Dive Brief:

• Digital payments juggernaut PayPal told employees that it’s cutting 2,000 workers, or about 7% of the company’s employees, in the next few weeks.
• The San Jose, California-based company said that the reduction in force was necessary to adapt to changes it faces with respect to customers, competitors and the world. 
• “Addressing these changes requires us to make hard decisions that will impact some of our colleagues,” PayPal CEO Dan Schulman said in a Tuesday note to employees posted on the company’s website. “These reductions will occur over the coming weeks, with some organizations impacted more than others.” 

Dive Insight:

The PayPal job cuts follow a $2-billion investment in the company last year by Elliott Investment Management, an activist investor that often pushes companies to increase profitability in the interest of boosting stock prices. The value of PayPal’s shares have declined since mid-2021 as it missed growth goals and pivoted to new strategies.

Schulman said the company’s plans would include cost cuts after reporting a second-quarter loss in August 2022. PayPal targeted $900 million in expense savings for last year aimed at rolling into additional savings of $1.3 billion this year. “We are meaningfully reducing our cost structure,” Schulman said on that earnings webcast last August.

Elliott is egging on the restructuring. “PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near- and long-term,” an Elliott partner said in an August statement last year. “Today’s announcement highlights a number of steps that have been underway and are being initiated to help realize the significant value opportunity.” 

Schulman has focused the company on new priorities, such as simplifying the way consumers can use PayPal’s checkout process online and at in-store retailers, but a difficult economic environment has depressed consumer spending. Meanwhile, fintech competitors have proliferated in recent years.

His efforts have also been complicated by the loss of some top PayPal executives. Chief Financial Officer John Rainey exited in May 2022; a new CFO took a medical leave last September; and more recently the company's chief accounting officer left this month.

Aside from upstart rivals such as buy now, pay later providers, including Affirm and Afterpay, PayPal has encountered more competition from tech giant tools such as Apple Pay and Google Pay. Even banks are mulling new digital wallet options for digging into retail payments. 

A spokesperson for PayPal declined to say what parts of the business were most likely to be impacted by the employee reductions. 

The company is likely to have more to say on Feb. 9 when it reports earnings for the fourth quarter, which ended Dec. 31. Aside from the exodus of financial executives from the company, there has been speculation that Schulman might step aside, too.

Although PayPal is still likely working through some “structural headwinds” with respect to its checkout features and in its digital wallets, about 15% year-over-year growth in adjusted earnings-per-share for fiscal year 2023 is achievable and this announcement supports that view, said RBC Capital Markets analyst Daniel Perlin in a note to investment clients on Tuesday.

Last year, PayPal pared jobs worldwide on a smaller scale, with reductions in San Francisco, Chicago and Ireland.

Meanwhile, upstart payments competitors did the same. Stockholm-based BNPL player Klarna eliminated about 700 employees, or about 10% of its workforce; e-commerce mega-fintech Stripe chopped 1,140 jobs, or about 14% of its headcount; and checkout startup Bolt shaved about 185 workers, about a third of its workers.