PayPal Holdings (PYPL) 10-K risk factor changes: FY2022 vs FY2021

*You should carefully [removed: review this section] [added: consider the risks and uncertainties described below,] in addition to [removed: the] other information appearing in this Form 10-K, including our consolidated financial statements and related notes, for important information regarding risks and uncertainties that [added: could] affect us.

[removed: Additional] [added: These risk factors do not identify all] risks [added: we face,] and [added: additional risks and] uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.* *If any of the following risks actually occur, our business, financial condition, results of operations, [removed: and] future [removed: prospects] [added: prospects, and the trading price of our common stock] could be materially and adversely affected.*

The techniques used to attempt to obtain unauthorized or illegal access to systems and information (including customers’ personal data), disable or degrade service, exploit vulnerabilities, or sabotage systems are constantly [removed: evolving, and in some circumstances may not be recognized or detected until after they have been launched against a target.][added: evolving.]

Unauthorized parties [removed: have attempted, and we expect that they] will continue to [removed: attempt,] [added: attempt] to gain access to our systems or facilities through various means, [removed: including, but not limited to,] [added: including through] hacking into our systems or facilities or those of our customers, partners, or vendors, and attempting to fraudulently induce users of our systems (including [removed: employees] [added: employees, vendor] and [added: partner personnel and] customers) into disclosing user names, passwords, payment card information, [added: multi-factor authentication application access] or other sensitive information used to gain access to such systems or facilities.

This information [removed: may] [added: may,] in [removed: turn] [added: turn,] be used to access our customers’ [added: confidential] personal or proprietary information and [removed: payment card] [added: financial instrument] data that are stored on or accessible through our information technology systems and those of third parties with whom we partner.

Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyberextortion, distributed denial-of-service attacks, ransomware, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology and infrastructure and those of third parties with whom we [removed: partner] [added: partner, are becoming increasingly sophisticated and complex, may be difficult to detect, and] could compromise the confidentiality, availability, and integrity of the data in our [removed: systems.][added: systems, as well as the systems themselves.]

We have experienced from time to time, and may experience in the future, breaches of our security measures due to human error, [added: deception,] malfeasance, insider threats, system [removed: errors or] [added: errors, defects,] vulnerabilities, or other irregularities.

We believe that [removed: PayPal is a particularly attractive target for] cybercriminals [added: may target PayPal] due to our name, brand recognition, types of data (including [removed: payments-related] [added: sensitive payments- and identity-related] data) that customers provide to us, and the widespread adoption and use of our products and services.

For example, in November 2017, we suspended the operations of TIO Networks (“TIO”) (acquired in July 2017) as part of an investigation of security vulnerabilities of the TIO [removed: platform.][added: platform, and in December 2017, we announced that we had identified evidence of unauthorized access to TIO’s network and the potential compromise of personally identifiable information for approximately 1.6 million TIO customers.]

Under payment card network rules and our contracts with our payment processors, if there is a breach of payment card information [removed: that we store, or that is] stored by [added: us or] our direct payment card processing vendors, we could be liable to the payment card issuing [removed: banks] [added: banks, including] for their cost of issuing new cards and related expenses.

Cybersecurity breaches and other exploited security vulnerabilities could subject us to significant costs and [added: third-party] liabilities, result in improper disclosure of data and violations of applicable privacy and other laws, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the operation of our business, result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to or claims by them, or expose us to [added: litigation,] regulatory [removed: penalties] [added: investigations,] and [removed: fines.][added: significant fines and penalties.]

While we maintain insurance policies intended to [added: help] offset the financial impact we may experience from these risks, our coverage may be insufficient to compensate us for all losses caused by security breaches and other damage to or unavailability of our systems.

| [removed: ] [added: ] | | | | | | | | | [removed: 16] [added: 17] | | |

[removed: Our systems and operations and those of our service providers and partners have experienced from time to time, and may experience in the future, business interruptions or degradation because of distributed denial-of-service and other] cyberattacks, insider threats, hardware and software defects or malfunctions, human error, earthquakes, hurricanes, floods, fires, and other natural disasters, public health crises (including pandemics), power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events.

A catastrophic event that [removed: results in] [added: could lead to] a disruption or failure of our systems or operations could result in significant losses and require substantial recovery time and significant expenditures to resume or maintain [removed: operations, which could have a material adverse impact on our business, financial condition, and results of] operations.

As a provider of payments solutions, we are [added: also] subject to heightened scrutiny by regulators that may require specific business continuity, resiliency and disaster recovery plans, and rigorous testing of such plans, which may be costly and time-consuming to implement, and may divert our resources from other business priorities.

We have experienced, and expect to continue to experience, system failures, cyberattacks, unplanned outages, and other events or conditions from time to time that have and may interrupt the availability, or reduce or adversely affect the speed or functionality, of our products and [removed: services.][added: services and result in loss of revenue.]

A prolonged interruption [removed: in the availability] [added: of,] or reduction [removed: in] [added: in,] the availability, speed, or functionality of our products and services could materially harm our business.

We [removed: have undertaken and] continue to undertake [removed: certain] system upgrades and re-platforming efforts designed to improve the availability, reliability, resiliency, and speed of our [added: payments] platform.

These efforts are costly and time-consuming, involve significant technical [removed: risk,] [added: complexity] and [added: risk,] may divert our resources from new features and products, and [removed: there can be no guarantee that these efforts will] [added: may ultimately not] be effective.

We also rely on facilities, components, applications, [added: software,] and services supplied by third parties, including data center facilities and cloud data storage and processing services.

If these third parties experience operational interference or disruptions (including a cybersecurity incident), [added: fail to perform their obligations, or] breach their agreements with us, [removed: or fail to perform their obligations and meet] our [removed: expectations, our] operations could be disrupted or otherwise negatively affected, which could result in customer dissatisfaction, regulatory scrutiny, and damage to our reputation and brands, and materially and adversely affect our business.

While we maintain insurance policies intended to [added: help] offset the financial impact we may experience from these risks, our coverage may be insufficient to compensate us for all losses caused by interruptions in our service [removed: as a result of] [added: due to] systems failures and similar events.

In addition, any failure to successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies in a timely manner could [removed: have an adverse] [added: adversely] impact [removed: on] our business, internal [removed: controls (including internal controls over financial reporting),] [added: controls,] results of operations, and financial condition.

| [removed: ] [added: ] | | | | | | | | | [removed: 17] [added: 18] | | |

Rapid, significant, and disruptive technological changes impact the industries in which we operate, [removed: for example,] [added: including] payment technologies (including real-time payments, payment card tokenization, virtual currencies, distributed ledger and blockchain technologies, and proximity payment technology such as Near Field Communication and other contactless payments); internet browser technologies, that enable users to easily store their payment card information for use on any retail or e-commerce website; artificial intelligence and machine learning; developments in technologies supporting our regulatory and compliance obligations; and in-store, digital, and social commerce.

We cannot predict the effects of technological changes on our business, which technological developments or innovations will become widely adopted, and how [removed: those technologies may be regulated.]

We expect that new [removed: services and] technologies applicable to the industries in which we operate will continue to emerge and may be superior to, or render obsolete, the technologies we currently use in our products and services.

Developing and incorporating new technologies into [removed: our] [added: new and existing] products and services may require significant investment, take considerable time, and [removed: ultimately] may not [added: ultimately] be successful.

Our ability to [removed: adopt] [added: develop, provide or incorporate] new [added: technologies and adapt our existing] products and services [removed: and to] [added: or] develop [added: future and] new [added: products and services using new] technologies may be limited or restricted by industry-wide standards, platform providers, payments networks, changes to laws and regulations, changing [removed: expectations of consumers or merchants,] [added: customer expectations,] third-party intellectual property rights, and other factors.

[removed: Our success will depend on our ability] [added: If we are unable] to develop and incorporate new technologies and adapt to technological changes and evolving industry [removed: standards.][added: standards in a timely or cost-effective manner, our business could be harmed.]

Our business is subject to complex and changing laws, rules, regulations, policies, and legal interpretations in the markets in which we offer services directly or through partners, [removed: including, but not limited to,] [added: including] those governing: banking, credit, deposit taking, cross-border and domestic money transmission, prepaid access, foreign currency exchange, privacy, data protection, data governance, cybersecurity, banking secrecy, digital payments, cryptocurrency, payment services (including payment processing and settlement services), fraud detection, consumer protection, antitrust and competition, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.

Regulators globally [removed: have been establishing and increasing their] [added: are increasingly exercising] regulatory authority, oversight, and enforcement in a manner that impacts our business.

[removed: As] [added: Further, as] we introduce new products and services and expand into new [removed: markets, including] [added: markets (including] through [removed: acquisitions,] [added: acquisitions) and expand and localize our international activities,] we expect to become subject to additional regulations, restrictions, and licensing requirements.

Any failure or [removed: perceived] [added: alleged] failure to comply with existing or new laws, regulations, or orders of any government authority (including changes to [removed: or expansion of] their interpretation) may subject us to significant [removed: fines,] [added: fines and] penalties, criminal and civil lawsuits, forfeiture of significant assets, and enforcement [removed: actions in one or more jurisdictions;] [added: actions;] result in additional compliance and licensure requirements; cause us to lose existing licenses or prevent or delay us from obtaining additional licenses that may be required for our business; increase regulatory scrutiny of our business; [removed: divert management’s time and attention from our business;] restrict [added: or cease] our operations; [removed: lead to increased friction for customers;] force us to make changes to our business practices, products or operations; [added: lead to increased friction for customers;] require us to engage in remediation activities; [removed: or] delay planned transactions, product launches or [removed: improvements.][added: other activities, or divert management’s time and attention from our business.]

The complexity of United States (“U.S.”) federal and state and international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in [removed: a single event] [added: one or more events] prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions.

| [removed: ] [added: ] | | | | | | | | | [removed: 18] [added: 19] | | |

If we [removed: violate the] [added: fail to comply with applicable] laws or regulations [removed: covered under] [added: required to maintain] our licenses, we could be subject to liability and/or additional restrictions, forced to cease doing business with residents of certain states or territories, forced to change our business practices, or required to obtain additional licenses or regulatory approvals, which could impose substantial costs and harm our business.

These [removed: limitations] [added: restrictions] may [removed: adversely affect] [added: limit] our ability to grow our business.

[removed: We] [added: Outside of the U.S., we] principally provide our services to customers in the European Economic Area (“EEA”) and the United Kingdom (“U.K.”) through PayPal (Europe), our wholly-owned subsidiary that is licensed and subject to regulation as a credit [removed: institution in Luxembourg.]

In some circumstances, these attempts may not be recognized or detected until after they have been launched against a target.

This information may also be used to execute fraudulent transactions or otherwise engage in fraudulent actions.

Our systems and operations and those of our service providers and partners have experienced from time to time, and may experience in the future, business interruptions or degradation of service because of distributed denial-of-service and other

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Further, some of our systems, including those of companies that we have acquired, are not fully redundant and any failure of these acquired systems, including due to a catastrophic event, may lead to operational outages or delays.

While we engage in disaster recovery planning and testing intended to mitigate risks from outages or delays, our planning and testing may not be sufficient for all possible outcomes or events.

If any system failure or similar event results in damage to our customers or their business partners, they could seek significant compensation or contractual penalties from us for their losses.

