PayPal: The beginning of a new era with incoming CEO Alex Chriss

PayPal has named the executive who will be succeeding Dan Schulman, its current CEO and president. Alex Chriss, who currently holds a senior position at Intuit, will fill Schulman’s shoes and take the reins of the payments firm starting September 27, 2023.

Recapping Dan Schulman’s leadership at PayPal

Daniel Schulman began his journey at PayPal in 2014, at a time when the company spun off from eBay to metamorphose as an independent publicly traded company. From his deep-rooted experience in payments starting from AT&T, and American Express through raw startups at the time like Priceline and Virgin Mobile, Schulman envisioned that PayPal could reinvent itself and expand its global footprint as a standalone company.

When he took over the company, he stated that one of his larger objectives at PayPal included making financial tools available to the millions of Americans underserved by the US financial system. 

“There's a saying that it's expensive to be poor and that is especially true in financial services. There's a really powerful way that technology can democratize financial services. It can make the managing and moving of money a right for all citizens and not just a privilege for the affluent,” said Schulman at the time.

During his 14-year tenure, Schulman’s PayPal explored growth opportunities on a global scale and underwent several key acquisitions and partnerships. Under his leadership, PayPal grew its revenue from $9.2 billion in 2015 to $27.5 billion in 2022. Total active users increased to over 435 million from 179 million in 2015, while it processed $1.36 trillion in Total Payment Volume (TPV) from $282 billion in 2015.

In February 2023, Schulman announced that he was ready to call it a day and will step down from his CEO position by the end of the year. He will continue to serve on the board of directors until May 2024.

Alex Chriss: The beginning of a new era

The quest for a new CEO began when Schulman revealed his retirement plans in February. Given the industry-wide shift to digitization, PayPal’s board was likely inclined to choose a candidate who had experience and expertise in global payments in conjunction with technology to drive growth across the PayPal platform. The board decided to elect Chriss as the new CEO from a list of nine nominees that were shortlisted.

Chriss worked his way up garnering experience in payments, as well as product development and AI-driven technology, over the years since he first joined Intuit in 2004. In 2019, he shifted gears and zeroed in on Intuit's small business and self-employed group that delivers QuickBooks and Mailchimp to millions of users globally. Under his leadership role, QuickBooks most recently launched its mobile banking app QuickBooks Money and QuickBook Commerce, an e-commerce platform among other tools.

During his last five years in a leading role, Chriss grew his segment’s customers and revenues at a compound annual growth rate of 20% and 23%. Additionally, in 2021, he also spearheaded Intuit's $12 billion strategic acquisition of Mailchimp, which the company said would help it in driving further growth among small business clients. The deal has been the largest for Intuit to date after Credit Karma’s $8 billion acquisition. 

Chriss takes over PayPal at a time when the firm is strategically moving in new directions like most recently rolling out its own US dollar-backed stablecoin. The new cryptocurrency, PayPal USD is expected to support quick fund transfers while being compatible with Web3 environments.

"With his depth of experience in product development, his passion for serving customers and his longstanding commitment to empowering and enabling small businesses, and his proven track record of developing and inspiring his team, Alex is the perfect leader to take PayPal forward and accelerate the company's growth opportunities," said John Donahoe, chair of the PayPal board of directors.

"The board search committee worked diligently and thoroughly to find the right candidate to take PayPal into its next stage of growth and expansion, and we are confident Alex is that person," he added.

The impact on the stock: New CEO, old problems

The news of PayPal’s new CEO received a muted positive reception from investors. The stock was up more than 2% on Monday following the announcement.

PayPal’s recent second-quarter earnings were a mixed bag of positive results coupled with negative aspects to consider. While the company did better than expected on revenue and net income and expanded its offerings contributing to its increased TPV, it also saw tightening operating margins and a slip in active users number. Total active accounts totaled 431 million on June 30, 2023, down from 433 million on March 31, the first quarter.

Although PayPal has a much larger existing user base and benefits from a strong and long-standing financial brand, Apple is gaining market share rather quickly, sniping off a portion of PayPal customers -- a growing concern of investors.

While discussing the future trajectory of the company, analysts at Mizuho Group expressed that they were taken by surprise by Chriss’ selection and it remains to be seen what impact he can have on the stock. Moreover, they indicated that Chriss will most likely encounter a variety of challenges related to growth and competition among other things while en route to a path less known to him.

“Chriss will be inheriting a challenged but not un-fixable story, in our opinion. First and foremost, PayPal will need to change the Apple Pay share loss narrative. This is the number one drag on the stock. He will also have to decide whether the PayPal and Venmo brands should be combined,” said Mizuho Group analysts.

Key factors that can adversely affect PayPal stock going forward include failure to acquire sufficient customers, intensifying competition in e-commerce checkout, and higher customer attrition. However, Mizuho analysts were in sync about the positive stock reaction and investor sentiment that they said was primarily due to clearer insight into management change.