PayPal said it closed 4.5 million accounts and lowered its forecast for new customers after it discovered “bad actors” were taking advantage of its incentive and rewards programs. Shares of the company fell the most on record.
The payments giant, which is also revamping its marketing strategy, said it no longer plans to reach 750 million active accounts by 2025, abandoning a target that helped drive up campaign spending last year. of sale.
“We regularly assess our active account base to ensure accounts are legitimate,” Chief Financial Officer John Rainey said in a conference call with analysts Tuesday after the company released fourth quarter results.
“This is especially important during incentivization campaigns which may be targeted by malicious actors trying to take advantage of these offers without ever intending to be a legitimate customer on our platform.”
The problem was revealed with an earnings report that fell below Wall Street estimates, sending stocks tumbling.
The company said lower-income customers were spending less as they struggled to keep up with rising prices amid the highest levels of inflation in the United States in decades. Growth in e-commerce spending also slowed as supply chain disruptions affected shipping times and consumers shopped more in stores during the holiday season.
The company’s shares fell a record 25% to $132.40 (€117.10).
Last year, PayPal began offering its first-ever signup incentives, handing out up to $10 to encourage new customers to open an account. But the company’s risk management team discovered that many accounts were created by bot farms, a system used by fraudsters to manipulate internet activity, a company spokesperson said. .
PayPal immediately began closing those accounts and attempting to recoup the inducements from those customers, the spokesperson said. PayPal said it would refocus its marketing efforts on increasing usage of its products among active customers.
The abrupt shift in marketing strategies came as a “shock,” MoffettNathanson analyst Lisa Ellis said in a note to clients. “You can officially add PayPal to your list of pandemic high-flyers who are having a pretty bumpy landing.”
