PayPal CEO sees international potential as countries like India skip over legacy fintech

  • "Mad Money" host Jim Cramer sits down with PayPal CEO Dan Schulman for insights into the international payment processing landscape.
  • Schulman said that countries like India are developing their payment systems so rapidly that credit cards and checking accounts are being overlooked in favor of digital solutions.

For PayPal CEO Dan Schulman, the main driver of his company's gains to date has been "the digitization of cash."

"The entire financial system's ecosystem is moving, more rapidly than ever before, away from cash and towards digital payments because of the explosion of mobile phones," Schulman told CNBC on Wednesday in an exclusive "Mad Money" interview with Jim Cramer.

With 227 million subscribers, 65 percent of whom reside outside of North America, PayPal has seized on this "explosion" of digital payments around the world, Schulman said, speaking from CNBC's 1Market in San Francisco.

In its latest quarter, PayPal added 8.6 million net new active users, a record since Schulman joined the payment processing giant as president and CEO in 2014.

This rapid digitization has led to countries like India and China opting for efficiency and, in some cases, skipping over financial technologies like checking accounts and credit cards in favor of digital payments, Schulman told Cramer.

"India [is] really going through demonetization right now," the CEO said. "They really never had point-of-sale terminals, credit card[s], and what they're trying to do now is do everything through digital."

Schulman, who worked in enterprise growth for American Express before joining PayPal, touted the efficiency of digital payment solutions like PayPal for both consumers and countries.

"There aren't middlemen in between to take a part of the transaction. There's less corruption and graft that can go on," he said. "And so for government benefits, that kind of thing, there's much less leakage if it can go directly from the government right into a digital wallet of the consumer. And so you're seeing leapfrogs over what were credit card infrastructure or checking."

Since PayPal and its former parent company eBay parted ways in the payment processing arena in late January, PayPal has partnered with Chinese internet company Baidu to allow Chinese consumers to access merchants around the world.

The company also partners with e-commerce colossus Alibaba to allow PayPal users outside of China to shop on the Chinese platform.

"I think that's the power of a two-sided network and an open platform: you're able to do ecosystem partnerships that you never could've imagined years ago," Schulman told Cramer.

With over 50 percent of its revenues coming from outside North America, PayPal has started to leverage its international ecosystem to benefit small businesses in the United States as well, the CEO said.

"In North America, ... only 5 percent of small businesses export internationally. Eighty percent of small businesses on PayPal in the U.S. export internationally," Schulman said. "So having a platform that's open, that's trusted, with guaranteed transactions, opens up the world to merchants, small business merchants and to consumers and that's a tremendous benefit for everybody."

Watch Dan Schulman's full interview here:

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