For many years, PayPal was the lone wolf of digital payments - founded in 1998, the company has been operating in the segment since 2000. But a lot has changed: the growth of the fintech industry and the interest in the tech giant sector, such as Facebook, have made the competition intense. To further confuse the scenario, the pandemic forced changes in people's habits, increasing the possibilities for digital financial transactions.
Guru Bhat is observing these changes closely. He has been with PayPal for four years and is a VP with the company.
In an exclusive interview with Estadão, Bhat celebrates the best quarter in the history of the American company, talks about the increase in competition, and indicates how to use artificial intelligence in business.
Excerpts from the interview:
How was the pandemic reflected in PayPal?
The second quarter (Q2) was record-breaking. We processed close to $ 222 billion and saw a 30% increase in our TPV. This was the first time that our revenue exceeded the US $ 5 billion in a single quarter: $5.26 billion growing by 25%. We added 21.3 million new accounts, higher than the number of new customers we added in the whole of 2016. What is more significant is that parts of our business were dormant during the pandemic, such as tourism. People have changed their spending habits: they are using e-commerce more to buy essentials and we have seen increase in P2P as well.
What were the specific challenges of the period?
At the beginning of the pandemic, one of them was when we all started working from homeIt took time to get used to it. Now, speaking of scale: whenever there is a significant opportunity, it does not just open to 'good people'. It also opens to ‘bad people’. The number of fake websites that appeared in the quarantine is huge. We had to invest in fraud prevention and protect our consumers and merchants.
What has been done to ensure the safety of operations?
We have an immense amount of data about our consumers and we use emerging technologies like AI to keep them safe. We use a multilayered security system. The concept is simple. There are multiple layers of deep encryption all the way that information does - from the moment you log in to your device till the transaction is completed. We also have We have our data centres in the US and Singapore with teams monitoring all transactions.
How does PayPal see the growth of fintech and the rise of local competitors?
We are obsessed with the customer, which leads us to create partnerships with our competitors and the industry because this is the right thing to do. We have partnerships with banks, with card networks ...
On the other hand, although there is a lot of activity in the sector, not every player can afford to scale globally and adhere to local regulations. One has to ensure that risk and security of all transactions are not compromised at any cost. We were at an advantage because of the data we have at our disposal having been in the industry for 20 years. Other players have only four or five years of history. They do not have the same capabilities we have. We also offer risk as a service.
Tech giants like Facebook are showing interest in payments and transfers. How to ensure that PayPal will maintain its leadership?
All giants, including the one you mentioned, are our partners. Much of the work they are doing has PayPal in the background. There is a sense of competition, but also validation: our business is adding value to people. Besides, PayPal is different from these other companies, as we only focus on payments. People trust us as they know we wont be using the data for other activities or sharing their personal information.
Why did PayPal abandon the Libra project, Facebook's digital currency?
It was a question of how the product was being developed and the type of value that we could add. We concluded, at the time, that the Libra project was not for us and that it was not aligning in the way that we want to do in this space.
What is the role of artificial intelligence in the company?
Historically, it has been used primarily against fraud. Also, we use it in customer service. We have between 60 and 70 million contacts per year on a base of 300 million customers. That number will continue to grow. We must predict the intention, get to them before they come to us. We can only do this if we use the data. We also use it in troubleshooting our systems. We have more than 100,000 servers, which can always go wrong. The ability to manage this comes from AI: predicting and even solving problems before a human agent even arrives. It is the only way we must grow.
How to ensure that your algorithms do not have a bias in the credit offer?
It starts with the values on which PayPal has been founded. We must be inclusive and fair. Then we move on to technology: it goes the way we use our data to train audits. When you serve data to an algorithm, it has no awareness. It will work with what you have served it. So, the data that is used to train the models must undergo rigorous checking. The next step is testing. We look at the validation of the training that the algorithm went through. Here comes the human element. Humans look to the tests to ensure that not only are the data good, but the results are good. So, we refine this until we reach a result that we can confidently say that there is no bias. Only then is the algorithm launched in the system.