PayPal’s Checkout Squeeze Forces Reset as Board Brings in New CEO

Leadership shift signals impatience with “too slow” execution

PayPal began its 2025 review with an unmistakable signal of boardroom impatience. Before the company could turn to the numbers, Interim CEO Jamie Miller disclosed that Chair Enrique Lores will become President and CEO on March 1, replacing Alex Chriss after just over a year at the helm.

The timing – paired with a strategic reiteration rather than a rethink – tells its own story. Miller was explicit that the move is “based on execution,” not a change in direction. The board, she said, concluded that PayPal has “not moved fast enough or with the level of focus required,” particularly in the core branded checkout franchise.

Lores, best known for steering HP through a complex restructuring and portfolio simplification, arrives with deep familiarity: five years on PayPal’s board, 18 months as chair, and a hand in shaping the current plan and 2026 guidance. That continuity lowers the odds of a wholesale strategy pivot, but raises the bar on delivery. Investors now have a clear protagonist to judge: can an execution-focused operator stabilize a franchise that sits at the heart of digital commerce yet is ceding momentum?

A solid P&L masks a branded engine misfiring

On the surface, PayPal’s 2025 scorecard looks respectable for a mature payments network in a choppy e‑commerce cycle. Total payment volume reached $1.8 trillion, up 7% year-on-year (6% on a currency-neutral basis), with fourth-quarter TPV of $475 billion growing 9% at spot. Revenue rose 4% to $33.2 billion, while non-GAAP EPS climbed 14% to $5.31. Transaction margin dollars – the lifeblood of profitability – advanced 6%.

Two features stand out in the income statement.

First, diversification is doing real work. Transaction margin dollars excluding interest grew 4% in the fourth quarter, with management crediting “strong credit performance, PSP profitability, Venmo monetization and loss improvement.” Venmo, buy now, pay later (BNPL), Enterprise Payments and omnichannel debit are no longer side projects; together they delivered nearly half of transaction margin dollar growth in 2025.

Second, risk management is quietly becoming a competitive asset. Transaction losses fell to 6 basis points of TPV in the fourth quarter, a sharp improvement from an 8 bps average over the first three quarters, thanks to tighter onboarding and AI‑driven fraud controls. For a model where each incremental basis point of loss can erode millions of dollars, this gives PayPal more room to invest around the edges of economics.

Yet beneath those tidy aggregates lies a more troubling dynamic: the core online branded checkout engine – still more than half of profit dollars – is misfiring.

Branded experiences TPV, which includes online checkout plus debit and Tap to Pay, grew 4% in the quarter. But strip out the newer omni offerings and the picture dulls. Online-only branded checkout TPV grew just 1% on a currency-neutral basis in the fourth quarter, down from 5% in the third. That four‑point deceleration, by Miller’s own admission, was “more than we expected.”

Management attributes roughly a third of the slowdown each to three drivers:

• a softer US retail backdrop, particularly among lower- and middle-income consumers where PayPal skews;
• international headwinds, with Germany – one of PayPal’s largest markets – squeezed by macro softness, normalization of its once-dominant share, and rising competition from local alternatives; and
• deceleration in several high-growth verticals such as travel, ticketing, crypto and gaming after an 18‑month surge.

Macro weakness alone does not explain it. PayPal’s own operational missteps have amplified the pressure. The company “reimagined” a checkout product that had been “stagnant and underinvested for years,” Miller said, but then assumed merchants would swiftly adopt the new stack to harvest conversion gains. In reality, large merchants with long IT queues and multiple competing priorities needed more hands-on support than PayPal had staffed for, slowing deployment.

The consequence is a patchwork. Only about 30% of global checkout transactions are running through the redesigned paysheet; cohorts that are “fully optimized” – with modern UX and biometrics – see around a 1‑point lift in conversion, rising to 2–5 points when biometric authentication is layered on. But those gains remain trapped in islands of best practice rather than coursing through the network.

2026: a deliberate‑pain year for checkout repair

The clearest message from the initial presentation is that 2026 will be a year of choosing long‑term health over near‑term optics in the branded franchise. New CFO Steve Winoker quantified what that means: targeted growth investments will represent about a 3‑percentage‑point headwind to transaction margin dollar growth in 2026.

Roughly two-thirds of that spend will fall directly on branded checkout and BNPL, with the remainder aimed at Venmo loyalty and nascent “agentic commerce” (AI‑driven shopping via platforms like Perplexity and Microsoft Copilot). The investments will often take the form of lower upfront economics – heavier co‑marketing subsidies, improved merchant pricing in exchange for prime placement, and richer rewards.

