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Corey Hajim: Today, our guest
is Dan Schulman, CEO of PayPal.

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When most of us think of PayPal,
we think of buying something online

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or paying a friend back
for a drink using Venmo.

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But PayPal has also become
a major financial services player,

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often acting as an alternative
to a traditional bank.

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During this pandemic,

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PayPal has supported small businesses
around the world by providing loans,

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waiving fees,

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and increasing cashback programs.

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It has also worked with the US Government

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on its Paycheck Protection Program,

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as well as distributing stimulus checks.

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It has enabled an outpouring
of generosity online as well.

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The trend towards digital payments,

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or what we might now want
to think of as contactless payments,

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has massively accelerated,

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and it's changing forever
how we think about commerce.

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So I'm really excited
to have Dan here with us.

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Thank you so much, Dan.

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Dan Schulman: Thanks for having me, Corey.
Pleasure to be here with you.

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CH: Glad to see you.

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So let's dive right in.

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Within a few months
of this pandemic's arrival,

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more than 30 million people
have filed for unemployment

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in the United States alone.

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These are certainly unusual circumstances,

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but it seems clear we were running
very close to the edge,

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and now so many businesses
and their employees

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are facing huge financial challenges.

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How worried are you?

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DS: Well, I think the crisis
has exposed three things.

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Obviously, it's a health crisis

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for so many people.

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Second thing is that health crisis

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has ricocheted,

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and the world is now
in an economic crisis.

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And the third crisis
that we don't talk so much about,

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but I think is impacting

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the way that we're going
to live our lives going forward,

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is this is a psychological crisis as well.

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People are reexamining
their place in the world,

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what's happening in the world,

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how they're going to live their lives,

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both in the pandemic and post-pandemic,

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and so I think this is something
that each of those phases

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will need to be dealt with.

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But you said this,

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and I completely agree with you:

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there was an economic crisis happening

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well before the pandemic exposed it.

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It's kind of like
the water level came down

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and exposed what was already there.

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You had, for instance, in the US,

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185 million adults in the US

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struggling to make ends meet
at the end of the month.

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You have over 70 million adults that are
really outside of the financial system,

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spending over 140 billion dollars
on high interest rates,

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unnecessary fees, and struggling as well.

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And so I think
what this has really done --

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because you can't ignore 20,
25 percent unemployment rates --

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it's exposed this crisis

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and forced a lot of people

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into maybe actions
that they might not have taken

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without this crisis happening.

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CH: Yeah, I think that's right.

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There are so many challenges
and so many opportunities,

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and I think you've spoken
of this opportunity

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of digital transactions
being helpful to people,

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and obviously the trend, as you've said,

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has massive accelerated and pushed us
into this world even further.

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So I'm curious,

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what does the world
look like without cash?

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Or less cash?

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What are the advantages
and what are the challenges

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of making that transition?

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DS: I think some of the trends
that are emerging

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coming out of this pandemic
or coming into it and as we look forward

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is clearly this has been a discontinuous
change in the trendline,

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as we move from physical to digital.

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I think we've accelerated
many forms of digital capabilities

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by three to five years.

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And that can be from digital payments

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to telemedicine

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to really changing the face of retail

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and how we think about retail

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and changing the face of entertainment,

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even changing the way governments
think about managing and moving money

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and really thinking about
digital currencies going forward.

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And so I think there are
a tremendous number of changes

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that will occur

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during this pandemic and coming out of it.

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Digital payments is obviously
one of the big ones that will happen.

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I mean, cash has been around
for quite some time,

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thousands of years.

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I would not be so bold
as to predict its full demise.

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Many people have been wrong doing that.

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But there is no question right now

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that you will see an acceleration
of the demise of cash.

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Last year, you had
over 18 trillion dollars of cash

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spent at retail.

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Eighty-five percent
of the world's transactions today

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are done in cash still.

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But the really big change right now

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towards digital payments,

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and that's both the advent
and the acceleration

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of commerce that's happening,

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as well as the shift to in-store
contactless payments, as you said,

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and the real impetus for that

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is health reasons.

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People do not want to hand over money.

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They do not want to touch screens.

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They don't want to pick up a pen
and sign at the point of sale.

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And so there is a demand

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for contactless payments
and digital payments

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to keep social distancing
requirements in place,

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to protect the health of cashiers,

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to protect the health of consumers.

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And I think we are going to see,
we are already seeing in our business,

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a surge in digital payments
across the world.

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CH: It seems like a great opportunity,

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but how do we make sure
that this transition is inclusive?

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I mean, you've talked about
how so many people are underserved

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by the traditional banking industry.

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How do we make sure that those people

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have that opportunity?

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And it feels like a smartphone

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becomes an essential item.

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How do we address that?

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DS: Yeah.

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I do think that a mobile
is really a key to unlocking this.

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I've often said that, really,

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one of the big moon shots
for the financial services industry,

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is this idea of not just
financial inclusion.

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Most people define financial inclusion
by somebody having access to bank account,

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but just having access to a bank account
is not nearly enough.

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I think what we need to aim for

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is how do we think about financial health?

