PayPal checkout growth stays at 2% as AI savings plan advances

PayPal checkout growth remained subdued in the second quarter, with online branded checkout up 2% on a currency-neutral basis for a second consecutive period, according to the company’s Tuesday earnings materials. PayPal also reported $486.4 billion in total payment volume, up 10%, or 9% currency-neutral, and revenue of $8.68 billion, up 5%, while its shares rose 3% at the start of Tuesday trading.

Chief Executive Enrique Lores told analysts that PayPal’s restructuring is built around improving checkout, rebuilding consumer engagement, expanding financial services and Venmo, updating technology and lowering costs. The longer-term plan also includes digital identity and agentic payments, which the company expects to become more significant from 2028 onward.

PayPal is using artificial intelligence first as an internal productivity tool. In an earnings presentation, the company said it is targeting at least $1.5 billion in gross run-rate savings over two to three years and has identified about $400 million in new run-rate savings by year-end. Management said AI has been embedded into software delivery cycles and has helped reduce production times.

What is PayPal doing with AI and digital identity?

PayPal’s near-term use of AI is focused on lowering costs and speeding product development, according to management. Its longer-term commerce plan links AI agents, digital identity and payments, a shift that could require checkout systems to verify users and complete transactions in ways that go beyond a consumer pressing a payment button.

The company is also simplifying its organization. Chief Financial and Operating Officer Jamie Miller said PayPal is removing duplication, bands and layers, with later restructuring phases expected over the next 12 to 18 months. Management said much of the savings will be reinvested in technology, risk tools and products, including financial services and buy now, pay later across PayPal and Venmo.

Analysts questioned why the current investment program should produce better results than earlier efforts. Lores said the change is PayPal’s focus on financial services, which he described as a larger market opportunity. The company said financial services represent close to 20% of transaction margin and are growing at a double-digit rate.

Checkout remains a central test for the turnaround. Monthly active accounts rose 1% to 228 million, while transactions per active account, excluding payment service provider activity, increased 7%. Branded experiences, including online checkout, PayPal and Venmo debit and tap to pay, grew 6%. Debit card and tap-to-pay volume rose more than 60%.

PayPal said Pay with Venmo grew 44% and buy now, pay later grew 26%, helping offset slower online branded checkout growth. Lores said 60% of merchants have moved to PayPal’s newer payment pages. He also told analysts that PayPal needs to work with large merchants across product, marketing and service, rather than presenting separate features in isolation.

Venmo is another focus of the consumer strategy. PayPal said it rebuilt the Venmo app to improve personalization and product discovery as it seeks to expand the service beyond peer-to-peer payments. Venmo debit monthly active accounts increased more than 50%, and customers using both Venmo debit and Pay with Venmo generated more than nine times the average revenue per account of users who only use peer-to-peer payments.

The call also touched on deal speculation. Analysts asked how PayPal was balancing possible deal activity with its turnaround and whether a change of control could affect merchant relationships. Lores declined to discuss the speculation and said PayPal’s focus remains on executing its strategic plan.

Management raised its full-year transaction margin dollar outlook to about $15.6 billion. Miller said PayPal expects third-quarter branded checkout growth to be about 2%, broadly consistent with the second quarter.

This story draws on original reporting from PYMNTS.