These claims, even if unsuccessful, would likely be time-consuming and costly for us to address.

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those technologies may be regulated.

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institution in Luxembourg.

Applicable regulation relating to payments, anti-money laundering and digital services, which are key focus areas of regulators and subject to extensive new regulation, could subject us to additional and complex obligations, risks and associated costs.

PayPal (Europe) is also subject to regulation by the ECB under the oversight framework for electronic payment instruments, schemes and arrangements (PISA), which may also lead to increased compliance obligations and costs.

Within the U.S., we are regulated by the New York Department of Financial Services as a virtual currency business, which does not qualify us to engage in securities brokerage or dealing activities.

The regulatory status of particular cryptocurrencies is unclear under existing law.

For example, if the SEC were to assert that any of the cryptocurrencies we support are securities, the SEC could assert that our activities involving that cryptocurrency require securities broker-dealer registration or other obligations under the federal securities laws.

We hold our customers’ cryptocurrency assets through a third-party custodian.

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We have selected a custodian partner, and may in the future select additional custodian partners, that are subject to regulatory oversight, capital requirements, maintenance of audit and compliance industry certifications, and cybersecurity procedures and policies.

Nevertheless, operational disruptions at any such custodian, or such custodian’s failure to safeguard cryptocurrency holdings could result in losses of customer assets, expose us to customer claims, reduce consumer confidence and materially impact our operating results and our cryptocurrency product offerings.

Custodial arrangements to safeguard cryptocurrency assets involve unique risks and uncertainties in the event of the custodian’s bankruptcy.

While other types of assets and some custodied cryptocurrencies have been deemed not to be part of the custodian’s bankruptcy estate under various regulatory regimes, bankruptcy courts have not yet definitively determined the appropriate treatment of custodial holdings of digital assets in a bankruptcy proceeding.

In the event of our custodian’s bankruptcy, the lack of precedent and the highly fact-dependent nature of the determination could delay or preclude the return of custodied cryptocurrency assets to us or to our customers.

Although, we contractually require our custodian to segregate our customer assets and not commingle them with proprietary or other assets, we cannot be certain that these contractual obligations, even if duly observed by the custodian, will be effective in preventing such assets from being treated as part of the custodian’s estate under bankruptcy or other insolvency law.

In that event, our claim on behalf of such customers against the custodian’s estate for our customers’ cryptocurrency assets could be treated as a general unsecured claim against the custodian, in which case our customers could seek to hold us liable for any resulting losses.

In addition, our cryptocurrency product offerings could have the effect of heightening or exacerbating many of the risk factors described in this “Risk Factors” section.

In addition, the CFPB, pursuant to its market-monitoring authority, may require us to provide extensive information on our products and offerings from time to time.

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verify the identity of our customers and to monitor international and domestic transactions.

Our compliance history may be considered by OFAC and other regulators as part of any potential future investigation of our sanctions regulation.

Many jurisdictions in which we operate globally have enacted, or are in the process of enacting, data privacy legislation or regulations aimed at creating and enhancing individual privacy rights.

For example, numerous U.S. states have enacted or are in the process of enacting state level data privacy laws and regulations governing the collection, use, and retention of their residents’ personal information.

We are regularly subject to claims, individual and class action lawsuits, arbitration proceedings, government and regulatory investigations, inquiries, actions or requests, and other proceedings alleging violations of laws, rules, and regulations with

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services that we do not offer.

The final rule reaffirms and

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We are undertaking efforts to diversify our reliance on a small number of third-party payment processors in various markets.

The risks and uncertainties described below are not the only ones we face.

In December 2017, we announced that we had identified evidence of unauthorized access to TIO’s network and the potential compromise of personally identifiable information for approximately 1.6 million TIO customers.

This incident resulted in governmental inquiries and civil claims against us and may lead to additional inquiries and claims in the future.

Additionally, some of our systems, including those of companies we have acquired, are not fully redundant, and our disaster recovery planning may not be sufficient for all possible outcomes or events.

These events have resulted and likely will continue to result in loss of revenue.

Moreover, if any system failure or similar event results in damage to our customers or their business partners, they could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described in this “Risk Factors” section under the caption “*Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition*.”

We expect new services and technologies to continue to emerge and evolve.

If we are unable to do so in a timely or cost-effective manner, our business could be harmed.

As we expand and localize our international activities, we expect that our obligations in the markets in which we operate will continue to increase.

European regulation, such as the Revised Payment Services Directive (“PSD2”) enabling payment and account information sharing by regulated payment providers, could subject us to data security and other legal and financial risks.

Ltd. is not able to offer outbound remittance payments to PayPal customers from Singapore.

Once PayPal Pte.

In addition, in certain markets outside of the U.S., we provide our services to customers through PayPal Pte.

Ltd. or, if required by local regulations, a local branch of PayPal Pte.

Ltd. or a local subsidiary subject to local regulatory supervision or oversight.

From time to time, we may also acquire entities subject to local payments regulatory supervision or oversight.

If we fail to comply with regulations, requirements,

We could be subject to fines, other enforcement action, and litigation if we are found to violate any aspects of applicable law or regulations.

In December 2021, the CFPB issued a separate order pursuant to its market-monitoring authority requiring us to provide information on our Buy Now, Pay Later offerings.

See “Note 13—Commitments and Contingencies” to our consolidated financial statements for disclosure relating to possible violations arising from our sanctions compliance program.

Such proceedings or actions could subject us to significant fines, penalties, judgments, and negative publicity, require us to change our business practices, increase the costs and complexity of compliance, result in reputational harm, and materially harm our business.

In the wake of the California Consumer Privacy Act passed in 2018, multiple U.S. states have adopted or proposed similar legislation to protect consumers in their states.

California passed the Consumer Privacy Rights Act of 2020, and Virginia and Colorado have passed similar privacy and data protection laws.

Some regulators and legislators, particularly those outside of the U.S., may perceive that our products and services are used so broadly that otherwise uncontroversial business practices could be deemed anticompetitive.

Determining legal reserves or possible losses from such

At any given time, we are typically a defendant in a number of patent lawsuits and subject to intellectual property infringement claims.

If we are unable to prevent third parties from adopting, registering, or using trademarks and trade dress that infringe, dilute, or otherwise violate our trademark rights, the value of our brands could be diminished and our business could be adversely affected.

The continuing effects of the novel coronavirus (“COVID-19”) pandemic could materially and adversely affect our business, financial condition, and results of operations.

The ultimate extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict, and subject to change, including, but not limited to, the duration, scope, severity, proliferation of variants and increase in the transmissibility of the virus, its impact on the global economy, actions taken to contain or limit the impact of COVID-19, such as the availability of an effective vaccine or treatment, geographic variation in how countries and states are handling the pandemic, and how quickly and to what extent normal economic and operating conditions may potentially resume.

The COVID-19 pandemic has adversely impacted and is likely to further adversely impact the operations of our customers, suppliers, vendors and other business partners, and may adversely impact our results of operations in the future.

Cross-border and domestic commerce may be adversely impacted by measures taken by government authorities and businesses globally to contain and limit the spread of COVID-19, including travel restrictions, border closures, quarantines, shelter in place and lock down orders, mask and social distancing requirements, and business limitations and shutdowns.

To the extent that such mitigation measures remain in place or are reinstated for significant periods of time, they may adversely affect our business, financial condition, and results of operations.

Actions that we have taken or may take in the future intended to assist customers impacted by COVID-19 may negatively impact our results of operations.

In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to: increased liability under our buyer protection program or chargebacks on payment cards resulting from merchants’ selling goods or services in advance of the delivery date or experiencing bankruptcy, insolvency or other business interruption; customer defaults on

payment obligations under PayPal branded credit products; increased cybersecurity and payment fraud risk; challenges to the availability and reliability of our products and services; and supply chain disruptions impacting our business.

While our business has benefited from the shift from in-store shopping and traditional payment methods towards e-commerce and digital payments, to the extent that customer preferences revert to pre-COVID-19 behaviors as the pandemic-related restrictions lessen, our business, financial condition, and results of operations would be adversely impacted.

The significant increase in the number of our employees who are working remotely as a result of the pandemic, and an extended period of remote work arrangements and subsequent reintroduction into the workplace could introduce operational risk, increase cybersecurity risk, strain our business continuity plans, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business.

Additionally, COVID-19 could require new or modified processes, procedures, and controls to respond to changes in our business environment.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.

There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.

These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” [added: "continue,"] “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,” and other similar expressions.

We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual [removed: results] [added: results, new information,] or future events or circumstances.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on [added: a] discussion of [removed: 2021] [added: 2022] results as compared to [removed: 2020] [added: 2021] results.

For [added: a] discussion of [removed: 2020] [added: 2021] results as compared to [removed: 2019] [added: 2020] results, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K for the year ended December 31, [removed: 2020] [added: 2021] filed with the SEC on February [removed: 5, 2021.][added: 3, 2022.]

The laws and regulations applicable to us, including those enacted prior to the advent of digital payments, [removed: are continuing] [added: continue] to evolve through legislative and regulatory action and judicial interpretation.

Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security [removed: incidents] [added: incidents,] and effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we remain subject to these risks and there can be no assurance that our security measures will provide sufficient security or prevent breaches or attacks.

| [removed: ] [added: ] | | | | | | | | | 33 | | |

The tables below provide the percentage of our total net revenues and gross loans and interest receivable from the U.K. and EU [removed: (excluding the U.K.)] for the periods presented:

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Net revenues generated from the U.K. | | | [removed: 9] [added: 8] | | % | | | | [removed: 11] [added: 9] | | % | | | | 11 | | % |

| Net revenues generated from the EU [removed: (excluding the U.K.)] | | | [removed: 19] [added: 17] | | % | | | | 19 | | % | | | | [removed: 17] [added: 19] | | % |

| | | | December 31, [removed: 2021] [added: 2022] | | | | | | December 31, [removed: 2020] [added: 2021] | | |

| Gross loans and interest receivable due from customers in the U.K. | | | [removed: 40] [added: 29] | | % | | | | [removed: 50] [added: 40] | | % |

| Gross loans and interest receivable due from customers in the EU [removed: (excluding the U.K.)] | | | [removed: 21] [added: 28] | | % | | | | [removed: 14] [added: 21] | | % |

The change in the percentage of gross loans and interest receivable due from customers in the U.K. and EU [removed: year-over-year] [added: year over year] was primarily attributable to expansion of our installment credit products in the [removed: EU.][added: EU, particularly in Germany where we have increased our product offerings.]