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How do we make sure
that people have the ability

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to have some wherewithal

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to create savings to withstand some kind
of financial shock to the system.

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I do think that mobile phones

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will be the way that this occurs

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and will be very inclusive going forward.

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There are going to be something like
six billion smartphones in the world

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over the next several years.

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The cost of a smartphone is plummeting.

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I think in India now you can buy
a smartphone for under 25 dollars.

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So you're going to have ubiquity
of smartphones across the world,

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and in fact what's very interesting

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is in lower income populations

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there is a greater penetration
of smartphones than in higher income

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because the smartphone
is the only device that somebody has.

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Higher income individuals
may have desktops or iPads,

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that kind of thing,

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but lower income can afford one device,

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and they choose it to be a smartphone

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because they can get and live their life
through that one device.

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And think about that one device.

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Really you have all the power
of a bank branch

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in the palm of your hands,

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and when you can start
to create distribution of services,

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financial services,

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through a smartphone,

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you then are able

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to manage and move money

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in ways that we couldn't do traditionally.

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In the physical world,

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if you get a check,

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you need to then go
to a cash checking place to cash it.

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You stand in line for 30 minutes.

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They then charge you anywhere
between two and five percent

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to just change the format of currency

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from a check to cash.

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And then you have cash
and you want to pay a bill.

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You need to stand in line again

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at a bill pay,

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and then you have to pay maybe 10 dollars

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for an individual bill as a fee.

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If you do that via a smartphone,

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I believe that not only do you save
a tremendous amount of time,

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because if you're outside
the financial system,

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managing and moving money
is practically a part-time job

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to go and do that,

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so not only do you save time
and return time to individuals,

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but you can cut the cost of transactions

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by anywhere between 50 and 75 percent.

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And remember that $140 billion
number that I gave you?

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And that's just in the US.

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Imagine if you could cut that in half

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and return that to the populations,
the most vulnerable populations

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that need it most.

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So I think there's tremendous promise

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in the use of technology

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to help provide both inclusion,

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and make sure there aren't
digital haves and have-nots,

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but also to start on this journey
towards financial health.

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CH: Yeah, I think a lot of people
don't realize that you don't need

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a bank account or even a credit card
to open a PayPal account,

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which is super-interesting.

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I mean, do you see a time
where traditional banks don't exist

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or at least play a much smaller role
in the financial services industry?

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DS: Well, I think the entire
financial services industry

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is evolving right now,

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and so I think banks
will always play a role,

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or as far into the future as I can see,

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but it will evolve.

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I mean, think about basic credit cards.

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Today, you think about a credit card,

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and you think about it
predominantly as a form factor,

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something that you pull
out of your pocket.

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Sometimes there's status associated with
what you're pulling out of your pocket,

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depending on the color
of that credit card.

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But really I think those
form factors start to go away

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and become embedded in digital wallets.

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So credit will always
be an important element.

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You know, most people in the world,

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it isn't that their cash outlays
exceed their cash intake.

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It's just that they're not
evenly distributed.

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So there are times where your
cash outflows exceed your cash intake,

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and there you need some form of credit
to make up that difference.

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And so I think forms of credit
will always be an important element.

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But the way that you extend credit
will change going forward,

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the way that you think
about scoring people

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in terms of can they handle credit.

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You know, traditionally,
in more developed countries,

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you use what's called
FICA scores or Bureau scores,

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but those ignore so many
of the financial transactions

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that people who are outside
the financial system do,

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like paying rent
or paying their bills on time.

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And with data and information
and machine learning around that --

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and we need to be careful
that there aren't biases

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built into those algorithms --

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we can start to do things
that could never be done before.

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I'll just give you one quick example.

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We're one of the largest providers
of working capital to small businesses

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in the world.

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We're probably one of the top five
in the United States.

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So we've done over 14, 15 billion dollars

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of lending of working capital
to small businesses.

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Seventy percent of that
goes to the 30 percent of counties

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where 10 or more banks
have closed branches.

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And where do banks close branches?

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Banks close branches in neighborhoods

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where the medium income
is below the national average,

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which makes sense because
for a branch to be profitable

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they need a certain amount of deposits

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for that branch to actually be profitable.

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And so, in lower income neighborhoods,

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branches are starting to close.

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So why are 70 percent of our loans
in those lower income neighborhoods?

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It's because we do machine learning.

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We don't even look at FICA scores
or Bureau scores.

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We look at a number
of different data elements.

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And so we can lend into
those lower income neighborhoods

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where nobody else can,

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and when we do that,

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the average sale of a small business
goes up by 22 percent.

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And imagine the impact that has
on communities and neighborhoods

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where they can finally get
the working capital

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to expand those small businesses.

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And I think that's a perfect example

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of the promise of what technology
and financial services

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married together can do.

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CH: I think it's so interesting.

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I'm curious.

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The tech industry has been criticized
for amassing power over society,

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not that the banking industry
isn't criticized.

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But what do you say about people
who might be worried

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about tech companies taking on
even more influence and control

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over what's happening in their lives?

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DS: Yeah.

