PayPal (NASDAQ:PYPL) ended the year with 305 million active accounts, but CEO Dan Schulman thinks there's a lot of room left to grow.

"Our aspiration is to have a billion people on our platform," Schulman said at a recent investors conference.

Schulman was clear this was merely an aspiration for the company -- not an outlook -- but he thinks it's a good medium-term goal for the company. PayPal's added 143 million active accounts over the last five years.

Schulman also wants PayPal users to engage with the service every day. The average PayPal user makes just over 40 transactions per year now, up from about 25 five years ago.

Getting to 1 billion active accounts transacting an average of 365 times per year would require a significant acceleration in growth for PayPal at a larger scale. Schulman says moving from primarily online to a combination of online and in-store transactions is what will drive PayPal to 1 billion highly engaged users.

Exterior of PayPal headquarters.

Image source: PayPal.

Being able to use PayPal anytime and anywhere

PayPal's transaction volume growth has historically outpaced the growth in e-commerce. PayPal's value proposition in online commerce is strong. It reduces friction in the checkout process by connecting its network of consumers to its network of merchants.

But the platform has struggled to translate that network effect into good value in brick-and-mortar retail. Despite the relatively rapid growth of e-commerce, physical retail still accounts for the vast majority of store sales. Last year, physical stores generated more than 88% of total retail sales in the United States.

Schulman sees PayPal making good headway in physical retail over the next few years. It introduced the Venmo debit card in 2018. Management says the debit card has seen good traction and it continues to expand, but it hasn't provided any specific attach rates on the product. PayPal will launch a Venmo credit card later this year.

But Schulman thinks there's a much bigger opportunity to engage in-store shoppers on mobile. He thinks broader adoption of QR codes -- those square-shaped pixels you can scan with your phone -- will produce a smoother checkout experience for many merchants than more traditional point of sale services. In China, for example, QR codes and mobile payments are prevalent. PayPal notably just acquired a majority stake in China's GoPay, which could play a significant role in its efforts to expand QR adoption.

He also thinks further integration with NFC chips will enable smoother in-store PayPal transactions. Tap-to-pay is becoming increasingly popular in the U.S., and it's even more prevalent internationally where contactless technology has been the standard longer. PayPal has made deals with most major payment networks to use the tokenization technology necessary to provide secure contactless payments, and enable it to charge card-present transaction rates instead of more expensive card-not-present rates.

Convincing users to actually pay with PayPal

It's one thing to build the capabilities and network of merchants to support in-store payments; it's another to convince people to actually use it. To that end, Schulman says PayPal has been expanding the value proposition of using its services in store.

The company notably added rewards to the Venmo debit card last year. Over the last couple years, the company has worked with credit card issuers to enable credit card reward point redemption at the point-of-sale.

The company's recent acquisition of Honey provides yet another incentive to check out with PayPal. Schulman thinks there's potential to expand Honey to include in-store offers or simply integrate offers directly into the PayPal app.

Old habits die hard, so consumers will need extra motivation to use PayPal over more established in-store checkout methods. Online, it's been enough to reduce the friction of transactions, but the amount of friction in stores is already fairly minimal; dipping or tapping a credit card is a lot easier than typing out all the payment details in an online form. And PayPal faces considerably tougher competition in physical retail from integrated contactless payments from the phone manufacturers themselves.

If PayPal can figure out how to grow in-store payments, though, the path to 1 billion global users making an average of 365 transactions per year might not be so far off.