PayPal Holdings Inc beat Wall Street estimates for quarterly profit on Wednesday, with a coronavirus-driven shift to online shopping and digital transactions driving record levels of payment volumes for both the quarter and the year.

PayPal said it was expecting an addition of about 50 million active users in 2021 and forecast annual revenue of about $25.5 billion, well above the $21.4 billion estimated by analysts. Its shares were up 5% in trading after the bell.

"At the beginning of the pandemic, consumers amid lockdown had no choice but to do all of their shopping online," Chief Executive Officer Dan Schulman said.

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"Today, the vast majority of consumers state that post pandemic, they will continue to shop online at their current elevated levels because it is more convenient, easier and saves time," Schulman added.

Online payments have got a boost since the start of the pandemic as people stuck indoors rely on mobile apps for shopping and paying bills.

San Jose, California-based PayPal said 2020 was its strongest ever annual performance as it processed a record $936 billion in payments.

US holiday sales jumped 8.3% last year to record their best growth in at least 19 years, the National Retail Federation said last month.

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PayPal's processed payments in the latest quarter rose 39% to $277.1 billion, with an additional 16 million net new active customers.

Venmo, PayPal's service that allows individuals in the United States to send each other money through an app, processed 60% more in payments in the quarter.

Quarterly revenue rose about 23% to $6.12 billion, topping estimates.

The company reported adjusted earnings of $1.08 per share in the fourth quarter ended Dec. 31, higher than analysts' average estimate of $1 per share, according to Refinitiv IBES.

Schulman said PayPal saw an exceptional response for its new cryptocurrency offering. (Reporting by Noor Zainab Hussain in Bengaluru; Editing by Ramakrishnan M. and Anil D'Silva)