Crucially, PayPal is baking in most of the cost but little of the benefit into its 2026 numbers. Management’s guidance assumes branded checkout growth is only “slightly positive to low single-digit” for the full year. Company-wide, transaction margin dollars are expected to be slightly down or roughly flat excluding interest on customer balances, with non-transaction OpEx up around 3% and non‑GAAP EPS in a range from slightly down to slightly positive.

In other words, PayPal is asking investors to stomach a valley in profitability now to rebuild the branded franchise’s competitive position over “coming quarters and years,” rather than promising a sharp inflection in 2026.

That realism extends to the company’s longer-term promises. The management team formally withdrew the multiyear 2027 outlook given at its 2024 Investor Day, acknowledging that assumptions about e‑commerce growth, competition, and the pace of product rollout have not held. From here, PayPal will guide one year at a time.

For a company that once traded on the idea of enduring double-digit growth, that is a humbling admission. But it may also allow Lores and Miller to reset expectations around what a mature, diversified payments network can deliver without over‑promising on the trajectory of a single product.

Experience, presentment and selection: a granular turnaround plan

If the high-level story is one of underwhelming branded growth and a guidance reset, the operational narrative is far more granular. Miller’s presentation offered a detailed, almost forensic account of how PayPal intends to close the gap with e‑commerce growth over time – and where the levers really sit in a crowded checkout landscape.

Three words anchor the plan: experience, presentment, selection.

On experience, PayPal now has a modern paysheet UX that performs well on desktop and mobile and delivers high conversion – typically 95% or better – when a consumer has PayPal vaulted as their default payment method. The issue is reach. Only a subset of global volume is on the target experience, and just 36% of consumers are considered “checkout ready” – meaning they have biometric authentication set up or a device passkey. The goal is to lift that to nearly half of consumers by the end of 2026, by bundling biometric campaigns with merchant upgrades rather than rolling them out sequentially.

On presentment, the company’s own data underlines the importance – and the cost – of positioning. When PayPal is placed above competitors on a merchant page, and its value proposition is reinforced with co‑marketing or pay later messaging, selection rates more than double versus being buried below rivals. Early deployments of upstream BNPL messaging – currently visible to less than 15% of traffic – show a more than 10% uplift in branded checkout volume where paired with a dedicated second button. The challenge is scale. Too few merchants are yet offering these high‑impact placements, particularly over the critical holiday season.

On selection, PayPal is trying to give consumers reasons to choose it repeatedly, not just when a balance happens to sit in their wallet. “Power users,” defined as those transacting more than 100 times a year, grew 5% in 2025. Mobile app engagement has become a powerful predictor of checkout choice: users with recent app activity are about 40% more likely to select PayPal in the following week. Hence the decision to launch a “brand-new app” this year that will concentrate BNPL management, rewards via PayPal Plus, and personalized offers.

The early test of this “experience-presentment-selection” flywheel comes from the Cyber 5 holiday period. For merchants that had implemented the full bundle – the new paysheet, strong presentment, upstream BNPL messaging, and co-branded marketing – PayPal saw “very attractive double-digit branded TPV growth,” significantly outpacing local e‑commerce markets. The problem, Miller conceded, is that “we just don’t yet have enough of these high-impact placements in market.”

To fix that, the company is narrowing its aperture. Instead of “optimizing for every merchant,” PayPal is concentrating on a strategic cohort that already accounts for roughly a quarter of branded checkout volume, assigning dedicated mission-based teams to drive full-stack implementations. Economics with those flagship merchants are increasingly being tied directly to performance: improved conversion, lower total payment costs, enhanced customer acquisition, or co-developed features.

The calculus is that the brand halo from being deeply embedded with the largest, most frequented merchants – and showcased in AI‑powered shopping agents – will eventually cascade through the long tail.

Venmo, omni and PSP: the other engines quietly build scale

One reason the board can afford to sanction heavy branded reinvestment is that other parts of the portfolio are outperforming and, increasingly, monetizing.

Venmo, a long‑time question mark on profitability, delivered what Miller called a “breakthrough” year in 2025, shifting from primarily peer-to-peer transfers toward commerce. Revenue grew about 20% to $1.7 billion (excluding interest income), total active accounts crossed 100 million, and monthly active accounts reached 67 million, up 7%. In the fourth quarter Venmo TPV rose 13%, marking a fifth straight quarter of double-digit growth.