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The following table provides a summary of our consolidated financial results for the years ended December 31, [added: 2022,] 2021, [removed: 2020,] and [removed: 2019:][added: 2020:]

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Net revenues | | | $ | [removed: 25,371] [added: 27,518] | | | | | $ | [removed: 21,454] [added: 25,371] | | | | | $ | [removed: 17,772] [added: 21,454] | | | | | [removed: 18] [added: 8] | | % | | | | [removed: 21] [added: 18] | | % |

| Operating expenses | | | [removed: 21,109] [added: 23,681] | | | | | | [removed: 18,165] [added: 21,109] | | | | | | [removed: 15,053] [added: 18,165] | | | | | | [removed: 16] [added: 12] | | % | | | | [removed: 21] [added: 16] | | % |

| Operating income | | | [removed: 4,262] [added: 3,837] | | | | | | [removed: 3,289] [added: 4,262] | | | | | | [removed: 2,719] [added: 3,289] | | | | | | [removed: 30] [added: (10)] | | % | | | | [removed: 21] [added: 30] | | % |

| Operating margin | | | [removed: 17] [added: 14] | | % | | | | [removed: 15] [added: 17] | | % | | | | 15 | | % | | | | | | | | | | | | |

| Other income (expense), net | | | [removed: (163)] [added: (471)] | | | | | | [removed: 1,776] [added: (163)] | | | | | | [removed: 279] [added: 1,776] | | | | | | [removed: (109)] [added: 189] | | % | | | | [removed: 537] [added: (109)] | | % |

| Income tax [removed: (benefit)] expense [added: (benefit)] | | | [removed: (70)] [added: 947] | | | | | | [removed: 863] [added: (70)] | | | | | | [removed: 539] [added: 863] | | | | | | [removed: (108)] | | [removed: %] | | | | [removed: 60] [added: (108)] | | % |

| Effective tax rate | | | [removed: (2)] [added: 28] | | % | | | | [removed: 17] [added: (2)] | | % | | | | [removed: 18] [added: 17] | | % | | | | | | | | | | | | |

| Net income [added: (loss)] | | | $ | [removed: 4,169] [added: 2,419] | | | | | $ | [removed: 4,202] [added: 4,169] | | | | | $ | [removed: 2,459] [added: 4,202] | | | | | [removed: (1)] [added: (42)] | | % | | | | [removed: 71] [added: (1)] | | % |

| Net income [added: (loss)] per diluted share | | | $ | [removed: 3.52] [added: 2.09] | | | | | $ | [removed: 3.54] [added: 3.52] | | | | | $ | [removed: 2.07] [added: 3.54] | | | | | [removed: (1)] [added: (41)] | | % | | | | [removed: 71] [added: (1)] | | % |

| Net cash provided by operating [removed: activities] [added: activities(1)] | | | $ | [removed: 6,340] [added: 5,813] | | | | | $ | [removed: 5,854] [added: 5,797] | | | | | $ | [removed: 4,071] [added: 6,219] | | | | | [removed: 8] [added: —] | | % | | | | [removed: 44] [added: (7)] | | % |

Net revenues increased [removed: $3.9] [added: $2.1] billion, or [removed: 18%,] [added: 8%,] in [removed: 2021] [added: 2022] compared to [removed: 2020] [added: 2021] driven primarily by growth in total payment volume (“TPV”, as defined below under “Key Metrics”) of [removed: 33%.][added: 9%.]

Total operating expenses increased [removed: $2.9] [added: $2.6] billion, or [removed: 16%,] [added: 12%,] in [removed: 2021] [added: 2022] compared to [removed: 2020] [added: 2021] due primarily to an increase in transaction expense, and to a lesser extent, increases in [removed: sales] [added: transaction] and [removed: marketing expenses,] [added: credit losses,] technology and development expenses, and [removed: customer support] [added: restructuring] and [removed: operations expenses,] [added: other charges,] partially offset by a decline in [removed: transaction] [added: sales] and [removed: credit losses.][added: marketing expenses.]

Our operating margin was [removed: 17%] [added: 14%] and [removed: 15%] [added: 17%] in [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively.

Operating margin for [removed: 2021] [added: 2022] was [removed: positively] [added: negatively] impacted primarily by [removed: the decrease] [added: increases] in transaction [added: expense] and [added: transaction and] credit losses.

Net income decreased by [removed: $33 million,] [added: $1.8 billion,] or [removed: 1%,] [added: 42%,] in [removed: 2021] [added: 2022] as compared to [removed: 2020] [added: 2021] due to [removed: a] [added: the previously discussed] decrease in [added: operating income of $425 million, higher expense of $308 million in] other income (expense), [removed: net of $1.9 billion,] [added: net,] driven primarily by [removed: lower net gains] [added: losses] on strategic [removed: investments in 2021 compared to the prior year, partially offset by the previously discussed increase in operating income of $973 million] [added: investments,] and [removed: a decrease] [added: an increase] in income tax expense of [removed: $933 million associated with] [added: $1.0 billion primarily related to] lower [removed: net gains on strategic investments, higher] benefits associated with stock-based compensation deductions, and [removed: lower] [added: higher] expense related to intra-group transfers of intellectual property.

In [added: 2022,] 2021, [removed: 2020,] and [removed: 2019,] [added: 2020,] we generated approximately [added: 43%,] 46%, [removed: 49%,] and [removed: 47%] [added: 49%] of our net revenues from customers domiciled outside of the [removed: United States,] [added: U.S.,] respectively.

| [removed: ] [added: ] | | | | | | | | | 35 | | |

While changes in foreign currency exchange rates affect our reported results, we have a foreign currency exchange exposure management program in which we [removed: designate certain] [added: use] foreign currency exchange [removed: contracts] [added: contracts, designated] as cash flow [removed: hedges] [added: hedges,] intended to reduce the impact on earnings from foreign currency exchange rate movements.

In the years ended December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the year-over-year foreign currency [added: exchange rate] movements relative to the U.S. dollar had the following impact on our reported results:

| | | | [added: 2022 | | | | | |] 2021 | | | | | | 2020 | | | [added: | | | 2022 | | | | | | 2021 | | |]

| [removed: Favorable] [added: (Unfavorable) favorable] impact to net revenues (exclusive of hedging impact) | | | $ | [removed: 440] [added: (949)] | | | | | $ | [removed: 66] [added: 440] | |

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RUSSIA AND UKRAINE CONFLICT

With respect to the military hostilities commenced by Russia in Ukraine in February 2022, our priority is the safety and well-being of our PayPal employee community impacted by these events.

We continue to take actions to comply with all applicable restrictions and sanctions that may impact our operations.

In March 2022, we suspended our transactional services in Russia.

We are unable to reasonably estimate the total potential financial impact that may ultimately result from this situation.

In the years ended December 31, 2022 and 2021, our total net revenues related to Russia and Ukraine were not material.

MACROECONOMIC ENVIRONMENT

The broader implications of the macroeconomic environment, including uncertainty around the duration and severity of the coronavirus pandemic (“COVID-19”), the Russia and Ukraine conflict, supply chain shortages, a recession globally or in markets in which we operate, higher inflation rates, higher interest rates, and other related global economic conditions, remain unknown.

If these conditions continue or worsen, they could adversely impact our future operating results.

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(1) Prior period amounts have been revised to conform to the current period presentation.

Refer to “Note 1—Overview and Summary of Significant Accounting Policies” to our consolidated financial statements included in this Form 10-K for additional information.

Operating income decreased $425 million, or 10%, in 2022 compared to 2021 due to growth in operating expenses exceeding growth in net revenues.

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| | | | 2022 | | | | | | 2021 | | |

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The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.

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This growth in transaction revenues was partially offset by a decline in TPV and revenue generated from our core PayPal products and services, including foreign currency exchange fees revenue, due primarily to a decrease in revenue earned on eBay’s marketplace platform.

Additionally, for the year ended December 31, 2022, transaction revenues included $190 million in contractual compensation from sellers that violated our contractual terms, compared to $82 million in the year ended December 31, 2021.

This contractual compensation and the year-over-year increase are predominantly attributable to activity in international markets.

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Revenues from other value added services increased by $343 million, or 17%, in 2022 compared to 2021 due primarily to an increase in interest earned on certain assets underlying customer account balances resulting from higher interest rates, our revenue share earned from an independent chartered financial institution (“partner institution”), and interest and fee revenue on our merchant loans receivable portfolio.

Growth in revenues from other value added services in the current period was partially offset by the impact of revenue earned from the servicing of loans facilitated under the U.S. Government’s Paycheck Protection Program in 2021 of $157 million, for which revenue was de minimis in the current period.

Not meaningful.

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The increase in transaction expense rate in 2022 compared to 2021 was also attributable to unfavorable changes in product mix with a higher proportion of TPV from unbranded card processing volume, which generally has higher expense rates than other products and services.

Estimating our current expected credit loss allowances for our loans receivable portfolios is an inherently uncertain process and the ultimate losses we incur may vary from the current estimates.

We regularly update our allowance estimates as new facts become known and events occur that may impact the ultimate losses incurred.

A deterioration in macroeconomic conditions or other factors beyond those considered in our estimates could result in credit losses that exceed our current estimated credit losses and adversely impact our future operating results.

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Transaction and credit losses increased by $512 million, or 48%, in 2022 compared to 2021.

The increase in transaction losses in 2022 was attributable to an increase in losses related to our Venmo products and services resulting from fraud schemes, an increase in goods and services transactions which are now eligible for coverage by our protection programs, and a loss related to a merchant insolvency proceeding, which was offset by recoveries attributable to enhancements in our fraud recoupment capabilities and benefits from continued risk mitigation strategies.

In the second quarter of 2022, we recorded a $114 million estimated loss related to the above mentioned merchant insolvency proceeding, and in the fourth quarter of 2022, this estimated loss was reduced by approximately $75 million to account for recoveries and changes in our estimated loss reserve.

Credit losses increased by $495 million in 2022 compared to 2021.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

The provision for the year ended December 31, 2022 was primarily attributable to loan originations during the period and a slight deterioration in the credit quality of loans outstanding.

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| | | | 2022 | | | | | | 2021 | | |

Additionally, our forward-looking statements include expectations related to anticipated impacts of the coronavirus pandemic.

| | | | | | | | | | | | |

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COVID-19

The coronavirus (“COVID-19”) pandemic has resulted in government authorities and businesses throughout the world implementing numerous measures intended to contain and limit the spread of COVID-19, including travel restrictions, border closures, quarantines, shelter-in-place and lock-down orders, mask and social distancing requirements, and business limitations and shutdowns.

The spread of COVID-19 and increased variants has caused, and may continue to cause us to make significant modifications to our business practices, including enabling most of our workforce to work from home, establishing strict health and safety protocols for our offices, restricting physical participation in meetings, events, and conferences, and imposing restrictions on employee travel.

We will continue to actively monitor the situation and may take further actions that alter our business practices as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, or business partners.

The spread of COVID-19 has also accelerated the shift from in-store shopping and traditional in-store payment methods (e.g., cash) towards e-commerce and digital payments and resulted in increased customer demand for safer payment and delivery solutions (e.g., contactless payment methods, buy online and pick up in store) and significant increases in online spending in certain verticals that have historically had a strong in-store presence.

On balance, our business has benefited from these behavioral shifts.

To the extent that consumers revert to pre-COVID-19 behaviors as the pandemic-related restrictions lessen, our business, financial condition, and results of operations would be adversely impacted.

The rapidly changing global market and economic conditions as a result of the COVID-19 pandemic have impacted, and are expected to continue to impact, our operations and business.

The broader implications of the COVID-19 pandemic and related global economic unpredictability on our business, financial condition, and results of operations remain uncertain.

For additional information on how the COVID-19 pandemic has impacted and could continue to negatively impact our business, see below for specific discussion in the respective areas, and also refer to “Part I, Item 1A, Risk Factors” in this Form 10-K.

| | | | | | | | | | | | | | | | | | |

Not Meaningful

Operating income increased $973 million, or 30%, in 2021 compared to 2020 due to growth in net revenues, partially offset by an increase in operating expenses.

