PayPal CEO: Demand for cryptocurrency services far exceeds expectations

This article is from Time, original author: Eben Shapiro

Odaily Planet Daily Translator | Yu Shunsui

While the coronavirus pandemic has forced shoppers to stay away from stores, they can make purchases on their phones and computers. Against this backdrop, financial technology giant PayPal has set a record in its recent performance. PayPal operates in more than 200 countries and trades in more than 100 currencies. It had an astonishing business volume last year, processing 1,000 transactions per second during the holiday shopping season. In total, PayPal processed 15.4 billion payments last year, with a total amount of $936 billion. PayPal also launched its latest products, including QR code payments in 20 markets around the world, to meet the demand for sterile transactions. Another major move is to help digital currencies such as Bitcoin enter the mainstream world by adding cryptocurrency services. PayPal CEO Dan Schulman recently spoke with TIME about the future of cash, central banks, and the security of digital currencies.

The following is the essence of the interview (the content has been deleted and modified, please focus on Q6 - Q9):

Q1: To what extent has the fear of contracting the virus during the epidemic driven lasting changes in the way people shop and pay?

Two things have accelerated the trend toward digital payments tremendously, in as little as three years and maybe as much as five years. And by the way, it's only continuing to accelerate. First, we had no choice. We were all in quarantine at home. We needed to get by. We needed to buy things, and everyone was buying things online. And eventually, that need became convenience. People realized they didn't have to wait in line at the checkout; it could be delivered anytime, and they had more choices and more different transactions.

Secondly, everything is going digital, even in stores, because of hygiene concerns. People want to make sure they can protect the cashier, and customers want to make sure they are safe. No one wants to touch cash, and this has led to a huge increase in the use of digital forms, not just for payments, but also for things like looking at menus and quotes in stores.

Q2: What will your business look like in the next 5 to 10 years?

First, retail fundamentally changes. Its strategy will basically change from, "How do I get people into the store?" to, "How do I optimize home delivery? How do I optimize around all the digital, online and offline things?" In fact, the difference between the two disappears. What this means is that retailers need to think about, where do they meet consumers? Consumers don't just visit their website. They will appear on TikTok, PayPal, or other large consumer platforms. Walmart wants to acquire TikTok in part because they want to put shopping capabilities on this platform. We call it contextual commerce.

It's the same thing inside PayPal. We know people are going to start using wish list shopping tools, and wish lists are really a form of creating a personalized demand curve. This is what you want. This is the price point you want: if the retailer can provide what you want, you'll buy it. So retailers are coming to where you're looking and personalizing it for you. Retail is going to change dramatically.

Q3: How do we pay?

There will probably be 6 to 10 super apps that are developing. You don’t need to have 50 apps installed on your phone because you can’t remember 50 usernames and passwords; you don’t want to give your financial information to every app; you can’t remember the navigation system for all the apps. These super apps are basically middle layers for other apps, so you only need to log in once and have a universal password. All your data and information is in one place, which can feed the products and services on the platform. It will be simpler and easier for consumers.

Q4: So cash is no longer king?

Ten years from now, you're going to see a massive decline in cash usage. All payment form factors are going to be moving to mobile phones. Credit cards as a form factor are going to disappear, and you're going to use your phone because it can deliver more value than just using a credit card. So when all of these things start to happen, central banks are also going to need to rethink monetary policy because you can't just add more paper money to the financial system just because people aren't using it. That's where digital money comes in.

Q5: What does this impending move toward digital currencies mean for the financial system as we know it?

In the next 5 to 10 years, you’re going to see more changes to the financial system than you’ve seen in the last 10 to 20 years. How do we think about modernizing the existing financial infrastructure? It needs to be modernized because right now it’s very inefficient. If you cash a check, it can take three days to get your money. If you send money internationally, it takes seven days to get your money. And it’s expensive. The “commission rate” for the global financial system is about 2.8%. By the way, over the last 10 years, you might expect the volume and the level of technological advancement to go down, but the worst part about this 2.8% is that if you make less or are outside the system, and you’re not wealthy, that commission rate is like 1,000 basis points instead of 280 basis points. If you’re really wealthy, the commission rate is 25 basis points. So when you consider that it’s expensive, exclusionary, and inefficient, we really need to start thinking about, how do you modernize this system? Is there a way you can do things more efficiently in a way that’s cheaper, more inclusive, and adds more utility to the system?

Q6: What is the difference between Bitcoin and other cryptocurrencies issued by central banks?

Central bank-issued digital currencies could also leverage distributed ledger technology (DLT) or other modern technologies, but they would essentially digitize fiat currencies like the dollar. A digital dollar would be fully backed by the U.S. government, but digitally, which could allow the government to open up the Fed’s funds to other institutions besides banks, perhaps companies like PayPal, where you could provide funds directly from the Fed to a digital wallet. You wouldn’t have to mail a stimulus check — just send it directly to their digital wallet via digital currency, with instant access, no cost and no friction.

Q7: You’ve taken a very cautious approach to digital currencies, investing heavily before launching consumer products. Why now?

We have been looking at digital forms of money and DLT for six years. But I thought it was too early, and I thought cryptocurrencies at the time were more like assets than currencies. They were too volatile to be a viable currency. And there were still too many people who didn't really understand what they were getting into, and what we really wanted to do was make sure it became more mainstream so that we could work hand in hand with regulators before we launched any products into the market.

Q8: What is the demand for these new services?

The demand for crypto services has been multiple times higher than we originally anticipated. It’s very exciting.

Q9: As all our assets move toward digitalization, how do we protect ourselves against increasingly sophisticated cybercrime?

We need to fight cybercrime in two ways. First, you have to build wide moats and towers and turrets to keep as many bad guys out as possible. But it's impossible to keep the bad guys out because usernames and passwords are stolen. So the real trick is how to prevent data from moving out. So if you make a transaction [with PayPal], it's not your username and password that gives you the authority to do that. We look at 130 different variables in every transaction, in milliseconds, to make sure it's you [doing the transaction]. The idea of ​​big data is to really know who you are, not who you say you are. Things like two-factor authentication, that's elementary school stuff. It needs to be far more sophisticated than that, and we've spent as many resources as we can to make sure we're doing our best to prevent data from leaving our systems illegally. But I say to every company around the world: This is an issue that should be front and center.