What COVID-19 means for the future of commerce, capitalism and cash

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

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

or paying a friend back
for a drink using Venmo.

But PayPal has also become
a major financial services player,

often acting as an alternative
to a traditional bank.

During this pandemic,

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

waiving fees,

and increasing cashback programs.

It has also worked with the US Government

on its Paycheck Protection Program,

as well as distributing stimulus checks.

It has enabled an outpouring
of generosity online as well.

The trend towards digital payments,

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

has massively accelerated,

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

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

Thank you so much, Dan.

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

CH: Glad to see you.

So let's dive right in.

Within a few months
of this pandemic's arrival,

more than 30 million people
have filed for unemployment

in the United States alone.

These are certainly unusual circumstances,

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

and now so many businesses
and their employees

are facing huge financial challenges.

How worried are you?

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

Obviously, it's a health crisis

for so many people.

Second thing is that health crisis

has ricocheted,

and the world is now
in an economic crisis.

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

but I think is impacting

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

is this is a psychological crisis as well.

People are reexamining
their place in the world,

what's happening in the world,

how they're going to live their lives,

both in the pandemic and post-pandemic,

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

will need to be dealt with.

But you said this,

and I completely agree with you:

there was an economic crisis happening

well before the pandemic exposed it.

It's kind of like
the water level came down

and exposed what was already there.

You had, for instance, in the US,

185 million adults in the US

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

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

spending over 140 billion dollars
on high interest rates,

unnecessary fees, and struggling as well.

And so I think
what this has really done --

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

it's exposed this crisis

and forced a lot of people

into maybe actions
that they might not have taken

without this crisis happening.

CH: Yeah, I think that's right.

There are so many challenges
and so many opportunities,

and I think you've spoken
of this opportunity

of digital transactions
being helpful to people,

and obviously the trend, as you've said,

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

So I'm curious,

what does the world
look like without cash?

Or less cash?

What are the advantages
and what are the challenges

of making that transition?

DS: I think some of the trends
that are emerging

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

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

as we move from physical to digital.

I think we've accelerated
many forms of digital capabilities

by three to five years.

And that can be from digital payments

to telemedicine

to really changing the face of retail

and how we think about retail

and changing the face of entertainment,

even changing the way governments
think about managing and moving money

and really thinking about
digital currencies going forward.

And so I think there are
a tremendous number of changes

that will occur

during this pandemic and coming out of it.

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

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

thousands of years.

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

Many people have been wrong doing that.

But there is no question right now

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

Last year, you had
over 18 trillion dollars of cash

spent at retail.

Eighty-five percent
of the world's transactions today

are done in cash still.

But the really big change right now

towards digital payments,

and that's both the advent
and the acceleration

of commerce that's happening,

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

and the real impetus for that

is health reasons.

People do not want to hand over money.

They do not want to touch screens.

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

And so there is a demand

for contactless payments
and digital payments

to keep social distancing
requirements in place,

to protect the health of cashiers,

to protect the health of consumers.

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

a surge in digital payments
across the world.

CH: It seems like a great opportunity,

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

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

by the traditional banking industry.

How do we make sure that those people

have that opportunity?

And it feels like a smartphone

becomes an essential item.

How do we address that?

DS: Yeah.

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

I've often said that, really,

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

is this idea of not just
financial inclusion.

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

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

I think what we need to aim for

is how do we think about financial health?

How do we make sure
that people have the ability

to have some wherewithal

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

I do think that mobile phones

will be the way that this occurs

and will be very inclusive going forward.

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

over the next several years.

The cost of a smartphone is plummeting.

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

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

and in fact what's very interesting

is in lower income populations

there is a greater penetration
of smartphones than in higher income

because the smartphone
is the only device that somebody has.

Higher income individuals
may have desktops or iPads,

that kind of thing,

but lower income can afford one device,

and they choose it to be a smartphone

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

And think about that one device.

Really you have all the power
of a bank branch

in the palm of your hands,

and when you can start
to create distribution of services,

financial services,

through a smartphone,

you then are able

to manage and move money

in ways that we couldn't do traditionally.

In the physical world,

if you get a check,

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

You stand in line for 30 minutes.

They then charge you anywhere
between two and five percent

to just change the format of currency

from a check to cash.

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

You need to stand in line again

at a bill pay,

and then you have to pay maybe 10 dollars

for an individual bill as a fee.

If you do that via a smartphone,

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

because if you're outside
the financial system,

managing and moving money
is practically a part-time job

to go and do that,

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

but you can cut the cost of transactions

by anywhere between 50 and 75 percent.

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

And that's just in the US.

Imagine if you could cut that in half

and return that to the populations,
the most vulnerable populations

that need it most.

So I think there's tremendous promise

in the use of technology

to help provide both inclusion,

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

but also to start on this journey
towards financial health.

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

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

which is super-interesting.