This contract matured in 2020.

In the year ended December 31, 2021, we benefited from the recovery of travel and events verticals, which were adversely impacted in the prior year as a result of the COVID-19 pandemic.

These factors favorably impacting growth in transaction revenues in 2021 were partially offset by a decline in TPV and revenue we generate from eBay’s marketplace platform, which we expect to continue, to a lesser extent, to negatively impact revenue growth trends in the first half of 2022.

In the first quarter of 2020, we experienced an adverse impact on our TPV and transaction revenues due to the initial impact of the COVID-19 pandemic.

In the second quarter of 2020, we benefited from a shift from in-store payment methods to digital payments (as described above) which was sustained throughout the remainder of 2020 and in 2021.

Changes in prices charged to our customers did not significantly impact transaction revenue growth in 2021.

Revenues from other value added services increased by $433 million, or 28%, in 2021 compared to 2020 due primarily to increases in our revenue share with Synchrony Bank (“Synchrony”) and fee revenue from the servicing of loans under the U.S government’s Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”) and enacted in March 2020 under the Coronavirus Aid, Relief, and Economic Security Act in response to the COVID-19 pandemic.

We do not own the receivables associated with loans originated through the PPP.

The fee revenue associated with the PPP loans in the year ended December 31, 2021 was $157 million, which included revenue recognized upon loan forgiveness and the extinguishment of our servicing obligations for a portion of the outstanding loans.

At December 31, 2021, the remaining unearned fee revenue associated with the PPP loans was not material.

The growth in revenue from other value added services in the year ended December 31, 2021 was also attributable to an increase in interest and fee revenue on our consumer loans receivable portfolio driven primarily by growth in international markets, partially offset by a decline in interest and fee revenue on our merchant loans receivable portfolio due to a decrease in average outstanding loans year-over-year and a decline in interest earned on certain assets underlying customer account balances resulting from lower interest rates.

In response to the COVID-19 pandemic, we took both proactive and reactive measures during 2020 to support our merchants and consumers that had loans and interest receivables due to us under our credit product offerings.

These measures were intended to help reduce financial difficulties experienced by our customers and included providing payment holidays to grant payment deferrals to certain borrowers for varying periods of time, and amended payment terms through loan modifications in certain cases.

Given the uncertainty surrounding the COVID-19 pandemic, including its duration and severity, related global economic conditions and the ultimate impact it may have on the financial condition of our merchants and consumers, the extent of these types of actions and their prospective impact on our interest and fee income is not determinable.

The decrease in transaction expense rate in 2021 compared to 2020 was due primarily to a decline in transaction expense rates associated with both our core PayPal and Braintree products, offset by an increase in the share of volume associated with our Braintree products.

Beginning in 2020, these losses are based on current expected credit losses.

Transaction and credit losses decreased by $681 million, or 39%, in 2021 compared to 2020.

The increase in transaction losses was due primarily to growth in TPV, partially offset by benefits realized from continued risk mitigation strategies, which also contributed to a decrease in our transaction loss rate over the same period.

The duration and severity of the impacts of the COVID-19 pandemic and related global economic conditions remain unknown.

Credit losses decreased by $699 million, or 115%, in 2021 compared to 2020.

(1) Credit losses for the year end December 31, 2019 were based on accounting guidance which was superseded by the adoption of Accounting Standards Update 2016-13, *Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments* (“CECL”), effective January 1, 2020.

The credit losses in the year ended December 31, 2020 were primarily associated with an increase in provisions for our loans receivable portfolio resulting from a reserve build driven by a sharp deterioration in macroeconomic projections reflecting the anticipated impact of the COVID-19 pandemic and provisions associated with originations, both of which significantly increased our then current expected credit losses, and to a lesser extent, changes in credit quality during the period.

The increase in provisions associated with macroeconomic projections in the year ended December 31, 2020 included qualitative adjustments to account for the impact of limitations in our expected credit loss models resulting from the extreme fluctuations in both the actual and projected macroeconomic conditions during the period as well as to incorporate varying degrees of merchant performance in the current environment and expected performance in future periods.

The consumer loans and interest receivable balance as of December 31, 2021 and 2020 was $3.8 billion and $2.2 billion, respectively, representing a year-over-year increase of 77% driven by growth of our installment credit products in international markets and the U.S. and, to a lesser extent, growth of PayPal Credit in international markets.

As of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] approximately [removed: 40%] [added: 57%] and [removed: 30%,] [added: 40%,] respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents.

The [added: remaining portfolio and] assets underlying the customer balances that we hold on our consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities.

[removed: If interest rates increased by] [added: A hypothetical] 100 basis [removed: points,] [added: points increase in interest rates would have resulted in a decrease in] the fair value of our [added: cash equivalents and] available-for-sale debt securities investment [removed: portfolio would have decreased] by approximately [removed: $272] [added: $161] million and [removed: $173] [added: $272] million at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively.

As of December 31, [added: 2022 and] 2021, we had [removed: $9.0] [added: $10.4] billion [added: and $9.0 billion, respectively,] in fixed rate debt with varying maturity dates.

However, the fair value of these notes fluctuates when interest rates [removed: change.][added: change, increasing in periods of declining interest rates and declining in periods of increasing interest rates.]

As of December 31, [added: 2022 and] 2021, we also had revolving credit facilities of approximately [removed: $5.2] [added: $5.7] billion [added: and $5.2 billion, respectively,] available to us.

As of December 31, [added: 2022 and] 2021, we had [removed: approximately] [added: ¥64.3 billion (approximately $491 million) and ¥11.3 billion (approximately] $98 [removed: million] [added: million), respectively,] outstanding under these credit facilities.

Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net [removed: income.][added: income (loss).]

We have significant operations internationally that are denominated in foreign currencies, primarily the British [removed: Pound,] [added: pound,] Euro, Australian [removed: Dollar,] [added: dollar,] and Canadian [removed: Dollar, subjecting] [added: dollar, which subject] us to foreign currency exchange rate [removed: risk, which] [added: risk and] may adversely impact our financial results.

We transact [removed: business] in various foreign currencies and have significant international revenues and costs.

| [removed: ] [added: ] | | | | | | | | | [removed: 54] [added: 53] | | |

We use foreign currency exchange forward contracts to protect our forecasted U.S. dollar-equivalent earnings and our investment in [removed: a] foreign [removed: subsidiary] [added: subsidiaries] from adverse changes in foreign currency exchange rates.

We designate these contracts as cash flow [added: hedges of forecasted revenues denominated in foreign currencies] and net investment hedges for accounting purposes.

The derivative’s gain or loss is initially reported as a component of [removed: accumulated other comprehensive income (“AOCI”).][added: AOCI.]

Cash flow hedges are subsequently reclassified into [removed: the financial statement line item in which the hedged item is recorded] [added: revenue] in the same period the forecasted transaction affects earnings.

The accumulated gains and losses associated with [removed: the] net investment [removed: hedge] [added: hedges] will remain in AOCI until the foreign [removed: subsidiary is] [added: subsidiaries are] sold or substantially liquidated, at which point they will be reclassified into earnings.

We considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that changes in exchange rates of [removed: 20%] [added: 10%] for all currencies could be experienced in the near term.

If the U.S. dollar weakened by [removed: 20%] [added: a hypothetical 10%] at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately [removed: $1.0 billion] [added: $710 million] and [removed: $1.1 billion] [added: $512 million] lower, [removed: respectively.][added: respectively, before considering the offsetting impact of the underlying hedged item.]

Adverse changes in exchange rates of [removed: 20%] [added: a hypothetical 10%] for all [added: foreign] currencies would have resulted in [removed: an adverse] [added: a negative] impact on income before income taxes of approximately [removed: $386] [added: $173] million and [removed: $353] [added: $196] million at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively, without considering the offsetting effect of foreign currency exchange contracts.

Foreign currency exchange contracts in place as of December 31, 2021 would have positively impacted income before income taxes by approximately [removed: $400] [added: $203] million, resulting in a net positive impact of approximately [removed: $14] [added: $7] million.

Foreign currency exchange contracts in place as of December 31, [removed: 2020] [added: 2022] would have positively impacted income before income taxes by approximately [removed: $369] [added: $144] million, resulting in a net [removed: positive] [added: negative] impact of approximately [removed: $16] [added: $29] million.

These reasonably possible adverse changes in exchange rates of [removed: 20%] [added: 10%] were applied to [removed: total] monetary [removed: assets] [added: assets, monetary liabilities,] and [removed: liabilities] [added: available-for-sale debt securities] denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.

As of [removed: both] December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] our strategic investments totaled [added: $2.1 billion and] $3.2 billion which represented approximately [removed: 20%] [added: 14%] and [removed: 17%] [added: 20%] of our total cash, cash equivalents, and short-term and long-term investment portfolio at each of those respective dates.

We are required to record all adjustments to the value of these strategic investments through our consolidated statements of [removed: income.][added: income (loss).]

As such, we [removed: anticipate] [added: expect] volatility to our net income [added: (loss)] in future periods due to changes in fair value related to our investments in marketable equity securities and changes in observable prices related to our non-marketable equity securities accounted for under the Measurement Alternative.

A hypothetical adverse change of 10% in the carrying value of our strategic [removed: investments,] [added: investments as of December 31, 2022,] which could be experienced in the near term, would have resulted in [removed: a] [added: an incremental] decrease of approximately [removed: $321] [added: $215] million to the carrying value of the [removed: portfolio as of December 31, 2021.][added: portfolio.]

We review our non-marketable equity [removed: investments] [added: securities] accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value.

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Interest rate movements affect the interest income we earn on cash and cash equivalents, time deposits, and available-for-sale debt securities and the fair value of those securities.

Changes in the fair value of our available-for-sale debt securities resulting from such interest rate changes are reported as a component of accumulated other comprehensive income (“AOCI”) and are realized only if we sell the securities prior to their scheduled maturities or the declines in fair values are due to expected credit losses.

A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the period.

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|  | | | | | | | | | 54 | | |

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Additionally, the financial success of our investments in privately held companies is typically dependent on a liquidity event, such as a public offering, acquisition, private sale, or other favorable market event providing the ability to realize appreciation in the value of the investment.

Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data, for which we assess factors such as the investees’ financial condition and business outlook, industry performance, regulatory, economic, or technological environment, and other relevant events and factors affecting the investee.

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|  | | | | | | | | | 55 | | |

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No amounts were outstanding as of December 31, 2020.

If the U.S. dollar strengthened by 20% at December 31, 2021 and 2020, the amount recorded in AOCI related to our foreign currency exchange forward contracts, before taxes, would have been approximately $1.0 billion and $1.1 billion higher, respectively.

Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data.

Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world in the markets we serve, anytime, on any platform, and using any device when sending payments or getting [removed: paid.][added: paid, including person-to-person (“P2P”) payments.]

We [added: also] believe that effective management of environmental, social, and governance (“ESG”) risks and opportunities is essential to deliver on our mission and strategy.

Our core values of [removed: Collaboration,] Inclusion, Innovation, [added: Collaboration,] and [removed: Wellness] [added: Wellness, reflected in our leadership principles,] are the driving forces behind our mission and form the foundation of our operating philosophy.

