In June 2023, we entered into a multi-year agreement with a global investment firm to sell up to €40 billion of our eligible consumer installment receivables portfolio, including a forward-flow arrangement for the sale of future originations. Loans and interest receivable, held for sale are recorded at the lower of cost or fair value, determined on an aggregate basis, with valuation changes and any associated charge-offs recorded in restructuring and other on our condensed consolidated statements of income (loss).

We offer revolving and installment credit products as a funding option for consumers in certain checkout transactions on our payments platform. Our revolving credit product consists of PayPal Credit in the U.K., which is made available to consumers as a funding source in their PayPal wallet once they are approved for credit. Additionally, we offer installment credit products at the time of checkout in various markets, including the U.S., several markets across Europe, Australia, and Japan. We offer non interest-bearing installment credit products in these markets as well as interest-bearing installment credit products in the U.S. and Germany. We purchase receivables related to interest-bearing installment loans extended to U.S. consumers by an independent chartered financial institution (“partner institution”) and are responsible for the servicing functions related to that portfolio. During the three months ended March 31, 2024 and 2023, we purchased approximately $25 million and $268 million in consumer receivables, respectively. As of March 31, 2024 and December 31, 2023, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $4.5 billion and $4.8 billion, respectively, net of the participation interest sold to the partner institution of $9 million and $14 million, respectively.

We closely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk. Credit risk management begins with initial underwriting and continues through the full repayment of a loan. To assess a consumer who requests a loan, we use, among other indicators, internally developed risk models using detailed information from external sources, such as credit bureaus where available, and internal data, including the consumer’s prior repayment history with our credit products where available. We use delinquency status and trends to assist in making (or, for interest-bearing installment loans in the U.S., to assist the partner institution in making) new and ongoing credit decisions, to adjust our models, to plan our collection practices and strategies, and in determining our allowance for consumer loans and interest receivable.

The following tables present the delinquency status and gross charge-offs of consumer loans and interest receivable by year of origination. The amounts are based on the number of days past the billing date for revolving loans or contractual repayment date for installment loans. The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable.


March 31, 2024
(In millions, except percentages)

	Revolving Loans Amortized Cost Basis		Installment Loans Amortized Cost Basis
			2024		2023		2022		2021		2020		Total		Percent
Consumer loans and interest receivable:
Current	$	2,193	$	1,185	$	726	$	189	$	—	$	—	$	4,293	95.9%
30 - 59 Days	27		12		14		3		—		—		56		1.2%
60 - 89 Days	18		1		21		3		—		—		43		1.0%
90 - 179 Days	41		—		41		4		—		—		86		1.9%
Total	$	2,279	$	1,198	$	802	$	199	$	—	$	—	$	4,478	100%
Gross charge-offs for the three months ended March 31, 2024	$	34	$	—	$	58	$	7	$	—	$	—	$	99


December 31, 2023
(In millions, except percentages)

	Revolving Loans Amortized Cost Basis		Installment Loans Amortized Cost Basis
			2023		2022		2021		2020		2019		Total		Percent
Consumer loans and interest receivable:
Current	$	2,225	$	2,045	$	289	$	—	$	—	$	—	$	4,559	95.4%
30 - 59 Days	27		34		4		1		—		—		66		1.4%
60 - 89 Days	20		26		4		—		—		—		50		1.0%
90 - 179 Days	41		55		8		1		—		—		105		2.2%
Total	$	2,313	$	2,160	$	305	$	2	$	—	$	—	$	4,780	100%
Gross charge-offs for the year ended December 31, 2023	$	125	$	101	$	140	$	5	$	—	$	—	$	371


	March 31, 2024						March 31, 2023
	Consumer Loans Receivable		Interest Receivable		Total Allowance		Consumer Loans Receivable		Interest Receivable		Total Allowance
	(In millions)
Beginning balance	$	357	$	23	$	380	$	322	$	25	$	347

Provisions	44		5		49		95		6		101
Charge-offs	(92)		(7)		(99)		(71)		(7)		(78)
Recoveries	11		—		11		7		—		7
Other(1)	(7)		—		(7)		4		—		4
Ending balance	$	313	$	21	$	334	$	357	$	24	$	381

The provision for the three months ended March 31, 2024 for our consumer receivable portfolio was primarily attributable to loan originations during the period for installment loans in Japan and revolving loans in the U.K. Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty with respect to macroeconomic conditions and the financial health of our borrowers.

