers, or our employees;

prohibit or require us to change the way we conduct our business;

Any violations of the complex foreign and U.S.

laws, rules and regulations that may apply to our international operations may result in fines, criminal actions, or sanctions against us and, our directors, officers, and employees;

prohibit or require us to change our business practices;

and damage our reputation.

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These risks are inherent in our international operations, may increase our costs of doing business internationally, and could materially and adversely affect our business.

The United Kingdom’s departure from the EU could harm our business, financial condition, and results of operations.

The U.K.’s departure from the EU could harm our business, financial condition, and results of operations.

Following the departure of the U.K.

from the EU and the EEA on January 31, 2020 (commonly referred to as “Brexit”) and the expiration of a transition period on December 31, 2020, there continues to be uncertainty over the practical consequences of Brexit including the potential for Brexit to contribute to long-term instability in financial, stock and currency exchange markets, greater restrictions on the supply and availability of goods and services between the U.K.

and EEA region, and a general deterioration in consumer sentiment and credit conditions leading to overall negative economic growth and increased risk of merchant default.

from the EU and the EEA on January 31, 2020 (commonly referred to as “Brexit”) and the expiration of the transition period on December 31, 2020, there continues to be uncertainty over the practical consequences of Brexit including the potential for Brexit to contribute to long-term instability in financial, stock and currency exchange markets, greater restrictions on the supply and availability of goods and services between the U.K.

and EEA region, and a general deterioration in consumer sentiment and credit conditions leading to overall negative economic growth and increased risk of

merchant default.

The consequences of Brexit have brought legal uncertainty and increased complexity for financial services firms, which could continue as national laws and regulations in the U.K.

differ from EU laws and regulations and additional authorization requirements come into effect.

These developments have led to additional regulatory costs and challenges for us, including:

These developments have led and could lead in the future to additional regulatory costs and challenges for us, including, but not limited to, the following:

• PayPal (Europe) operates in the U.K.

within the scope of its passport permissions (as they stood at the end of the transition period) pursuant to the Temporary Permissions Regime pending the grant of new UK authorizations by the U.K.

within the scope of its passport permissions (as they existed at the end of the transition period) pursuant to the Temporary Permissions Regime pending the grant of new U.K.

authorizations by the U.K.

financial regulators.

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market on a cross-border basis;

• our European operations are required to comply with new legal and regulatory requirements in the U.K.

that occasionally are in addition to, or inconsistent with, those of the EEA, in each case, leading to increased complexity and costs.

• our European operations being required to comply with new legal and regulatory requirements in the U.K.

that may be in addition to, or inconsistent with, those of the EEA, in each case, leading to increased complexity and costs.

Global and regional economic conditions could harm our business.

Adverse global and regional economic conditions such as turmoil affecting the banking system or financial markets, including tightening in the credit markets, extreme volatility or distress in the financial markets (including the fixed income, credit, currency, equity, and commodity markets), higher unemployment, high consumer debt levels, reduced consumer confidence or economic activity, government fiscal and tax policies, U.S and international trade relationships, agreements, treaties, tariffs and restrictive actions, the inability of a government to enact a budget in a fiscal year, government shutdowns, government austerity programs, and other negative financial news or macroeconomic developments could have a material adverse impact on the demand for our products and services, including a reduction in the volume and size of transactions on our Payments Platform.

Adverse global and regional economic conditions such as turmoil affecting the banking system or financial markets, including, but not limited to, tightening in the credit markets, extreme volatility or distress in the financial markets (including the fixed income, credit, currency, equity, and commodity markets), higher unemployment, high consumer debt levels, recessionary or inflationary pressures, supply chain issues, reduced consumer confidence or economic activity, government fiscal and tax policies, U.S.

and international trade relationships, agreements, treaties, tariffs and restrictive actions, the inability of a government to enact a budget in a fiscal year, government shutdowns, government austerity programs, and other negative financial news or macroeconomic developments could have a material adverse impact on the demand for our products and services, including a reduction in the volume and size of transactions on our payments platform.