We believe that [removed: they] [added: our core values] help stimulate the creativity and engagement of our global workforce to deliver products and services designed to meet the diverse needs of our customers.

| [removed: ] [added: ] | | | | | | | | | 4 | | |

[removed: ][added: ]

PayPal’s payment solutions enable our customers to [added: connect, transact, and] send and receive [removed: payments.][added: payments, whether they are online or in person.]

We operate a global, two-sided network at scale that connects merchants and consumers with [removed: 426] [added: 435] million active accounts (consisting of [removed: 392] [added: 400] million consumer active accounts and [removed: 34] [added: 35] million merchant active accounts) across more than 200 [removed: markets.][added: markets as of December 31, 2022.]

We provide proprietary payment solutions accepted by merchants that enable the completion of payments on our [removed: payments] platform on behalf of our customers.

We offer our customers the flexibility to use their [added: PayPal or Venmo] accounts to purchase and receive payments for goods and services, as well as the ability to transfer and withdraw funds.

We enable consumers to exchange funds more safely with merchants using a variety of funding sources, which may include a bank account, a PayPal or Venmo account balance, PayPal and Venmo branded credit [added: products including our installment] products, a credit card, a debit card, certain cryptocurrencies, or other stored value products such as gift cards, and eligible [removed: credit card] rewards.

We earn revenues primarily by charging fees for completing payment transactions for our customers and other payment-related [removed: services that] [added: services, which] are typically based on the volume of activity processed on our payments platform.

We [removed: generally do not charge customers to fund or draw from their accounts; however, we] [added: also] generate revenue from customers on fees charged for foreign currency conversion, [added: for] instant transfers from their PayPal or Venmo account to their [removed: debit card or] bank [removed: account,] [added: account or debit card,] and to facilitate the purchase and sale of [removed: cryptocurrencies.][added: cryptocurrencies; however, we generally do not charge customers to fund or draw from their accounts.]

We also earn revenue by providing other value added services, which [removed: comprises] [added: are comprised primarily of] revenue earned through partnerships, interest and fees from our merchant and consumer credit products, [added: interest earned on certain assets underlying customer balances,] referral fees, subscription fees, [removed: gateway services,] and [removed: other services that we provide to our merchants and consumers.][added: gateway services.]

| [removed: ] [added: ] | | | | | | | | | 5 | | |

[removed: ][added: ]

We measure the [added: scale of our platform and the] relevance of our products and services to our customers [removed: and the performance and success of our business] through [removed: active accounts,] [added: certain metrics, including total] payment [added: volume, payment] transactions, and [removed: total payment volume:][added: active accounts:]

A platform access partner is a third party whose customers are provided access to PayPal’s platform or services through such third-party’s login credentials, including [added: individuals and] entities that utilize Hyperwallet’s payout capabilities.

- *Two-sided network—*our payments platform connecting merchants and consumers enables PayPal to offer unique end-to-end product experiences while gaining valuable insights into how [added: our] customers use our platform.

As of December 31, [removed: 2021,] [added: 2022,] we had [removed: 426] [added: 435] million active accounts, consisting of [removed: 392] [added: 400] million consumer active accounts and [removed: 34] [added: 35] million merchant active accounts in more than 200 markets around the world.

In [removed: 2021,] [added: 2022,] we processed [removed: $1.25] [added: $1.36] trillion of TPV.

| [removed: ] [added: ] | | | | | | | | | 6 | | |

- *Trusted brands—*we have built and strengthened well-recognized and trusted brands, including PayPal, Braintree, Venmo, Xoom, [added: Hyperwallet, PayPal] Zettle, [added: PayPal Honey,] and [removed: Honey.][added: Paidy.]

- *Risk and compliance management—*our enterprise risk and compliance management program [removed: and use of tokenization are] [added: is] designed to help secure customer [removed: information,] [added: information] and to help ensure we process legitimate transactions around the world, while identifying and minimizing illegal, high-risk, or fraudulent transactions.

[removed: ][added: ]

We offer alternative payment [removed: methods, including] [added: methods (including] access to credit [removed: solutions,] [added: solutions),] provide fraud prevention and risk management solutions, reduce [added: merchant] losses through proprietary protection programs, and offer tools and insights for utilizing data analytics to attract [removed: new] [added: and engage] customers and improve sales conversion.

We employ a technology and platform agnostic approach intended to enable merchants of all sizes to quickly and easily provide digital checkout [removed: online] [added: online, including through PayPal-branded checkout] and [added: unbranded card processing (primarily consisting of Braintree), as well as] in-store [added: at the point of sale,] across all platforms and [removed: devices] [added: devices,] and to securely and simply receive payments from their customers.

PayPal’s payments platform enables merchants to accept all types of online and offline payments, including those made with the PayPal and Venmo digital wallets, our consumer credit products, credit cards and debit cards, and [removed: other competitor] [added: competing] digital wallets, as well as other popular local payment methods.

We have expanded our merchant value proposition to enable payment acceptance at the point of sale through our PayPal and Venmo digital [removed: wallets, quick response (“QR”) code-based solutions,] [added: wallets] and our [added: PayPal] Zettle point of sale solutions.

Through our [removed: consumer focused] [added: consumer-focused] offerings, we provide simplified and personalized shopping experiences for consumers, including [removed: the ability to easily make] [added: easier] exchanges and returns, to help merchants drive increased conversion through higher consumer engagement.

| [removed: ] [added: ] | | | | | | | | | 7 | | |

In the United States (“U.S.”), these products are provided under a program agreement with [removed: WebBank.][added: an independent chartered financial institution.]

We believe that [removed: these] [added: our] merchant finance offerings enable us to deepen our engagement with our existing small and medium-sized merchants and expand services to new merchants by providing access to capital that may not be available [removed: effectively or efficiently] from traditional banks or other lending providers.

We provide consumers with a digital wallet that enables them to send payments to merchants more safely using a variety of funding sources, which may include a bank account, a PayPal [removed: account balance, a] [added: or] Venmo account balance, our consumer credit products, [added: a] credit [removed: cards,] [added: card, a] debit [removed: cards,] [added: card,] certain cryptocurrencies, or other stored value products such as gift cards, and eligible [removed: credit card] rewards.

We also offer consumers [removed: person-to-person (“P2P”)] [added: P2P] payment solutions through our PayPal, Venmo, and Xoom products and services.

[added: Our] Xoom [removed: is an] international money transfer service [removed: that] enables our customers to send money [removed: and prepaid mobile phone reloads to, and pay bills for,] [added: to] people around the world in a secure, fast, and cost-effective way.

P2P is [added: an important source of customer engagement and also serves as] a [removed: significant] customer acquisition channel that facilitates organic growth by enabling potential [removed: PayPal] users to establish active accounts with [removed: us] [added: PayPal or Venmo] at the time they make or receive a P2P payment.

We also [removed: simplify] [added: focus on simplifying] and [removed: personalize] [added: personalizing] shopping experiences for our consumers by offering tools for product discovery, [removed: price-tracking,] [added: price tracking,] offers, [added: convenient tracking] and [added: redemption options for their shopping rewards, and] easier exchanges and returns, which [removed: enhances] [added: help our merchants to increase] consumer engagement and sales [removed: conversion for our merchants.][added: conversion.]

We offer credit products to consumers in certain markets as a [removed: potential] funding source at [removed: checkout.][added: checkout, subject to approval of credit for the account holder.]

[removed: In addition, we have expanded our] [added: Our] consumer credit offerings [removed: to] include [added: our] buy now, pay later [removed: installment] products in the U.S., [removed: U.K.,] [added: United Kingdom (“U.K.”),] France, [added: and] Germany, [removed: Australia, Spain, Italy,] [added: among others,] and [removed: through the acquisition of Paidy,] in [removed: Japan.][added: Japan through Paidy.]

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

We help reduce the friction typically involved in cross-border commerce by offering consumers a simple payment experience and by enabling merchants to extend their reach to consumers in the global markets in which our services are available.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.

A critical element of our overall growth strategy involves increasing the engagement of our active accounts, which we expect will contribute to growth in payment transactions, total payment volume, and net revenues.

- *Merchant and consumer choice—*our branded and unbranded card processing payment solutions support an open ecosystem that provides choice to both merchants and consumers, enabling flexibility to make and receive payments using a wide variety of different funding options and digital wallet solutions.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

During 2022, we reorganized our product organization to better align with merchants and consumers to help simplify decision making and enable our teams to innovate and launch new products and features more quickly and efficiently.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

Our goal is to create the simplest checkout experience possible for consumers both online and on mobile devices.

Further, we offer consumer interest-bearing installment products for consumers in the U.S., issued by an independent chartered financial institution, and in Germany.

In the U.S., consumers may apply for our PayPal- and Venmo-branded consumer credit cards and our PayPal Credit revolving consumer credit product, which are offered through a partnership with an independent chartered financial institution.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

In the State of New York, PayPal holds a full Bitlicense issued by the New York Department of Financial Services to offer cryptocurrency services in the state.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

Our U.S. consumer interest-bearing installment product is subject to federal and state laws and is offered by an independent chartered financial institution.

These loans are originated by PayPal (Europe).

Our U.S. merchant lending products are subject to federal and state regulations and are offered by an independent chartered financial institution.

Our merchant lending products offered in Germany, France and the Netherlands are subject to the laws of Luxembourg and certain local laws, and our merchant lending product offered in the U.K. is subject to U.K. regulation.

The loans offered to European and U.K. merchants are originated by PayPal (Europe).

Our merchant lending product in Australia is subject to the laws of Australia and originated by PayPal Credit Pty Limited.

Many jurisdictions in which we operate have adopted, or are in the process of adopting, or amending data privacy legislation or regulation aimed at creating and enhancing individual privacy rights.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

As of December 31, 2022, we employed approximately 29,900 people globally, with 44% in the Americas, 43% in Asia-Pacific, and 13% in Europe and the Middle East.

Our global employees work predominantly full-time and represent nearly 150 nationalities, across 27 countries, including approximately 11,800 located in the U.S.

In 2022, we developed 12 leadership principles based on our four core values that establish a common set of expectations for all employees.

We began integrating these principles across our global talent strategy to help shape our programs throughout the employee lifecycle and achieve key business priorities.

We also remain focused on promoting the physical, mental, and financial wellness of our employees, particularly as our workforce continues to navigate changes in where and how we work.


[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

In 2022, we enhanced our survey to incorporate viewpoints on the employee experience, diversity, inclusion, equity, and belonging (“DIE&B”) efforts, and our leadership principles, including specific questions on working style and strategic direction.

Accordingly, we have implemented programs focused on inclusive hiring practices and extending our talent pipeline through targeted partnerships, reimagined our career development program for individuals and managers, extended individual coaching and mentorship programs (particularly for underrepresented and technical talent), and advanced efforts for employees to grow through self-paced and community learning experiences.

Through our global community impact program, we support our employees’ individual passions and communities by matching eligible employee donations and volunteer time with non-profit organizations up to $2,500 annually per employee.

Additional U.S. workforce diversity metrics can be found in our public EEO-1 reports and annual Global Impact Report available at https://about.pypl.com/values-in-action/reporting/default.aspx.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

Through the leadership of our Global Head of DIE&B and dedicated DIE&B team, along with functional collaboration and accountability, we are focused on strengthening existing efforts and piloting new initiatives to promote an inclusive culture.

