It's Expensive to Be Poor. This CEO Wants to Reduce 'Antiquated' Bank Fees and Wait Times
Dan Schulman, president and chief executive officer of PayPal Holdings Inc., arrives for the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Wednesday, July 10, 2019.
Patrick T. Fallon/Bloomberg via Getty Images
BY VIVIENNE WALT
JANUARY 9, 2022 7:00 AM EST
PayPal’s CEO and president did not learn his most important business lesson in the C-suite of the $215-billion fintech platform, which he has led since 2014; nor in his previous top jobs at T-Mobile, Sprint, Virgin Mobile or Priceline. In his mind, it came from Krav Maga, the Israeli martial art, which he learned as a teenager and, at 63, still practices every day: “If you stand still, you’re asking to be hit,” Dan Schulman says. Introducing the new season of his podcast (called “Never Stand Still”) he says, “You have to stay in motion to thrive and be competitive. I’ve applied that lesson throughout my career, not just to business, but in life.”
Schulman’s industry is in rapid motion these days: The new technologies of distributed finance and cryptocurrency are radically reshaping people’s behavior, and prompting central banks to scramble to adapt. PayPal itself lagged in embracing crypto, but in April 2021 it began offering digital currencies for all payments. Now Schulman is convinced that crypto will dramatically change people’s financial lives for the better.
Dating from a time when financial executives were far less likely to reveal their opinions, Schulman has not been shy in stating his, about everything from discriminatory bank practices and wealth inequities. That, he says, has meant putting his views into reality in the way he leads PayPal. In 2019 he raised wages and cut health-care costs for lower-pay employees.
Schulman agreed to sit still long enough for a Zoom interview in December. He spoke with TIME’s Vivienne Walt about how his very public commitments to social justice mesh with the way he leads PayPal’s 26,500 employees.
(These answers have been condensed and edited for clarity.)
You talk a lot about equity. A lot of companies talk about equity, ESG goals. How do we trust that companies are actually doing what they claim to be doing, when there’s no real way to measure it?
I think that companies have an obligation and the CEOs who run those companies have an obligation to stand up and address the societal issues that are around us. You can’t have values on a wall without acting on them. Otherwise, it’s just propaganda and employees, and customers and share holders see through that.
For me, it was like the second or third week coming in [as PayPal CEO] and saying, ‘Do we pay equally across gender and ethnicity?’ Of course the answer was no. We finally got the study back, they were like, ‘Do you want to take three years to address that inequality?’ And I was like, ‘How about we do it next week?’
Then, North Carolina passed the bathroom bill. [In 2016, the state banned schoolkids from using bathrooms for genders different from their birth certificates.] I felt it was a bill that allowed for discrimination. We had just announced a huge deal with the Governor of North Carolina to establish a 600-person operation center. Once I heard that, I walked down the hallway and said to our corporate communications, ‘We’re going to pull out of North Carolina, and within a week.’
How do your views impact the way you lead PayPal?
I look at it not just externally, but internally. Are we driving financial health for our employees? My view of this is, we’ve gone from talking about employees’ physical health, to their mental health, to now their financial health.
So I’ve created internal metrics to measure the financial health of our employees, not just kind of talk about it, not try and increase our minimum wage, but how much net disposable income do they have, after they pay all of their taxes and essential living expenses? We feel it needs to be a minimum of 20% for people to feel financially healthy. And when we did our initial study that ranged between 4% and 6%. And so we invested tremendously in our own employees, because that was consistent with the values that we have.
What’s the biggest problem with the way the financial industry is set up?
It’s expensive to be poor. The less money you have, the more it costs you to do basic transactions. If you want to cash a check, and you’re part of the banking system, it’s simple and easy. It’s usually free of charge. But if you’re outside the system, you need to stand in line waiting at a cash checking location, and pay. You’re waiting in line, you’re losing money on every transaction, and then if you want to pay a bill, you need to stand in line again, and pay a transaction fee to pay your bills. This is the kind of system we have today.
In the U.S., people who are outside the banking system spend about $140 billion on unnecessary fees and high interest rates to complete basic transactions. Think about that amount of money going to those populations that most need it.
The underlying infrastructure of the financial system today is quite antiquated. If I cash a check, it can take three days for me to get that money. If I do an international remittance, the receiving party may not get that for a week to 10 days. Why is that so important? Because those who have less income, usually their expenses are not greater than their revenues coming in. Getting money efficiently and quickly is essential for so much of our world’s population.
Ok, so what’s your answer?
There’s a solution to this issue. It’s rooted in technology, and it’s why PayPal wants to do what we call ‘democratize financial access,’ which is a fancy way of saying that managing and moving money should be a right for everybody, not a privilege for just the affluent.
If you send an international remittance to somebody, it doesn’t matter if it’s to Mexico or India, it can cost $8 for every $100. If you do that from one digital wallet to another digital wallet, it can cost under $2, and you have access to your money instantaneously. That’s a 6% savings. Multiply that on an industry level of international remittances, that’s $635 billion dollars. Just think about how much more money can go to those who absolutely need this.
