emily: from the earliest days, paypal's story is a silicon valley legend. now, this payment giant is in the midst of a makeover. >> it is regeneration. emily: preparing for what it believes is a revolution in commerce. >> the market could bela as $25 trillion. emily: what does mobile wallets and a growing consumer class mean for the future of this newly independent, publicly traded company? that is all coming up when we take you inside paypal. i am emily chang and welcome to a bloomberg special, "inside paypal."

♪ emily: after 13 years, e-bay's crown jewel is going out on its own again. we give you an inside look at the payment processor's business to show you what the future holds for mobile payments and paypal. but first, even if you have never shopped on ebay, you have probably used paypal without knowing it. i recently went on a search to find out the ways you can use paypal in the wild. take a look. here at whole foods, an apple pay partner, paypal's breakthrough technology actually powers every single apple pay transaction. ok, thanks.

i just hold the phone up here, i will input the pass code in. paypal technology also powers transactions for airbnb and taskrabbit. you can use your paypal account to order an uber. speaking off, let me call a car. paypal is spending big on acquisitions, betting big on the move to mobile. >> mobile is really driving one of the most fundamental shift in human behavior we have ever seen. emily: the shift to mobile is still in its infancy. figuring out how people will spend money in the future may be paypal's biggest challenge yet. these twentysomethings may look like they are just texting. >> and then how much was it? >> $25.

emily: they're are actually paying each other back for lunch. it allows users to transfer money from one bank account to another. separate checks no longer necessary. the expansion of mobile technology has analysts calling for growth in mobile payments, a massive opportunity and challenge for a payment giant like paypal. >> the biggest hurdles paypal will face going forward is reinventing the brand and themselves as a company at the forefront of the payment space. emily: total transaction value is predicted to grow 43% annually over the next five years, hitting $4 trillion by 2020. when mobile purchases will make up about 7% of all transactions. >> i think the runway is wide.

emily: idc breaks down mobile payments into four categories. mobile commerce or buying goods online using your mobile device, nfc payments for things in stores using apple pay or android pay, and barcode payments where a barcode is scanned at the point-of-sale. idc expects all four mobile payment types to have growth through 2020. paypal has invested heavily in mobile, buying startups and building products that facilitate transactions and all double payment categories and competition is heating up. >> investors are really looking for this to get even more competitive as we have apple, google coming into the marketplace and there is always other smaller players. like square and stripe. emily: the ceo wants the mobile presence to be different.

>> we are working with merchants like subway and burger king where a consumer can use their mobile phone to order ahead, to skip the line, to get loyalty. it is not just tap and pay, it is a value proposition change. >> take vacation back. emily: efforts to simplify mobile transactions are already paying off. >> the strength in working with paypal comes down to mobile. mobile now makes up more than 20% of our total sales at hsn. >> consumers really value being able to book travel without typing in a lot of credit card information through secure means. paypal has been extremely popular with our consumers. emily: to stay at the forefront, paypal will rely on young developers to innovate new features and create fresh usage for payment technology. >> i love the social feed. it is one of those things where a lot of people say "why would i share my payments?" but it is so fun to scroll through the feed and check up on people and see what they are up to.

emily: trading a penny for your thoughts is a brave new world. just how big and how brave paypal's new world turns out to be depends on its ability to expand into new markets. how does paypal plan to quickly reach consumers in india, the philippines, and mexico? we take a look coming up.

♪ emily: paypal has long facilitated payments across borders but now that the company has separated from ebay, international growth is paramount to an independent paypal's bottom line. >> the payment business is very tricky to do in emerging markets. there is a lot of work that has to be done but that globally is where i think a lot of the growth is for a lot of players. emily: paypal has big plans to expand to the digital remittance industry and an impact on the movement of money around the world. once a week, hong kong's domestic helpers converge on the city on their day off to run errands, shop, and send money to relatives at home. it is a long observed ritual that could soon be obsolete. >> if you want to send money to a loved one overseas, you stand in line, you give cash, you know, there is a large percentage of the cash that is taken to send money to someone

overseas who stands in line to get cash in a high crime area. we think that technology can fundamentally change that equation. emily: many companies are working to change the way consumers move money internationally and paypal is one of them. with operations in 203 countries, the company is expanding, and tackling regulatory challenges in markets all over the world. >> what we do in one country will not always be the same in another. some require you to keep the data in countries. you have to set up servers and data centers within the country in order to operate. so just the operational impact can sometimes be quite extensive. emily: in 2014, paypal expanded into 10 more countries, capitalizing on a potential 80 million users according to euro monitor international. this year, the company leapt into the international remitted assistance by requiring san francisco-based money transferring, acquiring the san francisco money-based transferring company xoom. expansion into developing markets is crucial to paypal's long-term growth.

