Creating a new global standard for online payments 10/07/04
PayPal overview <ul><li>50M user accounts </li></ul><ul><li>5 currencies, 45 countries </li></ul><ul><li>Alternative fundi...
eBay is a premier growth company … (Real $M) GMV 1 5 10 15 20 25 30 35 40 Years from incorporation Note: Sales and GMV adj...
… and so is PayPal! GMV 1 5 10 15 20 25 30 35 40 Years from incorporation (Real $M) Note: Sales and GMV adjusted to reflec...
How PayPal works Senders Visa/MC, Amex, Discover Bank Account Debit Card (e.g., Switch-Solo in UK) Stored Value Account Ba...
Why PayPal works for buyers <ul><li>Free  to use </li></ul><ul><li>Pay  anyone  with a credit card or bank account: “onlin...
Why PayPal works for sellers <ul><li>Enables credit card acceptance </li></ul><ul><li>Faster payment = faster inventory tu...
Complementary missions The world’s online marketplace The world’s online payments standard Powering Online Commerce
Symbiotic relationship with eBay <ul><li>Increases velocity of trade </li></ul><ul><li>Enhances trust & safety </li></ul><...
Impact to eBay marketplace PayPal integration Year-over-year US transaction revenue growth Note: 2001 data reflects growth...
PayPal enables global trade Can be used in 45 countries PayPal available PayPal available + Local Bank Acct. Withdrawal Cu...
A Global Destiny <ul><li>Milestones </li></ul><ul><ul><li>Multi-currency support in November 2002 </li></ul></ul><ul><ul><...
Can banks profit from “remittances”? <ul><li>Yes, but… </li></ul><ul><li>Market competition is fierce </li></ul><ul><ul><l...
Possible market strategies <ul><li>Banks </li></ul><ul><ul><li>Learn from past experiences – C2it, from Citibank </li></ul...
Partnering for success in remittances <ul><li>PayPal offers </li></ul><ul><li>User network of 50 million, with stored fina...
Segment share (projected) Source: Financial DNA, June 2002; Celent Communications, August 2002 <ul><li>Card-based transact...
Preferred payment methods Source: BIS Red Book
Prioritizing segments for remittances Mexico India <ul><li>Sophistication of bank system </li></ul><ul><ul><li>Financial s...
Thank You! Merci Dank ë Cheers! Domo arigato Xie xie Dhanyabad  Abhar Gracias Spasibo Grazie  Asante Sipas Go raibh maith ...
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PayPal: Creating a New Global Standard for Online Payments

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  • At a high level, PayPal is simply a way to enable someone to send money to another person The buyer can source the funds from a number of places PayPal does some risk-modeling and notifies the seller of the funds The seller can then access those funds from a variety of mechanisms
  • THE EBAY MARKETPLACE AND PAYPAL ARE NOT SIMPLY GOOD FOR EACH OTHER; THEY ALSO SHARE COMPLEMENTARY MISSIONS. EBAY IS THE WORLD’S ONLINE MARKETPLACE; PAYPAL THE WORLD’S ONLINE PAYMENTS STANDARD. TOGETHER, WE ARE MAKING INEFFICIENT MARKETS EFFICIENT AND POWERING GLOBAL E-COMMERCE.
  • PAYPAL IS NOT ONLY TERRIFIC FOR BUYERS AND SELLERS—IT’S ALSO GREAT FOR EBAY. EBAY, IN TURN, IS GREAT FOR PAYPAL. INDEED, PAYPAL AND EBAY HAVE BEEN SYNERGISTIC FROM THE BEGINNING. EBAY WAS THE IDEAL LAUNCHING PAD FOR PAYPAL’S SUCCESS. EBAY IS THE AGGREGATION POINT FOR SMALL BUSINESSES ON THE NET—BUSINESSES WHO, PRIOR TO PAYPAL, WERE STARVING FOR A SOLUTION TO THE HIGH COST AND INEFFICIENCIES OF TRADITIONAL PAPER-BASED FORMS OF PAYMENTS. IT IS NOT SURPRISING, THEREFORE, THAT PAYPAL WAS BUILT ON THE POWER OF THE EBAY MARKETPLACE. EBAY’S CRITICAL MASS OF SMALL SELLERS COUPLED WITH PAYPAL’S VIRAL MODEL ENABLED PAYPAL TO SOLVE THE CLASSIC “COUNTER-PARTY” PROBLEM—THE DIFFICULTY THAT ANY NEW PAYMENT SYSTEM HAS IN ESTABLISHING A CRITICAL MASS OF ADOPTION.   PAYPAL, IN TURN, HAS ENHANCED EBAY’S SUCCESS BY INCREASING THE VELOCITY OF TRADE. SELLERS CAN NOW RECEIVE THEIR CASH IMMEDIATELY, ENCOURAGING THEM TO MORE QUICKLY BUY AND RESELL ADDITIONAL INVENTORY. BUYERS RECEIVE THEIR GOODS MORE RAPIDLY, ENTICING THEM TO BUY MORE. PAYPPAL ALSO IMPROVES THE TRUST AND SAFETY ON THE EBAY MARKETPLACE AND FACILITATES CONTINUED INNNOVATION ON THE EBAY PLATFORM.
  • We support 5 currencies – see chart. We are available (with ACH-out) in US, Canada; UK, Germany, France, Spain, Italy, Ireland, Belgium, Austria; Sweden, Finland, Norway, Denmark, Netherlands; Japan, South Korea, Hong Kong, Singapore, Australia, and Taiwan. We are available (no ACH-out) in India, China, Costa Rica, Brazil, Argentina, Chile, Jamaica, Ecuador, the DR, Greece, Luxembourg, Venezuela, Uruguay, Malaysia, Monaco, Israel, Turkey, Thailand, Portugal and Iceland.
  • Payment usage does not follow regional similarity or cultural commonality
  • Payment usage does not follow regional similarity or cultural commonality
  • Payment usage does not follow regional similarity or cultural commonality
  • PayPal: Creating a New Global Standard for Online Payments

    1. 1. Creating a new global standard for online payments 10/07/04
    2. 2. PayPal overview <ul><li>50M user accounts </li></ul><ul><li>5 currencies, 45 countries </li></ul><ul><li>Alternative funding options for buyers who don’t own credit cards or prefer not to use them: </li></ul><ul><ul><li>Bank account transfer </li></ul></ul><ul><ul><li>eCheck </li></ul></ul><ul><ul><li>Stored balance </li></ul></ul><ul><ul><li>Buyer Credit </li></ul></ul>PayPal Member Account Growth through Q2 ‘04 A growing community of users
    3. 3. eBay is a premier growth company … (Real $M) GMV 1 5 10 15 20 25 30 35 40 Years from incorporation Note: Sales and GMV adjusted to reflect 2003 dollars. http://www.bea.gov/dn/home/gdp.htm Source: eBay; US Department of commerce; Bureau of Economic Analysis; BCG analysis.
    4. 4. … and so is PayPal! GMV 1 5 10 15 20 25 30 35 40 Years from incorporation (Real $M) Note: Sales and GMV adjusted to reflect 2003 dollars. http://www.bea.gov/dn/home/gdp.htm Source: eBay; US Department of commerce; Bureau of Economic Analysis; BCG analysis. TPV
    5. 5. How PayPal works Senders 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 Receivers eCheck
    6. 6. Why PayPal works for buyers <ul><li>Free to use </li></ul><ul><li>Pay anyone with a credit card or bank account: “online wallet” </li></ul><ul><li>Fast, secure payment – 1 week -> 1 minute </li></ul><ul><li>Stores financial information securely to maintains user privacy </li></ul><ul><li>Works cross-border </li></ul>eCommerce P2P/remittances Importance PP competitiveness Cost Convenience Rewards/loyalty points Security Network
    7. 7. Why PayPal works for sellers <ul><li>Enables credit card acceptance </li></ul><ul><li>Faster payment = faster inventory turn </li></ul><ul><li>Easy to sign up </li></ul><ul><li>No setup, monthly or gateway fees </li></ul><ul><li>Competitive price with no minimum time commitment </li></ul><ul><li>Fraud protection – 25 bp vs. 110 bp </li></ul>
    8. 8. Complementary missions The world’s online marketplace The world’s online payments standard Powering Online Commerce
    9. 9. Symbiotic relationship with eBay <ul><li>Increases velocity of trade </li></ul><ul><li>Enhances trust & safety </li></ul><ul><li>Enables innovation </li></ul><ul><li>Provides the aggregation point for small business </li></ul><ul><li>Drives critical mass of buyers & sellers </li></ul><ul><li>Solved counter-party problem </li></ul>
    10. 10. Impact to eBay marketplace 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.