Additionally, any inability to access the capital markets when needed due to volatility or illiquidity in the markets and increased regulatory liquidity and capital requirements may strain our liquidity position.

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Quantitative and Qualitative Disclosures About Market Risk” for additional information on our financial risks.

Real or perceived inaccuracies in our metrics may harm our reputation and negatively affect our business.

Our key metrics are calculated using internal company data based on the activity we measure on our platform and may be compiled from multiple systems, including systems that are organically developed or acquired through business combinations.

While the measurement of our key metrics is based on what we believe to be reasonable methodologies and estimates, there are inherent challenges and limitations in measuring our key metrics globally at scale.

The methodologies used to calculate our key metrics require judgment.

We regularly review our processes for calculating these key metrics, and from time to time we may make adjustments to improve their accuracy or relevance.

For example, we continuously apply models, processes and practices designed to detect and prevent fraudulent account creation on our platforms, and work to improve and enhance those capabilities.

When we detect a significant volume of illegitimate activity, we generally remove the activity identified from our key metrics.

Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.

Further, as our business develops, we may revise or cease reporting metrics if we determine that such metrics are no longer appropriate measures of our performance.

If investors, analysts, or customers do not consider our reported measures to be sufficient or to accurately reflect our business, we may receive negative publicity, our reputation may be harmed, and our business may be adversely impacted.

Environmental, social and governance (“ESG”) issues may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

Customers, investors, employees and other stakeholders are increasingly focused on ESG practices, including our efforts with respect to global talent, cybersecurity, data privacy and protection and climate change.

If we do not adapt to and comply with new laws and regulations or changes to legal or regulatory requirements concerning ESG matters, or fail to meet rapidly evolving investor, industry or stakeholder expectations and standards, or if the Company is perceived to have not responded appropriately to growing concerns with respect to ESG issues, our reputation may be harmed, customers may choose to refrain from using our products and services, and our business or financial condition may be adversely affected.

We specifically recognize the inherent physical climate-related risks wherever business is conducted.

Our primary locations may be vulnerable to the adverse effects of climate change.

For example, California, where our headquarters is located, has historically experienced, and is projected to continue to experience, climate-related events more frequently, including drought, water scarcity, heat waves, wildfires and resultant air quality impacts, and power shutoffs associated with wildfire prevention.

These extreme weather conditions may disrupt our business and may cause us to experience additional costs to maintain or resume operations and higher attrition.

In addition, current and emerging legal and regulatory requirements with respect to climate change (e.g., carbon pricing) and other aspects of ESG (e.g., disclosure requirements) may result in increased compliance requirements on our business and supply chain, which may increase our operating costs and cause disruptions in our operations.

If one or more of our counterparty financial institutions default on their financial or performance obligations to us or fail, we may incur significant losses.

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Our outstanding indebtedness and any additional indebtedness we incur may have significant consequences, including, without limitation:

requiring us to use a significant portion of our cash flow from operations and other available cash to service our indebtedness, thereby reducing the funds available for other purposes, including capital expenditures, acquisitions, and strategic investments;

reducing our flexibility in planning for or reacting to changes in our business, competition pressures and market conditions;

and limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, share repurchases, or other general corporate and other purposes.

Our revolving credit facilities and the indenture for our senior unsecured notes pursuant to which certain of our outstanding debt securities were issued contain financial and other covenants that restrict or could restrict, among other things, our business and operations.

and limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, strategic investments, share repurchases, or other general corporate and other purposes.

Our revolving credit facilities and the indentures for our senior unsecured notes pursuant to which certain of our outstanding debt securities were issued contain financial and other covenants that restrict or could restrict, among other things, our business and operations.

If we fail to pay amounts due under a debt instrument or breach any of its covenants, the lenders would typically have the right to demand immediate repayment of all borrowings thereunder (subject in certain cases to a grace or cure period).