We continue to evaluate DIE&B progress across the company and as part of the individual performance assessment under our 2022 annual incentive plan for our senior executives.

PayPal helps merchants and consumers connect, transact, and complete payments, whether they are online or in person.

PayPal is more than a connection to third-party payment networks.

We enable consumers to engage in cross-border shopping and merchants to extend their global reach while reducing the complexity and friction involved in enabling cross-border trade.

Our acquisition of Paidy, Inc. (“Paidy”) enables us to expand our buy now, pay later solutions and other capabilities in Japan.

Our acquisition of Guofubao Information Technology Co. (GoPay), Ltd., a holder of payment business licenses in China, enables us to partner with Chinese financial institutions and technology platforms to provide a more comprehensive set of payment solutions to merchants and consumers, both in China and globally.

Once a consumer is approved for credit, the product is made available as a funding source for that account holder.

The U.S. PayPal- and Venmo-branded consumer credit program is offered through Synchrony Bank.

We offer a PayPal-issued PayPal Credit product in the United Kingdom (“U.K.”) and a PayPal branded consumer credit card issued by Citigroup in Australia.

A transaction on our payments platform can involve multiple participants in addition to us, including a merchant, a consumer, and the consumer’s funding source provider.

In the State of New York, PayPal has obtained a conditional virtual currency license from the New York Department of Financial Services to offer cryptocurrency services in the state in partnership with Paxos Trust Company.

The laws and regulations applicable to the payments industry in any given jurisdiction are subject to interpretation and change.

Our merchant finance offerings are subject to the applicable laws and regulations governing those programs, which differ by jurisdiction.

The EU has adopted a comprehensive General Data Protection Regulation (the “GDPR”), which expanded the scope of the EU data protection law to foreign companies processing personal data of European Economic Area (“EEA”) individuals and imposed a stricter data protection compliance regime.

In the U.S., we are subject to privacy and information safeguarding requirements under the Gramm-Leach-Bliley Act as well as the California Consumer Privacy Act, which requires privacy protections comparable to those afforded by the GDPR, as well as the maintenance of a written, comprehensive information security program.

In Europe, the operations of our Luxembourg bank are subject to confidentiality and information safeguarding requirements under the Luxembourg Banking Act.

Global talent management

As of December 31, 2021, we employed approximately 30,900 people globally, representing approximately 150 nationalities, in approximately 30 countries, including approximately 13,100 located in the U.S.

We are focused on supporting our employees across the full employee lifecycle from recruitment to onboarding to ongoing development, and have implemented programs designed to promote their total wellness, particularly during difficult times such as the COVID-19 pandemic.

For example, in 2021, we continued to invest in employee mental wellness by providing workplace flexibility to reflect the diverse needs of our global workforce and appointing a Global Wellness Advocate.

We also evaluate employee survey responses for feedback on other key components of our culture and programs.

For example, in 2021, we focused on enhancing our employee communications and opportunities to better support ongoing remote working.

To that end, we have implemented programs focused on inclusive hiring practices, enriched virtual new hire experiences, individual coaching and mentorship programs, and ongoing learning opportunities, including unlimited access to LinkedIn Learning.

In 2021, we expanded our new employee development program with specific topical training sessions, including mobility and developing women in leadership.

We also listened to employee feedback and sought opportunities to reduce employee stress and formalized the removal of individual performance ratings as part of our annual performance review process, which we believe has led to more meaningful performance conversations.

In 2021, we recognized the ongoing impact the COVID-19 pandemic was having on our global employees.

We also enhanced our executive compensation framework and annual performance evaluations to integrate DIE&B considerations as part of the individual performance portion of our 2021 annual incentive program for our senior executives.

For the fiscal year ended December 31, [removed: 2021.][added: 2022.]

[removed: ][added: ]

As of June 30, [removed: 2021,] [added: 2022,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $342.2] [added: $80.7] billion based on the closing sale price as reported on the NASDAQ Global Select Market.

Portions of the registrant’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, [removed: 2021.][added: 2022.]

| Item 1. | | | [removed: [Business](#i09726fea9d9f449582277ae89ab03ce6_16)] [added: [Business](#i9e4dafd0cefd4f3ca6a7b3807735d972_16)] | | | [removed: [4](#i09726fea9d9f449582277ae89ab03ce6_16)] [added: [4](#i9e4dafd0cefd4f3ca6a7b3807735d972_16)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i09726fea9d9f449582277ae89ab03ce6_19)] [added: Factors](#i9e4dafd0cefd4f3ca6a7b3807735d972_19)] | | | [removed: [16](#i09726fea9d9f449582277ae89ab03ce6_19)] [added: [17](#i9e4dafd0cefd4f3ca6a7b3807735d972_19)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i09726fea9d9f449582277ae89ab03ce6_22)] [added: Comments](#i9e4dafd0cefd4f3ca6a7b3807735d972_22)] | | | [removed: [30](#i09726fea9d9f449582277ae89ab03ce6_22)] [added: [31](#i9e4dafd0cefd4f3ca6a7b3807735d972_22)] | | |

| Item 2. | | | [removed: [Properties](#i09726fea9d9f449582277ae89ab03ce6_25)] [added: [Properties](#i9e4dafd0cefd4f3ca6a7b3807735d972_25)] | | | [removed: [31](#i09726fea9d9f449582277ae89ab03ce6_25)] [added: [31](#i9e4dafd0cefd4f3ca6a7b3807735d972_25)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i09726fea9d9f449582277ae89ab03ce6_28)] [added: Proceedings](#i9e4dafd0cefd4f3ca6a7b3807735d972_28)] | | | [removed: [32](#i09726fea9d9f449582277ae89ab03ce6_28)] [added: [32](#i9e4dafd0cefd4f3ca6a7b3807735d972_28)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i09726fea9d9f449582277ae89ab03ce6_31)] [added: Disclosures](#i9e4dafd0cefd4f3ca6a7b3807735d972_31)] | | | [removed: [32](#i09726fea9d9f449582277ae89ab03ce6_31)] [added: [32](#i9e4dafd0cefd4f3ca6a7b3807735d972_31)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity [removed: Securities](#i09726fea9d9f449582277ae89ab03ce6_37)] [added: Securities](#i9e4dafd0cefd4f3ca6a7b3807735d972_37)] | | | [removed: [32](#i09726fea9d9f449582277ae89ab03ce6_37)] [added: [32](#i9e4dafd0cefd4f3ca6a7b3807735d972_37)] | | |

| Item 6. | | | [Removed and [removed: Reserved](#i09726fea9d9f449582277ae89ab03ce6_40)] [added: Reserved](#i9e4dafd0cefd4f3ca6a7b3807735d972_40)] | | | [removed: [33](#i09726fea9d9f449582277ae89ab03ce6_40)] [added: [33](#i9e4dafd0cefd4f3ca6a7b3807735d972_40)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i09726fea9d9f449582277ae89ab03ce6_43)] [added: Operations](#i9e4dafd0cefd4f3ca6a7b3807735d972_46)] | | | [removed: [33](#i09726fea9d9f449582277ae89ab03ce6_43)] [added: [33](#i9e4dafd0cefd4f3ca6a7b3807735d972_46)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i09726fea9d9f449582277ae89ab03ce6_58)] [added: Risk](#i9e4dafd0cefd4f3ca6a7b3807735d972_61)] | | | [removed: [54](#i09726fea9d9f449582277ae89ab03ce6_58)] [added: [53](#i9e4dafd0cefd4f3ca6a7b3807735d972_61)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i09726fea9d9f449582277ae89ab03ce6_61)] [added: Data](#i9e4dafd0cefd4f3ca6a7b3807735d972_64)] | | | [removed: [55](#i09726fea9d9f449582277ae89ab03ce6_61)] [added: [55](#i9e4dafd0cefd4f3ca6a7b3807735d972_64)] | | |

| Item 9. | | | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#i09726fea9d9f449582277ae89ab03ce6_64)] [added: Disclosure](#i9e4dafd0cefd4f3ca6a7b3807735d972_67)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_64)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_67)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i09726fea9d9f449582277ae89ab03ce6_67)] [added: Procedures](#i9e4dafd0cefd4f3ca6a7b3807735d972_70)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_67)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_70)] | | |

| Item 9B. | | | [Other [removed: Information](#i09726fea9d9f449582277ae89ab03ce6_70)] [added: Information](#i9e4dafd0cefd4f3ca6a7b3807735d972_73)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_70)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_73)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i09726fea9d9f449582277ae89ab03ce6_1645)] [added: Inspections](#i9e4dafd0cefd4f3ca6a7b3807735d972_76)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_1645)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_76)] | | |

| Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#i09726fea9d9f449582277ae89ab03ce6_76)] [added: Governance](#i9e4dafd0cefd4f3ca6a7b3807735d972_82)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_76)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_82)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i09726fea9d9f449582277ae89ab03ce6_79)] [added: Compensation](#i9e4dafd0cefd4f3ca6a7b3807735d972_85)] | | | [removed: [56](#i09726fea9d9f449582277ae89ab03ce6_79)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_85)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i09726fea9d9f449582277ae89ab03ce6_82)] [added: Matters](#i9e4dafd0cefd4f3ca6a7b3807735d972_88)] | | | [removed: [57](#i09726fea9d9f449582277ae89ab03ce6_82)] [added: [56](#i9e4dafd0cefd4f3ca6a7b3807735d972_88)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i09726fea9d9f449582277ae89ab03ce6_85)] [added: Independence](#i9e4dafd0cefd4f3ca6a7b3807735d972_91)] | | | [removed: [57](#i09726fea9d9f449582277ae89ab03ce6_85)] [added: [57](#i9e4dafd0cefd4f3ca6a7b3807735d972_91)] | | |

| Item 14. | | | [Principal Accounting Fees and [removed: Services](#i09726fea9d9f449582277ae89ab03ce6_88)] [added: Services](#i9e4dafd0cefd4f3ca6a7b3807735d972_94)] | | | [removed: [57](#i09726fea9d9f449582277ae89ab03ce6_88)] [added: [57](#i9e4dafd0cefd4f3ca6a7b3807735d972_94)] | | |

| Item 15. | | | [Exhibits, Financial Statement [removed: Schedules](#i09726fea9d9f449582277ae89ab03ce6_94)] [added: Schedules](#i9e4dafd0cefd4f3ca6a7b3807735d972_100)] | | | [removed: [58](#i09726fea9d9f449582277ae89ab03ce6_94)] [added: [58](#i9e4dafd0cefd4f3ca6a7b3807735d972_100)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i09726fea9d9f449582277ae89ab03ce6_184)] [added: Summary](#i9e4dafd0cefd4f3ca6a7b3807735d972_187)] | | | [removed: [122](#i09726fea9d9f449582277ae89ab03ce6_184)] [added: [126](#i9e4dafd0cefd4f3ca6a7b3807735d972_187)] | | |

*This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or [removed: intentions, such] [added: intentions (such] as those relating to future business, future results of operations or financial condition, new or planned features or services, mergers or acquisitions, or management [removed: strategies.][added: strategies).]

These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” [added: "continue,"] “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,” and other similar expressions.