>> the xoom acquisition is a great example of the broad reach of that payments are making. there are a lot of underserved customers in the payment space. emily: the idea consumers could soon have a cheaper, easier, cashless way to use money around the world is a game-changer. but there are hurdles. paypal relies on the traditional banking system to complete international transactions, meaning when banks shut down, paypal does also, as one greek startup founder found first hand. >> we depend on web transactions, so having a block imposed on the difficult gateways actually prevents our operation. emily: despite the challenges, the vision of a simpler digital payment system looks achievable and the opportunities for growth and the international business is limitless.

>> one of the things that gets us so excited is for as fast as we have grown, we still think we have 90% of the world's transactions left to digitize. it is a really, really encouraging thing for us. emily: for all of the optimism about limitless potential for international growth, competition is also on the rise. >> of course, i am talking about apple pay. >> the biggest competitors are just coming into markets now and that would be apple pay and google. i think the marketplace has been waiting to see what these two big tech giants do in the mobile payment space. emily: how does paypal compete against the flood of startups and tech behemoths like apple and google entering the market? they say a reputation as a

secure digital payment processor is the key. >> for sure, i would also say it is a big part of their brand equity. emily: paypal processes more than $235 billion in transactions a year for 165 million customers and 10 million merchants. all of that volume creates unprecedented security challenges. >> bottom line, i am not sure if there is anything -- emily: paypal has several hundred security experts working in the u.s., asia, europe, and israel. it is that army that has protected paypal from a major cyber security breach. >> the fact that they have not disclosed a major attack in a major breach of consumer information is a good sign. emily: that doesn't mean the bad guys aren't trying. >> paypal would be a real prize for any of them. emily: which is why they are spending big on making sure no one gets that prize. what are you doing to ensure the security of transactions? >> we invest heavily in security and our goal is to be world-class in being able to protect ourselves. emily: that includes spending $60 million on israeli security

firms to help customers predict cyber attacks and another $285 million for a cloud payment company and $800 million for payment platform brain tree which powers payments for everything from apple pay to airbnb. paypal has been criticized for innovating through acquisition. but it's deep pockets could be its biggest asset as an independent company. >> fraud detection is huge. i think it will propel them over the next decade. emily: and keep paypal relevant. the man charged with securing paypal's relevance is the new ceo, dan schulman.

i got a chance to sit down with schulman just minutes after the stock started trading on the nasdaq. and asked about his strategy for rivals as well is what it is like dealing with activist investor carl icahn who pushed for the spilt before it happened.

>> i literally just met the guy for the first time. he seems great. he was wearing cowboy boots. seems very confident. seems like he is excited to take the company forward. emily: the man leading paypal into the future is known for his unique look and for expanding international footprints like american express. >> he has mobile experience, he

has technology experience, understands payment. he is a seasoned, global leader. emily: will that be enough to keep paypal on top in an ever-changing landscape? i sat down with paypal's new ceo and asked what paypal can do now without ebay. dan: being an independent company changes some things but not others. the thing we will always focus on is how do we innovate for our customers going forward. being an independent company allows us to be a true neutral third party. we are the largest digital payments platform maybe in the world and by being neutral, it allows us to partner with retailers and others that maybe we couldn't have were we a part of ebay. being truly neutral and focused on customers is a huge advantage. emily: you work with apple and google and compete against them. apple is doing apple pay.

what is the biggest value for paypal in mobile that these guys don't have? dan: one of the things we have that no other player has is we are truly an agnostic platform. we integrate any payment type for merchants. not just the paypal digital wallet, which has 169 million customers around the world, but we also integrate apple pay into that or other forms of payment. we really want to be a full-service payment partner for merchants and being technology agnostic, operating system agnostic, gives us a tremendous advantage. emily: apple pay, though, has so many credit cards, so many users. they have all of our information. how do you compete? dan: paypal has been around for 15 years and we have had competition throughout our 15-year period. from the time we were acquired by ebay, competition year in and out and by focusing on the needs of customers, whether they be consumers or merchants and