The increase in charge-offs for the three months ended March 31, 2024 compared to the same period in the prior year was due to credit quality deterioration of our U.S. interest-bearing installment credit products and the growth of U.K. revolving credit products and installment credit products in Japan.

The provision for current expected credit losses relating to our consumer receivable portfolio is recognized in transaction and credit losses on our condensed consolidated statements of income (loss). The provision for interest receivable for interest earned on our consumer receivable portfolio is recognized in revenues from other value added services as a reduction to revenue. Loans receivable continue to accrue interest until they are charged off.

We charge off consumer receivable balances in the month in which a customer’s balance becomes 180 days past the billing date or contractual repayment date, except for the U.S. consumer interest-bearing installment receivables, which are charged off 120 days past the contractual repayment date. Bankrupt accounts are charged off within 60 days after receipt of notification of bankruptcy. Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable.

We offer access to merchant finance products for certain small and medium-sized businesses through our PayPal Working Capital (“PPWC”) and PayPal Business Loan (“PPBL”) products, which we collectively refer to as our merchant finance offerings. We purchase receivables related to credit extended to U.S. merchants by a partner institution and are responsible for the servicing functions related to that portfolio. During the three months ended March 31, 2024 and 2023, we purchased approximately $419 million and $666 million in merchant receivables, respectively. As of March 31, 2024 and December 31, 2023, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $1.2 billion, net of the participation interest sold to the partner institution of $43 million and $44 million, respectively.

Through our PPWC product, merchants can borrow a certain percentage of their annual payment volume processed by PayPal and are charged a fixed fee for the loan or advance based on the overall credit assessment of the merchant. Loans and advances are repaid through a fixed percentage of the merchant’s future payment volume that PayPal processes. Through our PPBL product, we provide merchants access to short-term business financing for a fixed fee based on an evaluation of the applying business as well as the business owner. PPBL repayments are collected through periodic payments until the balance has been satisfied.

The interest or fee is fixed at the time the loan or advance is extended and is recognized as deferred revenue in accrued expenses and other current liabilities on our condensed consolidated balance sheets. The fixed interest or fee is amortized into revenues from other value added services based on the amount repaid over the repayment period. We estimate the repayment period for PPWC based on the merchant’s payment processing history with PayPal. For PPWC, there is a general requirement that at least 10% of the original amount of the loan or advance plus the fixed fee must be repaid every 90 days. We calculate the repayment rate of the merchant’s future payment volume so that repayment of the loan or advance and fixed fee is expected to generally occur within 9 to 12 months from the date of the loan or advance. On a monthly basis, we recalculate the repayment period based on the repayment activity on the receivable. As such, actual repayment periods are dependent on actual merchant payment processing volumes. For PPBL, we receive fixed periodic payments over the contractual term of the loan, which generally ranges from 3 to 12 months.

We actively monitor receivables with repayment periods greater than the original expected or contractual repayment period, as well as the credit quality of our merchant loans and advances that we extend or purchase, so that we can evaluate, quantify, and manage our credit risk exposure. To assess a merchant seeking a loan or advance, we use, among other indicators, risk models developed internally which utilize information obtained from multiple internal and external data sources to predict the likelihood of timely and satisfactory repayment by the merchant of the loan or advance amount and the related interest or fee. Primary drivers of the models include the merchant’s annual payment volume, payment processing history with PayPal, prior repayment history with PayPal’s credit products where available, information sourced from consumer and business credit bureau reports, and other information obtained during the application process. We use delinquency status and trends to assist in making (or, in the U.S., to assist the partner institution in making) ongoing credit decisions, to adjust our internal models, to plan our collection strategies, and in determining our allowance for these loans, advances, and interest and fees receivable.

The following tables present the delinquency status and gross charge-offs of merchant loans, advances, and interest and fees receivable by year of origination. The amounts are based on the number of days past the expected or contractual repayment date for amounts outstanding. The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable.