We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual [removed: results] [added: results, new information,] or future events or circumstances.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

As of February 3, 2023, there were 1,131,373,298 shares of common stock outstanding.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

This report contains additional trade names and trademarks of other companies.

The use or display of other companies’ trade names or trademarks does not imply our endorsement or sponsorship of, or a relationship with these companies.

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

As of January 28, 2022, there were 1,165,004,913 shares of common stock outstanding.

Each trademark, trade name, or service mark of any other company appearing in this Annual Report on Form 10-K is, to PayPal’s knowledge, owned by such other company.

Additionally, our forward-looking statements include expectations related to anticipated impacts of the coronavirus (“COVID-19”) pandemic.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

|  | | | | | | | | | 30 | | |

We use [removed: the] [added: these] properties for executive and administrative offices, customer services and operations centers, product development offices, warehouses, and data centers.

As of December 31, [removed: 2021,] [added: 2022,] our owned and leased properties provided us with aggregate square footage as follows:

| Leased facilities | | | [removed: 1.4] [added: 2.2] | | | | | | 2.0 | | | | | | [removed: 3.4] [added: 4.2] | | |

| Total facilities | | | [removed: 2.4] [added: 3.2] | | | | | | 2.1 | | | | | | [removed: 4.5] [added: 5.3] | | |

| [removed: ] [added: ] | | | | | | | | | 31 | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

As of [removed: January 28, 2022,] [added: February 3, 2023,] there were [removed: 4,103] [added: 4,123] holders of record of our common stock.

Our stock repurchase [removed: program is] [added: programs are] intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, may also be used to make opportunistic repurchases of our common stock to reduce outstanding share count.

Any share repurchases under our stock repurchase [removed: program] [added: programs] may be made through open market transactions, block trades, privately negotiated transactions including accelerated share repurchase agreements or other means at times and in such amounts as management deems appropriate, and will be funded from our working capital or other financing alternatives.

We may terminate our stock repurchase [removed: program] [added: programs] at any time without prior notice.

The stock repurchase activity under our stock repurchase [removed: program] [added: programs] during the three months ended December 31, [removed: 2021] [added: 2022] is summarized as follows:

| [removed: ] [added: ] | | | | | | | | | 32 | | |

In June 2022, our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to $15 billion of our common stock, with no expiration from the date of authorization.

| Balance as of September 30, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 16,871 | |

| October 1, 2022 through October 31, 2022 | | | 8.2 | | | | | | $ | 85.81 | | | | | 8.2 | | | | | | | | | | | | 16,167 | | |

| November 1, 2022 through November 30, 2022 | | | 3.6 | | | | | | $ | 85.42 | | | | | 3.6 | | | | | | | | | | | | 15,861 | | |

| December 1, 2022 through December 31, 2022 | | | — | | | | | | $ | — | | | | | — | | | | | | | | | | | | 15,861 | | |

| Balance as of December 31, 2022 | | | 11.8 | | | | | | | | | | | | 11.8 | | | | | | | | | | | | $ | 15,861 | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| Balance as of September 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 6,560 | |

| October 1, 2021 through October 31, 2021 | | | — | | | | | | $ | — | | | | | — | | | | | | | | | | | | 6,560 | | |

| November 1, 2021 through November 30, 2021 | | | 1.7 | | | | | | $ | 186.67 | | | | | 1.7 | | | | | | | | | | | | 6,236 | | |

| December 1, 2021 through December 31, 2021 | | | 6.3 | | | | | | $ | 187.56 | | | | | 6.3 | | | | | | | | | | | | 5,060 | | |

| Balance as of December 31, 2021 | | | 8.0 | | | | | | | | | | | | 8.0 | | | | | | | | | | | | $ | 5,060 | |

The audited consolidated financial statements covering the years ended December 31, [added: 2022,] 2021, [removed: 2020,] and [removed: 2019] [added: 2020] and accompanying notes listed in Part IV, Item 15(a)(1) of this Form 10‑K are included in this report.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

|  | | | | | | | | | 55 | | |

*Evaluation of disclosure controls and [removed: procedures.*] [added: procedures.*] Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), our principal executive officer and our principal financial officer have concluded that as of December 31, [removed: 2021,] [added: 2022,] the end of the period covered by this report, our disclosure controls and procedures were effective.

Based on its evaluation under the framework in *Internal Control - Integrated Framework*, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2021] [added: 2022] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Form 10-K.

In October 2021, we completed our acquisition of Paidy, Inc. (“Paidy”).

Based upon Securities and Exchange Commission staff guidance, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting for the first year of acquisition.

We have excluded Paidy from our assessment of internal control over financial reporting as of December 31, 2021.

Paidy is a wholly-owned subsidiary whose total revenue and assets, excluding goodwill and intangibles, represented less than 1% of our total consolidated revenue and consolidated assets for the year ended and as of December 31, 2021.

Incorporated by reference from our Proxy Statement for our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2021.][added: 2022.]

Incorporated by reference from our Proxy Statement for our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2021.][added: 2022.]

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

|  | | | | | | | | | 56 | | |

Incorporated by reference from our Proxy Statement for our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2021.][added: 2022.]

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

|  | | | | | | | | | 56 | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

Incorporated by reference from our Proxy Statement for our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2021.][added: 2022.]

Incorporated by reference from our Proxy Statement for our [removed: 2022] [added: 2023] Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, [removed: 2021.][added: 2022.]

| [removed: ] [added: ] | | | | | | | | | 57 | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| [Report of Independent Registered Public Accounting [removed: Firm](#i09726fea9d9f449582277ae89ab03ce6_97)] [added: Firm](#i9e4dafd0cefd4f3ca6a7b3807735d972_103)] (PCAOB ID 238) | | | [removed: [59](#i09726fea9d9f449582277ae89ab03ce6_97)] [added: [59](#i9e4dafd0cefd4f3ca6a7b3807735d972_103)] | | |

| [Consolidated Balance [removed: Sheets](#i09726fea9d9f449582277ae89ab03ce6_100)] [added: Sheets](#i9e4dafd0cefd4f3ca6a7b3807735d972_106)] | | | [removed: [61](#i09726fea9d9f449582277ae89ab03ce6_100)] [added: [61](#i9e4dafd0cefd4f3ca6a7b3807735d972_106)] | | |

[removed: | [Consolidated Statements of Income](#i09726fea9d9f449582277ae89ab03ce6_103) | | | [62](#i09726fea9d9f449582277ae89ab03ce6_103) | | |][added: CONSOLIDATED STATEMENTS OF INCOME (LOSS)]

[removed: | [Consolidated Statements of Comprehensive Income](#i09726fea9d9f449582277ae89ab03ce6_106) | | | [63](#i09726fea9d9f449582277ae89ab03ce6_106) | | |][added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)]

| [Consolidated Statements of Stockholders’ [removed: Equity](#i09726fea9d9f449582277ae89ab03ce6_109)] [added: Equity](#i9e4dafd0cefd4f3ca6a7b3807735d972_115)] | | | [removed: [64](#i09726fea9d9f449582277ae89ab03ce6_109)] [added: [64](#i9e4dafd0cefd4f3ca6a7b3807735d972_115)] | | |

| [Consolidated Statements of Cash [removed: Flows](#i09726fea9d9f449582277ae89ab03ce6_112)] [added: Flows](#i9e4dafd0cefd4f3ca6a7b3807735d972_118)] | | | [removed: [65](#i09726fea9d9f449582277ae89ab03ce6_112)] [added: [65](#i9e4dafd0cefd4f3ca6a7b3807735d972_118)] | | |

[removed: | [Notes to Consolidated Financial Statements](#i09726fea9d9f449582277ae89ab03ce6_115) | | | [67](#i09726fea9d9f449582277ae89ab03ce6_115) | | |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)]

| [Schedule II—Valuation and Qualifying [removed: Accounts](#i09726fea9d9f449582277ae89ab03ce6_178)] [added: Accounts](#i9e4dafd0cefd4f3ca6a7b3807735d972_181)] | | | [removed: [117](#i09726fea9d9f449582277ae89ab03ce6_178)] [added: [121](#i9e4dafd0cefd4f3ca6a7b3807735d972_181)] | | |

| [3. Exhibits Required by Item 601 of Regulation [removed: S-K](#i09726fea9d9f449582277ae89ab03ce6_181)] [added: S-K](#i9e4dafd0cefd4f3ca6a7b3807735d972_184)] | | | [removed: [118](#i09726fea9d9f449582277ae89ab03ce6_181)] [added: [122](#i9e4dafd0cefd4f3ca6a7b3807735d972_184)] | | |

| [removed: ] [added: ] | | | | | | | | | 58 | | |

We have audited the accompanying consolidated balance sheets of PayPal Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the related consolidated statements of [removed: income,] [added: income (loss),] of comprehensive [removed: income,] [added: income (loss),] of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, [removed: 2021] [added: 2022] listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021] [added: 2022] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses on financial instruments in [removed: 2020 and the manner in which it accounts for leases in 2019.][added: 2020.]

| [removed: ] [added: ] | | | | | | | | | 59 | | |

As described in Notes 1 and 11 to the consolidated financial statements, as of December 31, [removed: 2021,] [added: 2022,] the Company recorded total loans and interest receivable of [removed: $4,846] [added: $7,431] million, net of an allowance of [removed: $491] [added: $598] million.

The allowance for loans receivable is primarily based on expectations of credit losses based on historical lifetime loss data as well as macroeconomic forecasts applied to the [removed: portfolio, which is segmented by factors such as geographic region, delinquency and vintage.][added: portfolio.]

[removed: Management applies] [added: The forecasted] macroeconomic factors [removed: such as forecasted trends in unemployment rates, which] are sourced externally, using a single scenario to reflect the economic conditions applicable to a particular period.