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Well, I think what's so important
for any company, and tech companies,

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is to respect the boundaries

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in terms of what consumers expect
from a company that serves them.

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I think the most important brand attribute
that a company can have is trust,

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and trust comes from the understanding

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that a company respects your privacy

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and will not sell
your data or information,

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that it can perform transactions
in a secure manner

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so that your transactions are protected.

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And I think those
are kind of foundational,

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and I think any company

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needs to respect that.

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They need to assure that consumers

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have the privacy that they desire

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and the safety and security
that is required

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to serve them the right way.

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CH: And obviously, you've gained
a lot of trust with the US Government.

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Maybe we could talk a little bit
about how you've been working with them

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to distribute some money
through the Paycheck Protection Program.

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And I was curious,

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I've been reading about it
and it sounds like

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30 million-ish small businesses
in the United States

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are able to get those funds,

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but only six million have received loans.

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What do you think's happened?

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DS: Yep.

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Well, I think initially, the government,
and I give them a lot of credit,

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they responded quite quickly

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with a $3 trillion stimulus package.

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These are massive numbers
that were happening

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in very condensed timeframes.

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We were working with various agencies,

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very closely with the Treasury Department,

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in terms of distribution of the stimulus.

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And they were working literally
night and day on this.

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The Small Business Administration
was working night and day.

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But these are volumes

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that have never been seen before
running through these systems,

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and the first tranche of those loans

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was very difficult.

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There were a lot of technical difficulties
in getting those out to small businesses.

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And that first tranche was not enough,

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and it was quickly used,

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and there are still
a host of small businesses

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that needed money.

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The second tranche that came out

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is still actually in effect.

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It has not been used up,

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and we are continuing to lend on that.

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We've been able to lend
to some 50,000 small businesses.

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We've lent out about 1.7 billion dollars,

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and our loan size,

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which really I'm proud of,

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is about 31,000 dollars.

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The average that a bank does
is between 100 and 125,000 dollars.

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So we are lending
to these true small businesses

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on Main Street,

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and I'm proud that we've
been able to go do that,

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and I think we should give credit

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to the US Government
and governments around the world

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that are taking this quite seriously

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and putting a tremendous amount,
percentage of their GDP,

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towards the rescue of small businesses

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and towards trying
to take care of consumers

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that find themselves
in really difficult straits right now.

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And we've been trying to,

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instead of people mailing out checks,
which is ridiculous in today's world.

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People aren't living where they think
they're going to be living.

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They're with their parents or with friends
or in a different location,

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and mailing a check

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and then having to take a check
and go somewhere,

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which you can't even go
if you're sheltered in place,

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to cash it,

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doing that electronically
just makes a ton more sense,

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and we've been working
with the IRS and Treasury

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and other government agencies
to distribute that electronically.

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CH: Yeah, that makes a lot of sense.

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It's a massive, massive project

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for all of us.

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Whitney is here with some questions
from our community.

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DS: Hello, Whitney.

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Whitney Pennington Rodgers:
Hello Dan. How are you?

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So the community has
some interesting questions

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99:59:59,999 --> 99:59:59,999
following up on what you
were talking about earlier about security.

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We have a question from Marc --

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and I apologize in advance
if I mispronounce your name, here, Marc --

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Marc Vanlerberghe:

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"The move to digital cash
could be one more step

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towards creating the perfect
surveillance state.

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How do we avoid this from happening?"

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DS: Yeah, well this is what
I was talking about, Marc, before.

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I mean, I think this idea of trust

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is incredibly important.

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It is, I think, the only companies
that will [inaudible].

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And I think we hold a lot of this
in our own hands as consumers, by the way.

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We need to be aware of data
and information that we're giving

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and to what companies
we're doing that with,

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but I think the companies
that will be successful

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are those that have
a high degree of trust,

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and trust happens
by protecting your privacy

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but also very much assuring
that your transactions in a digital world

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are safe and secure.

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I mean, the idea of cybersecurity

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has always been important,

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but is ever more important
as we move from physical to digital,

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and that's where
large datasets are important,

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because a consumer's identity
is stolen every two seconds.

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Every two seconds, some consumer
has their identity stolen.

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And so we have to be, for instance,

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we have to be sure
that even when you sign in

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with your credentials,

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they're actually real credentials,

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we have to look at 30 to 100
different elements of that transaction

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to make sure it's really you

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before we let that money
out of your account.

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And so there is a combination
of making sure that you have

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enough data to protect somebody

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but also assure that your privacy
is held sacrosanct,

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and I think that is a balancing act
and one that needs to happen

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in order for us to do this successfully.

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WPP: Great, and actually sort of going
from digital cash to digital currency,

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99:59:59,999 --> 99:59:59,999
we have another question
from Simone Ross in our community

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99:59:59,999 --> 99:59:59,999
about the opportunity that exists
for digital currency.

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99:59:59,999 --> 99:59:59,999
She mentioned that PayPal [?].

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99:59:59,999 --> 99:59:59,999
What would it take for a truly inclusive
digital currency to take hold here?

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DS: Yeah.