Dan Schulman, president and chief executive officer of PayPal Holdings Inc., arrives for the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Wednesday, July 10, 2019.
Patrick T. Fallon/Bloomberg via Getty Images
BY VIVIENNE WALT
JANUARY 9, 2022 7:00 AM EST
PayPal’s CEO and president did not learn his most important business lesson in the C-suite of the $215-billion fintech platform, which he has led since 2014; nor in his previous top jobs at T-Mobile, Sprint, Virgin Mobile or Priceline. In his mind, it came from Krav Maga, the Israeli martial art, which he learned as a teenager and, at 63, still practices every day: “If you stand still, you’re asking to be hit,” Dan Schulman says. Introducing the new season of his podcast (called “Never Stand Still”) he says, “You have to stay in motion to thrive and be competitive. I’ve applied that lesson throughout my career, not just to business, but in life.”
Schulman’s industry is in rapid motion these days: The new technologies of distributed finance and cryptocurrency are radically reshaping people’s behavior, and prompting central banks to scramble to adapt. PayPal itself lagged in embracing crypto, but in April 2021 it began offering digital currencies for all payments. Now Schulman is convinced that crypto will dramatically change people’s financial lives for the better.
Dating from a time when financial executives were far less likely to reveal their opinions, Schulman has not been shy in stating his, about everything from discriminatory bank practices and wealth inequities. That, he says, has meant putting his views into reality in the way he leads PayPal. In 2019 he raised wages and cut health-care costs for lower-pay employees.
Schulman agreed to sit still long enough for a Zoom interview in December. He spoke with TIME’s Vivienne Walt about how his very public commitments to social justice mesh with the way he leads PayPal’s 26,500 employees.
(These answers have been condensed and edited for clarity.)
You talk a lot about equity. A lot of companies talk about equity, ESG goals. How do we trust that companies are actually doing what they claim to be doing, when there’s no real way to measure it?
I think that companies have an obligation and the CEOs who run those companies have an obligation to stand up and address the societal issues that are around us. You can’t have values on a wall without acting on them. Otherwise, it’s just propaganda and employees, and customers and share holders see through that.
For me, it was like the second or third week coming in [as PayPal CEO] and saying, ‘Do we pay equally across gender and ethnicity?’ Of course the answer was no. We finally got the study back, they were like, ‘Do you want to take three years to address that inequality?’ And I was like, ‘How about we do it next week?’
Then, North Carolina passed the bathroom bill. [In 2016, the state banned schoolkids from using bathrooms for genders different from their birth certificates.] I felt it was a bill that allowed for discrimination. We had just announced a huge deal with the Governor of North Carolina to establish a 600-person operation center. Once I heard that, I walked down the hallway and said to our corporate communications, ‘We’re going to pull out of North Carolina, and within a week.’
How do your views impact the way you lead PayPal?
I look at it not just externally, but internally. Are we driving financial health for our employees? My view of this is, we’ve gone from talking about employees’ physical health, to their mental health, to now their financial health.
So I’ve created internal metrics to measure the financial health of our employees, not just kind of talk about it, not try and increase our minimum wage, but how much net disposable income do they have, after they pay all of their taxes and essential living expenses? We feel it needs to be a minimum of 20% for people to feel financially healthy. And when we did our initial study that ranged between 4% and 6%. And so we invested tremendously in our own employees, because that was consistent with the values that we have.
What’s the biggest problem with the way the financial industry is set up?
It’s expensive to be poor. The less money you have, the more it costs you to do basic transactions. If you want to cash a check, and you’re part of the banking system, it’s simple and easy. It’s usually free of charge. But if you’re outside the system, you need to stand in line waiting at a cash checking location, and pay. You’re waiting in line, you’re losing money on every transaction, and then if you want to pay a bill, you need to stand in line again, and pay a transaction fee to pay your bills. This is the kind of system we have today.
In the U.S., people who are outside the banking system spend about $140 billion on unnecessary fees and high interest rates to complete basic transactions. Think about that amount of money going to those populations that most need it.
The underlying infrastructure of the financial system today is quite antiquated. If I cash a check, it can take three days for me to get that money. If I do an international remittance, the receiving party may not get that for a week to 10 days. Why is that so important? Because those who have less income, usually their expenses are not greater than their revenues coming in. Getting money efficiently and quickly is essential for so much of our world’s population.
Ok, so what’s your answer?
There’s a solution to this issue. It’s rooted in technology, and it’s why PayPal wants to do what we call ‘democratize financial access,’ which is a fancy way of saying that managing and moving money should be a right for everybody, not a privilege for just the affluent.
If you send an international remittance to somebody, it doesn’t matter if it’s to Mexico or India, it can cost $8 for every $100. If you do that from one digital wallet to another digital wallet, it can cost under $2, and you have access to your money instantaneously. That’s a 6% savings. Multiply that on an industry level of international remittances, that’s $635 billion dollars. Just think about how much more money can go to those who absolutely need this.