The principal considerations for our determination that performing procedures relating to the allowance for loans receivable is a critical audit matter are (i) the high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence relating to certain models which apply macroeconomic forecasts to estimate expected credit losses; and (ii) the audit effort involved [added: in] the use of professionals with specialized skill and knowledge.

| [removed: ] [added: ] | | | | | | | | | 60 | | |

| | | | [added: 2022 | | | | | |] 2021 | | | | | | 2020 | | |

| Cash and cash equivalents | | | $ | [added: 7,776 | | | | | $ |] 5,197 | | | | | $ | 4,794 | |

| Short-term investments | | | [removed: 4,303] [added: 3,092] | | | | | | [removed: 8,289] [added: 4,303] | | |

| Accounts receivable, net | | | [removed: 800] [added: 963] | | | | | | [removed: 577] [added: 800] | | |

| Loans and interest receivable, net of allowances of [removed: $491] [added: $598] and [removed: $838] [added: $491] as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively | | | [removed: 4,846] [added: 7,431] | | | | | | [removed: 2,769] [added: 4,846] | | |

| Funds receivable and customer accounts | | | [removed: 36,141] [added: 36,357] | | | | | | [removed: 33,418] [added: 36,141] | | |

| Prepaid expenses and other current assets | | | [removed: 1,287] [added: 1,898] | | | | | | [removed: 1,148] [added: 1,287] | | |

| Total current assets | | | [removed: 52,574] [added: 57,517] | | | | | | [removed: 50,995] [added: 52,574] | | |

| Long-term investments | | | [removed: 6,797] [added: 5,018] | | | | | | [removed: 6,089] [added: 6,797] | | |

| Property and equipment, net | | | [removed: 1,909] [added: 1,730] | | | | | | [removed: 1,807] [added: 1,909] | | |

| Goodwill | | | [removed: 11,454] [added: 11,209] | | | | | | [removed: 9,135] [added: 11,454] | | |

| Intangible assets, net | | | [removed: 1,332] [added: 788] | | | | | | [removed: 1,048] [added: 1,332] | | |

| Other assets | | | [removed: 1,737] [added: 2,455] | | | | | | [removed: 1,305] [added: 1,737] | | |

| Total assets | | | $ | [removed: 75,803] [added: 78,717] | | | | | $ | [removed: 70,379] [added: 75,803] | |

| Accounts payable | | | $ | [removed: 197] [added: 126] | | | | | $ | [removed: 252] [added: 197] | |

| Funds payable and amounts due to customers | | | [removed: 38,841] [added: 40,107] | | | | | | [removed: 35,418] [added: 38,841] | | |

| Accrued expenses and other current liabilities | | | [removed: 3,755] [added: 4,055] | | | | | | [removed: 2,648] [added: 3,755] | | |

| Income taxes payable | | | [removed: 236] [added: 813] | | | | | | [removed: 129] [added: 236] | | |

| Total current liabilities | | | [removed: 43,029] [added: 45,101] | | | | | | [removed: 38,447] [added: 43,029] | | |

| [Notes to Consolidated Financial Statements](#i9e4dafd0cefd4f3ca6a7b3807735d972_121) | | | [67](#i9e4dafd0cefd4f3ca6a7b3807735d972_121) | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

The loss models incorporate various portfolio attributes, as well as macroeconomic factors such as forecasted trends in unemployment, retail e-commerce sales, and household disposable income.

February 9, 2023

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| | | | 2022 | | | | | | 2021 | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| Net income (loss) | | | $ | 2,419 | | | | | $ | 4,169 | | | | | $ | 4,202 | |

| Net investment hedges CTA (losses) gains, net | | | (25) | | | | | | — | | | | | | 55 | | |

| Tax benefit on net investment hedges CTA losses, net | | | 6 | | | | | | — | | | | | | — | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| Tax benefit on net investment hedges CTA losses, net | | | — | | | | | | — | | | | | | — | | | | | | 6 | | | | | | — | | | | | | — | | | | | | 6 | | |

| Balances at December 31, 2022 | | | 1,136 | | | | | | $ | (16,079) | | | | | $ | 18,327 | | | | | $ | (928) | | | | | $ | 18,954 | | | | | $ | — | | | | | $ | 20,274 | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

| Net income (loss) | | | $ | 2,419 | | | | | $ | 4,169 | | | | | $ | 4,202 | |

| Transaction and credit losses | | | 1,572 | | | | | | 1,060 | | | | | | 1,741 | | |

| Purchases and originations of loans receivable | | | (28,170) | | | | | | (13,420) | | | | | | (6,098) | | |

| Principal repayment of loans receivable | | | 24,903 | | | | | | 11,826 | | | | | | 6,392 | | |

| Collateral posted related to derivative instruments, net | | | (19) | | | | | | 336 | | | | | | (327) | | |

| Other investing activities | | | 187 | | | | | | — | | | | | | — | | |

| Collateral received related to derivative instruments, net | | | (6) | | | | | | 207 | | | | | | (38) | | |

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

[Table of](#i9e4dafd0cefd4f3ca6a7b3807735d972_7) [](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)[Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

In the first quarter of 2022, we terminated Paidy’s legacy debt structure and replaced it with a new credit agreement executed in February 2022.

As a result, we no longer have any consolidated VIEs as of December 31, 2022.

See “Note 12—Debt” for additional information.

[Table of Contents](#i9e4dafd0cefd4f3ca6a7b3807735d972_7)

Reclassifications

Beginning with the fourth quarter of 2022, we reclassified certain cash flows related to our collateral security arrangements for derivative instruments from cash flows from operating activities to cash flows from investing activities and cash flows from financing activities within the consolidated statements of cash flows.

Prior period amounts have been reclassified to conform to the current period presentation.

The current period presentation classifies all changes in collateral posted and collateral received related to derivative instruments on our consolidated statements of cash flows as cash flows from investing activities and cash flows from financing activities, respectively.

We believe that the current period presentation provides a more meaningful representation of the nature of the cash flows and allows for greater transparency as the cash flows related to the derivatives impact operating cash flows upon settlement exclusive of the offsetting cash flows from collateral.

The following tables present the effects of the changes on the presentation of these cash flows to the previously reported consolidated statements of cash flows:

| | | | As Previously Reported (1) | | | | | | Adjustments | | | | | | Reclassified | | |

| Net cash provided by (used in): | | | | | | | | | | | | | | | | | |

| Operating activities(2) | | | $ | 6,340 | | | | | $ | (543) | | | | | $ | 5,797 | |

| Investing activities(3) | | | (5,485) | | | | | | 336 | | | | | | (5,149) | | |

| Financing activities(4) | | | (764) | | | | | | 207 | | | | | | (557) | | |

| Effect of exchange rates on cash, cash equivalents, and restricted cash | | | (102) | | | | | | — | | | | | | (102) | | |

As described in Management’s report on internal control over financial reporting, management has excluded Paidy, Inc. from its assessment of internal control over financial reporting as of December 31, 2021 because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded Paidy, Inc. from our audit of internal control over financial reporting.

Paidy, Inc. is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

February 3, 2022

| Noncontrolling interest | | | — | | | | | | 44 | | |

| Total equity | | | 21,727 | | | | | | 20,063 | | |

| | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balances at December 31, 2018 | | | 1,174 | | | | | | $ | (5,511) | | | | | $ | 14,939 | | | | | $ | 78 | | | | | $ | 5,880 | | | | | $ | — | | | | | $ | 15,386 | |

| Adoption of lease accounting standard | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3 | | | | | | — | | | | | | 3 | | |

| Purchase of noncontrolling interest | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 44 | | | | | | 44 | | |

| Net investment hedge CTA gain | | | | | | | | | | | | | | | | | | | | | 55 | | | | | | | | | | | | | | | | | | 55 | | |

| Changes in loans and interest receivable held for sale, net | | | — | | | | | | — | | | | | | 4 | | |

| Changes in principal loans receivable, net | | | (1,594) | | | | | | 294 | | | | | | (1,631) | | |

These estimates may change as new events occur, and as additional information surrounding the continued impact of the novel coronavirus (“COVID-19”) pandemic becomes available.

Actual results could differ from these estimates and any such differences may be material to our financial statements.

Prior to January 1, 2020, this assessment with respect to our available-for-sale debt securities took into account the severity and duration of the decline in value, our intent to sell the security, whether it was more likely than not we would be required to sell the security before recovery of its amortized cost basis, and whether we expected to recover the entire amortized cost basis of the security (that is, whether a credit loss existed).

Loss curves are generated using historical loss data for each loan portfolio and are applied to segments of each portfolio, categorized by factors such as geographic region, first borrowing versus repeat borrowing, delinquency, credit rating, and vintage, which vary by portfolio.

We utilize externally sourced macroeconomic scenario data to supplement our historical information due to the limited period in which our credit product offerings have been in existence.

Our consumer receivables consist of revolving products, which do not have a contractual term, and installment products.

In 2020, the reasonable and supportable forecast period for revolving consumer products was based only on externally sourced data due to the lack of availability of historical data, and in 2021, it was updated to reflect historical loss experience with the portfolio.

This change did not result in a material impact to the reserve.

Prior to January 1, 2020, the allowance for our consumer loans receivable was primarily based on forecasted principal balance delinquency rates (“roll rates”).

Roll rates are the percentage of balances which we estimate would migrate from one stage of delinquency to the next based on our historical experience, as well as external factors such as estimated bankruptcies and levels of unemployment.

Roll rates were applied to the principal amount of our consumer receivables for each stage of delinquency, from current to 179 days past the payment due date, to estimate the principal loans which had incurred losses and were probable to be charged off.

For merchant loans and advances receivable, the allowance was primarily based on principal balances, forecasted delinquency rates, and recoveries through the use of a vintage-based loss forecasting model.

The determination of delinquency, from current to 179 days past due, for principal balances related to merchant receivables outstanding was based on the current expected or contractual repayment period of the loan or advance and interest or fixed fee as compared to the original expected or contractual repayment period.

The allowance for loss against interest receivable was primarily determined by applying historical average customer account roll rates to the interest receivable balance in each stage of delinquency to project the value of accounts that had incurred losses and were probable to be charged off.

The allowance for fees receivable was primarily based on fee balances, forecasted delinquency rates, and recoveries through the use of a vintage-based loss forecasting model.

The Company adopted ASU 2016-02, *Leases* (Topic 842) effective January 1, 2019, using a modified retrospective basis and applied the optional practical expedients related to the transition.

Our financial assets and liabilities are valued using market prices on both active markets (Level 1) and less active markets (Level 2).

Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2 instrument valuations are obtained from quoted prices for identical instruments in less active markets, readily available pricing sources for comparable instruments, or models using market observable inputs.

In 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, *Reference Rate Reform* (Topic 848): *Facilitation of the Effects of Reference Rate Reform on Financial Reporting*.

This amended guidance provides transition relief for the accounting impact of reference rate reform.

For a limited period, this guidance provides optional expedients and exceptions for applying GAAP to certain contract modifications, hedging relationships, and other transactions affected by a reference rate expected to be discontinued due to reference rate reform.

The amended guidance is effective through December 31, 2022.

Our exposure to London Interbank Offered Rate (“LIBOR”) is primarily limited to an insignificant portion of our available-for-sale debt securities and, accordingly, we do not expect reference rate reform to have a material impact on our consolidated financial statements.

Our seller protection programs provide protection to merchants against claims that a transaction was not authorized by the buyer or claims that a purchased item was not received by covering the seller for the full amount of the payment on eligible sales.

In our partnership agreement with Synchrony, in addition to the revenue share we earn, we also recognized revenue for transition servicing activities which we performed on their behalf through the second quarter of 2019 using a relative selling price determined through the adjusted market assessment approach.

| [removed: ] [added: ] | | | | | | | | | [removed: 122] [added: 126] | | |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February [removed: 3, 2022.][added: 9, 2023.]

[removed: Rainey,] [added: Schulman, Gabrielle Rabinovitch,] Bimal Patel, Brian Y.

Karbowski, and each or any one of them, each with the power of substitution, his or her attorney-in-fact, to sign any amendments to this report, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his [added: or her] substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February [removed: 3, 2022.][added: 9, 2023.]

| | | | President, Chief Executive Officer and Director | | | | | | | | | [removed: Chief] [added: Acting Chief] Financial Officer and [removed: Executive] [added: Senior] Vice President, [removed: Global Customer Operations] [added: Investor Relations and Treasurer] | | |

| By: | | | */s/ Daniel H. Schulman* | | | | | | By: | | | */s/ Gabrielle Rabinovitch* | | |

| | | | Daniel H. Schulman | | | | | | | | | Gabrielle Rabinovitch | | |

Schulman, John D.

| By: | | | */s/ Daniel H. Schulman* | | | | | | By: | | | */s/ John D. Rainey* | | |

| | | | Daniel H. Schulman | | | | | | | | | John D. Rainey | | |