innovating around that, we have grown to be 169 million customers across the world. last year, we processed 4 billion transactions and we partner with a lot of people so we don't always compete. we partner. in fact, when apple pay announced, over half of the partners for part of apple pay integrated through the paypal platform. emily: let's talk about facebook. facebook is sort of the dark horse. the guy who used to run paypal is running facebook messenger. what about facebook and other messenger services that could try to get a cut of what you are taking? dan: paypal is the world's largest peer-to-peer platform. venmo is growing. it is the way the millenial generation moves and uses money. our platform allows people to transfer money easily and inexpensively. and we can partner with any of the different platforms to help them to do that. i think in our future, there will definitely be a lot of partnerships with technology companies going forward. if you think about it, we have 17,000 people across the world and all we do is focus on

digital payments. they have platform advantages, we have platform advantages. potentially bringing those two platforms together in a partnership can create very powerful value propositions for consumers. emily: what is it like working with carl icahn as a shareholder? and he is not just any shareholder. dan: no, he is not, but we have shareholders across the world right now from our early trading.

there is a lot of interest in paypal. what we really want to focus on is creating a great company going forward. focus on customers, what customers need. if we can do that, hopefully it will be a great investment for all shareholders. emily: what about carl specifically? have you talked? dan: we have not. i have been on a roadshow speaking to tens and tens of different investors, getting their feedback, learning what they expect from us, what growth opportunities they have for us. it has been tremendously valuable i think for both parties. emily: are you worried about potential agitation? dan: i am not. carl and other investors are all the same. they want great value to be delivered for investors and great value to be delivered for customers. as long as we stay focused on that, that is the thing for us to do. emily: a lot of people talk about paypal as an acquisition target. alibaba would love to buy it. what do you think is going to happen? dan: we were split apart to create two great companies. we were set up to really capitalize on the changing chessboard that is going on in

digital payments right now and we have tremendous opportunity. our addressable market now could be as large as $25 trillion and focusing on that and delivering value to those customers will deliver value as an independent company to shareholders. emily: you see paypal staying independent. dan: i do. emily: you are working on an acquisition at xoom. you bought braintree a few years ago.

what other kinds of acquisitions might we see? what are you looking at? dan: we look at opportunities organically and through potentially using our balance sheet. we have a strong sheet. we have launched with no debt. obviously that is a competitive weapon for us. we did our first announcement of an acquisition, which allows us to get to the international remittance market. it is a $600 billion market that i think is ripe for disruption. we think it is possible for people to have an easier way for people to send money to their family. we think about organic, home-grown solutions like one touch and looking across the payment spectrum of potential companies to acquire. emily: some of the critics say that paypal has innovated by acquisition and there has not been a lot of innovation from within. dan: take a look at what we announced on our earnings a couple days ago.

we see expansion of one touch, which is the biggest improvement in the checkout experience in the past five years. that was started with our braintree platform but quickly expanded to the rest of the paypal payment flows. we could not have done that if we had not upgraded our payment platform within paypal significantly. we've spent the last couple of years upgrading our payment platform, upgrading our technology stack. and we can now innovate what used to take us months and months we can do in days and sometimes minutes. emily: most important international markets for you. dan: we have half of our revenues from overseas right now. we are fully a global company . if you look at every single region across the company, they

are all growing. emily: he has his work cut out for him as he navigates the untamed waters of the digital payment industry. competition is fierce but as chairman of the board john donahue points out, paypal has laid the groundwork to stay ahead. john: the thing you have to keep in mind is payments is a really hard business. paypal guarantees every transaction for the consumer and merchant. paypal has proprietary risk models that allow it to process $240 billion of volume with less than 3/10 of a loss. while guaranteeing performance. paypal has almost 10,000 customer support representatives that are there if you have a problem. i think the real future is to leverage that and allow many of these technology partners to build on top of them. emily: the fast, simple, affordable movement of currency is at the heart of a thriving global economy and as an independent company, paypal is in a position to impact consumers and markets worldwide. it is up to paypal to take advantage of this position to win consumers and markets all around the world. i am emily chang for bloomberg in san francisco.

♪

♪ martha: i was told when i started that i could not be a director because i was a woman. and i have been directing now for many years, but certainly not as frequently as i would have had i been a man. maria: i was going into meetings on projects with people as a featured director that would work with academy award nominated actors. so i should have been taken seriously in these meetings. but i wasn't. it was always a sense of, can you really do this? that a man could do it better. lexi: people would say things like your movie would get a bigger distribution deal had you been a man.