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Any failure by us to comply with these and similar reporting and record-keeping obligations could result in substantial monetary penalties and other sanctions, adversely impact our ability to do business in certain jurisdictions, and harm our business.

If the distribution of our common stock in connection with our separation from eBay, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes, we and certain of our stockholders could be subject to significant tax liabilities.

On July 17, 2015, we became an independent publicly traded company through the pro rata distribution by eBay Inc.

of 100% of our outstanding common stock to eBay’s stockholders (which we refer to as the “separation” or the “distribution”).

eBay received an opinion from its outside legal counsel regarding the qualification of the distribution, together with certain related transactions, as a transaction that is generally tax-free for U.S.

federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code.

Notwithstanding the opinion of counsel, the Internal Revenue Service (the “IRS”) could determine that the distribution, together with certain related transactions, should be treated as a taxable transaction if the IRS determines that any of these representations, assumptions, or undertakings upon which such opinion was based are incorrect or have been violated or if the IRS disagrees with the conclusions in the opinion of counsel.

If the distribution, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, eBay stockholders who received PayPal common stock in the distribution may be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares, and we could incur significant liabilities.

There are risks associated with our relationship with eBay.

In connection with our separation from eBay, we entered into a separation and distribution agreement with eBay and various other agreements, including an operating agreement and agreements covering tax, employee, and intellectual property matters, data sharing, and product development.

These agreements determined the allocation of assets and liabilities between the companies following the separation for those respective areas and associated indemnification obligations and established certain commercial relationships between eBay and us.

If either we or eBay are unable to satisfy our performance, payment, or indemnification obligations under these agreements or other commercial agreements between the parties, we could incur operational difficulties or losses or be required to make substantial indemnification or other payments to eBay.

We expect the portion of our revenue and operating income attributable to eBay will continue to decline due to various factors, including the speed and extent to which eBay intermediates payments on its platform and migrates eBay merchants to eBay’s managed payments platform, limits the availability of PayPal as a payment option, offers or promotes alternative payment options, directs transactions on its platforms to different providers of payment services, or eliminates or modifies its risk management or customer protection programs on its platforms, which could result in customer dissatisfaction, reduction in eBay volume, and other consequences adverse to our business.

If we are unable to generate sufficient business from our non-eBay customers to offset the expected reduction in the portion of our business attributable to eBay, the growth of our business and our ability to meet our long-term financial targets could be negatively impacted.

We may be unable to attract, retain, and develop the highly skilled employees we need to support our business.

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We may be limited in our ability to recruit or hire internationally, including due to restrictive laws or policies on immigration, travel, or availability of visas for skilled workers.

The loss of the services of any of our key personnel, or our inability to attract, hire, train, and retain highly qualified personnel effectively, could harm our business and growth prospects.

The loss of the services of any of our key personnel, or our inability to attract, hire, develop, motivate and retain key and other highly qualified and diverse talent, whether in a remote or in-office environment, or address the safety, health and productivity of our workforce could harm our overall business and results of operations.

We are subject to risks associated with information disseminated through our products and services.

We may be subject to claims relating to information disseminated through our online services, including claims alleging defamation, libel, harassment, hate speech, breach of contract, invasion of privacy, negligence, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated through the services, among other things.

We invest in measures intended to detect and block activities that may occur within our payments platform in violation of our policies.

These measures require continuous improvement and may not be effective in detecting and preventing the exchange of information in violation of our policies.

If these measures are not effective, our business could be negatively impacted.

If the laws or regulations that provide protections for online dissemination of information are invalidated or are modified to reduce protections available to us and we become liable for information provided by our customers and carried on our products and services, we could be directly harmed and we may be forced to implement new measures to reduce our exposure, including expending substantial resources or discontinuing certain product or service offerings, which could harm our business.

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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 1A. Risk Factors