March 31, 2024
(In millions, except percentages)
	2024		2023		2022		2021		2020		Prior		Total		Percent
Merchant loans, advances, and interest and fees receivable:
Current	$	553	$	428	$	45	$	2	$	17	$	10	$	1,055	88.7%
30 - 59 Days	6		32		12		1		1		1		53		4.5%
60 - 89 Days	1		17		8		—		1		1		28		2.4%
90 - 179 Days	—		28		16		1		1		—		46		3.9%
180+ Days	—		2		3		1		—		1		7		0.5%
Total	$	560	$	507	$	84	$	5	$	20	$	13	$	1,189	100%
Gross charge-offs for the three months ended March 31, 2024	$	—	$	28	$	21	$	1	$	2	$	1	$	53


December 31, 2023
(In millions, except percentages)
	2023		2022		2021		2020		2019		Total		Percent
Merchant loans, advances, and interest and fees receivable:
Current	$	925	$	74	$	3	$	22	$	14	$	1,038	87.0%
30 - 59 Days	37		16		2		2		1		58		4.9%
60 - 89 Days	16		12		1		1		1		31		2.5%
90 - 179 Days	27		28		1		1		1		58		4.9%
180+ Days	2		4		1		—		1		8		0.7%
Total	$	1,007	$	134	$	8	$	26	$	18	$	1,193	100%
Gross charge-offs for the year ended December 31, 2023	$	38	$	228	$	14	$	16	$	4	$	300


	March 31, 2024						March 31, 2023
	Merchant Loans and Advances		Interest and Fees Receivable		Total Allowance		Merchant Loans and Advances		Interest and Fees Receivable		Total Allowance
	(In millions)
Beginning balance	$	148	$	12	$	160	$	230	$	18	$	248
Provisions	17		(1)		16		49		10		59
Charge-offs	(50)		(3)		(53)		(51)		(6)		(57)
Recoveries	8		—		8		7		—		7
Ending balance	$	123	$	8	$	131	$	235	$	22	$	257

The provision for the three months ended March 31, 2024 was primarily attributable to loan originations during the period partially offset by improvement in credit quality of the PPBL portfolio. Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty around the financial health of our borrowers, including the effectiveness of loan modification programs made available to merchants, as described further below.

For merchant loans and advances, the determination of delinquency is based on the current expected or contractual repayment period of the loan or advance and fixed interest or fee payment as compared to the original expected or contractual repayment period. We charge off the receivables outstanding under our PPBL product when the repayments are 180 days past the contractual repayment date. We charge off the receivables outstanding under our PPWC product when the repayments are 180 days past our expectation of repayments and the merchant has not made a payment in the last 60 days, or when the repayments are 360 days past due regardless of whether the merchant has made a payment in the last 60 days. Bankrupt accounts are charged off within 60 days after receipt of notification of bankruptcy. The provision for credit losses on merchant loans and advances is recognized in transaction and credit losses on our condensed consolidated statements of income (loss), and the provision for interest and fees receivable is recognized as a reduction of deferred revenue in accrued expenses and other current liabilities on our condensed consolidated balance sheets. Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable.

In certain instances, we may modify the merchant loans, advances, and interest and fees receivable for which we determine it is probable that, without modification, we would be unable to collect all amounts due. These modifications are intended to provide merchants with financial relief and enable us to potentially mitigate losses.

We closely monitor the performance of the merchant loans, advances, and interest and fees receivable that were modified to extend the term to understand the effectiveness of these modification efforts. The following table depicts the performance of merchant loans, advances, and interest and fees receivable as of March 31, 2024 that were modified during the 12 months ended March 31, 2024:

A merchant is considered in payment default after a modification when the merchant’s payment is 60 days past their expected or contractual repayment date. Merchant loans, advances, and interest and fees receivable modified during the 12 months ended March 31, 2024 that subsequently defaulted were not material.

Allowances for merchant loans, advances, and interest and fees receivable modified due to merchants experiencing financial difficulties are assessed separately from other loans and advances within our portfolio and are determined by estimating current expected credit losses utilizing the modified term. Historical loss estimates are utilized in addition to macroeconomic assumptions to determine current expected credit losses. Further, we may include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses.