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Creating a new global standard for online payments 10/07/04
PayPal overview
• 50M user accounts
• 5 currencies, 45 countries
• Alternative funding options for buyers who don’t own credit cards or prefer not to use them:
• Bank account transfer• eCheck• Stored balance• Buyer Credit 1 2 3 5 7 8 10
1214
1719
2327
3235
40
4650
PayPal Member Account Growth through Q2 ‘04
A growing community of users
eBay is a premier growth company …
1
10
100
1,000
10,000
100,000
1,000,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43
(Real $M)
STARBUCKS
GMV
1 5 10 15 20 25 30 35 40
Years from incorporationNote: Sales and GMV adjusted to reflect 2003 dollars. http://www.bea.gov/dn/home/gdp.htmSource: eBay; US Department of commerce; Bureau of Economic Analysis; BCG analysis.
1
10
100
1,000
10,000
100,000
1,000,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43
STARBUCKS
… and so is PayPal!
GMV
1 5 10 15 20 25 30 35 40
Years from incorporation
TPV
(Real $M)
Note: Sales and GMV adjusted to reflect 2003 dollars. http://www.bea.gov/dn/home/gdp.htmSource: eBay; US Department of commerce; Bureau of Economic Analysis; BCG analysis.
How PayPal works
SendersSenders
Visa/MC, Amex,
Discover
Bank Account
Debit Card (e.g., Switch-
Solo in UK)Stored Value
Account
Bank Account
PayPal Debit MasterCard
Paper Check
Another PayPal account
Stored Value Account
ReceiversReceivers
eCheck
Why PayPal works for buyers
• Free to use• Pay anyone with a credit card or bank account: “online wallet”• Fast, secure payment – 1 week → 1 minute• Stores financial information securely to maintains user privacy• Works cross-border
eCommerce
P2P/remittances
Importance PP competitiveness
Cost
Convenience
Rewards/loyalty points
Security
Network
Why PayPal works for sellers
• Enables credit card acceptance• Faster payment = faster inventory turn• Easy to sign up• No setup, monthly or gateway fees• Competitive price with no minimum time commitment• Fraud protection – 25 bp vs. 110 bp
Complementary missions
The world’s online marketplace
The world’s online
payments standard
Powering Online
Commerce
Symbiotic relationship with eBay
• Increases velocity of trade
• Enhances trust & safety
• Enables innovation
• Provides the aggregation point for small business
• Drives critical mass of buyers & sellers
• Solved counter-party problem
Impact to eBay marketplace
56%
49%45%
41%38% 39%
32%
58%53%
48%44%44%
68%68%
0%
10%
20%
30%
40%
50%
60%
70%
80%PayPal integration
Year-over-year US transaction revenue growth
Note: 2001 data reflects growth rates in total US revenues, not just “transaction revenues.” Transaction revenues have constituted over 95% of total US revenues from 2002 through Q2, 2004.
PayPal enables global trade
Can be used in 45 countries
PayPal available
PayPal available + Local Bank Acct. Withdrawal
Currencies Supported: US $, CA $, GBP £, Euro €, JP Yen ¥
Localized: US, UK, DE, FR, BE, CH, NL, AT
A Global Destiny
PayPal TPV
$0.63 $0.74$0.88
$1.10$1.30
$1.41 $1.59
$2.12
$2.63
$2.86$3.07
$4.42
$3.76
$4.46
Q1 01Q2 01
Q3 01Q4 01
Q1 02Q2 02
Q3 02Q4 02
Q1 03Q2 03
Q3 03Q4 03
Q1 04Q2 04
US
$ B
illi
on
s
• Milestones• Multi-currency support in November
2002• UK site: September 2003• DE site: July 2004• FR site: August 2003
• PayPal will continue to support eBay in key geographies where eBay is strong and payments solutions are required
% of PayPal revenues from Int'l
19.6%21.0% 21.4%
23.2%
26.2%28.7%
Q1 03Q2 03
Q3 03Q4 03
Q1 04Q2 04
Can banks profit from “remittances”?
• Yes, but…
• Market competition is fierce• MTOs have 90% of the “official” market (Western Union, MoneyGram)• MTOs have robust physical distribution, low access barriers, real time funds transfer• Internet P2P players (e.g., Yahoo PayDirect)
• Need to overcome the “the first mile problem”• Establish profitability to serve customers• Customer-friendly interface• Customer acquisition• No real time funds transfer between institutions• Legal/Regulatory barriers – USA Patriot Act, card associations, NACHA
• Need to overcome the “the last mile problem”• Receivers are largely “unbanked,” exhibit low financial literacy• Local bank networks (branches and ATMs) still in development• FATF
Possible market strategies
• Banks• Learn from past experiences – C2it, from Citibank• Acquire user base – lower barriers to access• Offer a compelling product• Compete on price, value
• MTOs• Business model already works• Compete on “real time funds transfer”• Offer a customer-friendly UI, “fast and secure” payment to reach out new
customer segments• Upgrade product line to offer P2P, “delayed payment” offering
• New technologies mean new opportunities• Leverage ATM networks• Use the proliferation of the Internet
Partnering for success in remittances
PayPal offers• User network of 50 million, with stored
financial information
• Millions of immigrants
• Convenient, “always on” front end in key sender countries: US, UK, DE
• Pricing is 50% less than MTO
• Real time funds availability (instant ACH or credit cards)
• Innovative products
• Trusted payments brand in US
• Secure platform
• Money transmitter license
• Compliant with USA Patriot Act
• International account-to-account transfers
PayPal needs• Banked senders and receivers, who are
online; OR
• Partner to deliver funds from a user’s PayPal account; OR
• Physical access points for offline or unbanked receivers
• Access to customers in receiver countries
• Sponsorship into the ATM network
• Compliance – OFAC, AML, etc
• Trusted payments brand in receiver countries
Segment share (projected)
Source: Financial DNA, June 2002; Celent Communications, August 2002
0%
10%
20%
30%
40%
50%
60%
2002E 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E
Seg
men
t sh
are
Western Union
MoneyGram
Large banks
Card to Card ATM
P2P
• Card-based transactions will be disruptive to agent-based players like Western Union→ Ubiquity
– 30,000 McDonalds– 169,000 Western Union Agents– 1.2 million ATM locations
→ Acceptance– In 2003, there were 2.5 million remittance ATM-card holders in developing world– By 2006, that could be 13 million
• Revenue opportunity in card-based transactions could exceed $2 billion
Preferred payment methods
0
10
20
30
40
50
60
70
80
90
100
% o
f V
olu
me
US Canada France UK Italy Germany
Cashless Payment Usage
Checks Cards Bank Transfer
Source: BIS Red Book
Mexico
India
Prioritizing segments for remittances
• Sophistication of bank system
• Financial services coverage
• Trustworthiness of financial institutions
EU
# Segment size
($ Billions)
China
LAC
CAUK
• Internet adoption• Online penetration• High-speed access
High
Low
Low High
Philippines
Eastern Europe
Middle east
Thank You!
Merci Dankë Cheers! Domo arigatoXie xie Dhanyabad Abhar GraciasSpasibo Grazie Asante Sipas
Go raibh maith agaibh Murromboo Komapsumnida Shukriya Tashakkur Achiu Wanìshi Doh je Mahalo Toda Shukran
Aman VerjeeAverjee@PayPal.com
Dickson ChuDickson.Chu@PayPal.com
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