The composition of that revenue is changing in ways that matter for margins. Over the past two years, revenue from “Pay with Venmo” and the Venmo debit card has doubled, as more users adopt the product for everyday spending. In 4Q, Venmo debit card TPV grew over 50%, with monthly active accounts on the card also up 50%. Pay with Venmo TPV rose 32%, with its MAAs up 26%. On top of that, a new loyalty program, Stash, is designed to pull users into a staged journey from P2P to debit and eventually credit, rewarding deeper engagement within the Venmo ecosystem.

Elsewhere, PayPal’s move into omni-channel payments is starting to resemble a proper second act. The PayPal consumer debit card, launched in the US more than a year ago, saw TPV growth accelerate to over 50% in the fourth quarter, with monthly active accounts growing over 35%. Similar products in Germany and the UK now count more than 700,000 monthly active accounts in aggregate. Debit and Tap to Pay spend, while still a small fraction of branded experiences, grew 60% year-on-year in the quarter.

On the merchant side, the Enterprise Payments business – part of PayPal’s PSP arm – has quietly been turned from a drag into a contributor. In 2025 it delivered seven consecutive quarters of profitable growth, with volume growth re-accelerating to 12% in Q4. Net processing yield has roughly doubled versus early 2024, largely through the disciplined introduction of 16 value-added services that merchants “are happy to pay for,” from authorization enhancement to fraud cost reduction. The first omnichannel enterprise merchant is now live through Verifone, enabling PayPal to bid for RFPs that require both online and in‑store capabilities, where roughly 80% of payments still occur.

Overlaying these is a more speculative but potentially strategic bet: “agentic commerce.” PayPal’s Store Sync product, built with Cymbio (now being acquired), is stitching merchants like Abercrombie & Fitch, Fabletics, PacSun and Wayfair into AI chat platforms so users can discover and buy items inside AI experiences such as Perplexity and Microsoft Copilot. Management is clear that this will not “materially impact 2026 growth,” but the ambition is clear: be the default payment option when AI agents start orchestrating purchases at scale.

Guidance reset and capital discipline

The financial framework for 2026 is deliberately sober, aiming to trade some short-term margin comfort for a better-balanced, more resilient business mix.

For the first quarter of 2026, PayPal expects low single-digit revenue growth on a currency-neutral basis. Transaction margin dollars ex-interest are guided to be slightly down or roughly flat, non-transaction operating expenses to grow mid-single digits, and non-GAAP EPS to decline mid-single digits.

For the full year, the company sees transaction margin dollars slightly down or flat excluding interest, non-transaction OpEx up about 3%, and non-GAAP EPS anywhere from a low single-digit decline to slightly positive. The range reflects both the cost of growth investments and uncertainty about the exact timing of branded checkout stabilization.

Yet the balance sheet gives management room to maneuver. PayPal finished the year with $14.8 billion in cash, cash equivalents and investments against $11.6 billion of debt. Adjusted free cash flow – excluding the timing effects of originating and selling BNPL receivables – was $6.4 billion in 2025. The company returned $6 billion of that via share repurchases and began paying a quarterly dividend of $0.14 per share. For 2026, it plans at least $6 billion in adjusted free cash flow and a similar $6 billion share buyback, alongside roughly $1 billion of capex.

Miller was keen to present this as a “both/and” rather than an “either/or” choice between growth and capital return. The board, she stressed, reviews capital allocation regularly, but the current priority is “transforming this business and really growing the assets we have and investing organically.” Lores’ arrival is expected to sharpen that prioritization rather than to trigger asset sales; Venmo and Enterprise Payments are explicitly described as core.

The open question is what happens if branded checkout fails to re-accelerate despite the investment. Miller and Winoker argue that PayPal has already demonstrated its ability to deliver at least mid-single-digit transaction margin dollar growth and double-digit EPS growth “even in a challenging branded environment,” thanks to its diversified set of growth levers. But that argument relies on continued outperformance in Venmo, PSP, credit, and omni in the face of intensifying competition from both big tech wallets and local alternatives.

For now, investors face a more prosaic task: watch the checkout metrics. If, over the next few quarters, the share of transactions on the new paysheet, biometric enrollment, and the incidence of upstream BNPL messaging climb visibly – and if cohorts with full deployments continue to grow branded TPV at double digits – Lores will have the raw material for a credible narrative of renewal. If not, the board’s decision to change captains may start to look like a prelude to deeper structural surgery.