Photo of Ciaran Walsh, J.P. Morgan, Meredith Vance, PayPal.
This project uses a new International Treasury Centre in Luxembourg to centralise international cash management, investments, FX and internal financing. The benefits are simple: control visibility, simplification and scalability.
PayPal is a leading technology platform that enables digital and mobile payments on behalf of merchants and consumers worldwide. PayPal became an independently public-traded company in 2015 and provides payment solutions for 184m active customer accounts in over 200 markets as of 31st March 2016. During 2015, total payment volume processed through its platforms was $282bn, representing growth of 20% over 2014.
in partnership with
PayPal has historically operated with a decentralised treasury structure, fraught with complexity. For instance, treasury was managing 18 separate pools of cash in multiple currencies and hedging exposures in the name of 25 different entities, with high associated costs. Internal financing was achieved by lending across 18 different entities with an inter-company lending portfolio of approximately $2bn (USD equivalent).
The complexity of its treasury operations was, unsurprisingly, impacting its ability to effectively manage global liquidity and group funding, investments, FX, payments and to scale with the international growth of the company.
As Meredith Vance, Assistant Treasurer at PayPal recalls: “Our issues included a lack of visibility over global cash which led to difficulties around concentrating investments, FX exposures and providing an adequate funding strategy for group companies. Moreover, our governance structure required approvals from the boards of each entity to execute standard treasury activities, which made for an inefficient and slow process.”
The company’s inter-company settlement approach, which occurred across hundreds of bank accounts, was also decentralised, creating a lack of visibility, hindering the management of foreign exchange.
“Faced with these significant challenges, a transformation was required,” states Vance. The right people, processes and systems were going to be key in PayPal’s treasury success.
PayPal engaged in an impressive treasury transformation initiative, moving from a highly complex, decentralised organisation to a simpler, more scalable one with greater cash visibility and concentration of key activities and controls.
By creating a uniquely effective governance structure that delegated authority to treasury personnel to execute a standard set of activities on behalf of 60+ global entities and reforming underlying operating policies, treasury was able to establish a consistent standard around the world for conducting core activities and paved the way for the international treasury centre (ITC); a new USD functional treasury legal entity in Luxembourg.
This was key to centralised management of international cash, investments, enabling PayPal to realise its US dollar investment strategy, as well as centralising FX exposure and streamlining internal financing. In addition, ensuring that the right people with the appropriate skills were employed in its ITC helped to drive its success.