    11. 11. 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
    12. 12. A Global Destiny <ul><li>Milestones </li></ul><ul><ul><li>Multi-currency support in November 2002 </li></ul></ul><ul><ul><li>UK site: September 2003 </li></ul></ul><ul><ul><li>DE site: July 2004 </li></ul></ul><ul><ul><li>FR site: August 2003 </li></ul></ul><ul><li>PayPal will continue to support eBay in key geographies where eBay is strong and payments solutions are required </li></ul>
    13. 13. Can banks profit from “remittances”? <ul><li>Yes, but… </li></ul><ul><li>Market competition is fierce </li></ul><ul><ul><li>MTOs have 90% of the “official” market (Western Union, MoneyGram) </li></ul></ul><ul><ul><li>MTOs have robust physical distribution, low access barriers, real time funds transfer </li></ul></ul><ul><ul><li>Internet P2P players (e.g., Yahoo PayDirect) </li></ul></ul><ul><li>Need to overcome the “the first mile problem” </li></ul><ul><ul><li>Establish profitability to serve customers </li></ul></ul><ul><ul><li>Customer-friendly interface </li></ul></ul><ul><ul><li>Customer acquisition </li></ul></ul><ul><ul><li>No real time funds transfer between institutions </li></ul></ul><ul><ul><li>Legal/Regulatory barriers – USA Patriot Act, card associations, NACHA </li></ul></ul><ul><li>Need to overcome the “the last mile problem” </li></ul><ul><ul><li>Receivers are largely “unbanked,” exhibit low financial literacy </li></ul></ul><ul><ul><li>Local bank networks (branches and ATMs) still in development </li></ul></ul><ul><ul><li>FATF </li></ul></ul>
    14. 14. Possible market strategies <ul><li>Banks </li></ul><ul><ul><li>Learn from past experiences – C2it, from Citibank </li></ul></ul><ul><ul><li>Acquire user base – lower barriers to access </li></ul></ul><ul><ul><li>Offer a compelling product </li></ul></ul><ul><ul><li>Compete on price, value </li></ul></ul><ul><li>MTOs </li></ul><ul><ul><li>Business model already works </li></ul></ul><ul><ul><li>Compete on “real time funds transfer” </li></ul></ul><ul><ul><li>Offer a customer-friendly UI, “fast and secure” payment to reach out new customer segments </li></ul></ul><ul><ul><li>Upgrade product line to offer P2P, “delayed payment” offering </li></ul></ul><ul><li>New technologies mean new opportunities </li></ul><ul><ul><li>Leverage ATM networks </li></ul></ul><ul><ul><li>Use the proliferation of the Internet </li></ul></ul>
    15. 15. Partnering for success in remittances <ul><li>PayPal offers </li></ul><ul><li>User network of 50 million, with stored financial information </li></ul><ul><li>Millions of immigrants </li></ul><ul><li>Convenient, “always on” front end in key sender countries: US, UK, DE </li></ul><ul><li>Pricing is 50% less than MTO </li></ul><ul><li>Real time funds availability (instant ACH or credit cards) </li></ul><ul><li>Innovative products </li></ul><ul><li>Trusted payments brand in US </li></ul><ul><li>Secure platform </li></ul><ul><li>Money transmitter license </li></ul><ul><li>Compliant with USA Patriot Act </li></ul><ul><li>International account-to-account transfers </li></ul><ul><li>PayPal needs </li></ul><ul><li>Banked senders and receivers, who are online; OR </li></ul><ul><li>Partner to deliver funds from a user’s PayPal account; OR </li></ul><ul><li>Physical access points for offline or unbanked receivers </li></ul><ul><li>Access to customers in receiver countries </li></ul><ul><li>Sponsorship into the ATM network </li></ul><ul><li>Compliance – OFAC, AML, etc </li></ul><ul><li>Trusted payments brand in receiver countries </li></ul>
    16. 16. Segment share (projected) Source: Financial DNA, June 2002; Celent Communications, August 2002 <ul><li>Card-based transactions will be disruptive to agent-based players like Western Union </li></ul><ul><ul><li>Ubiquity </li></ul></ul><ul><ul><ul><li>30,000 McDonalds </li></ul></ul></ul><ul><ul><ul><li>169,000 Western Union Agents </li></ul></ul></ul><ul><ul><ul><li>1.2 million ATM locations </li></ul></ul></ul><ul><ul><li>Acceptance </li></ul></ul><ul><ul><ul><li>In 2003, there were 2.5 million remittance ATM-card holders in developing world </li></ul></ul></ul><ul><ul><ul><li>By 2006, that could be 13 million </li></ul></ul></ul><ul><li>Revenue opportunity in card-based transactions could exceed $2 billion </li></ul>
    17. 17. Preferred payment methods Source: BIS Red Book
    18. 18. Prioritizing segments for remittances Mexico India <ul><li>Sophistication of bank system </li></ul><ul><ul><li>Financial services coverage </li></ul></ul><ul><ul><li>Trustworthiness of financial institutions </li></ul></ul>EU # Segment size ($ Billions) China LAC CA UK <ul><li>Internet adoption </li></ul><ul><ul><li>Online penetration </li></ul></ul><ul><ul><li>High-speed access </li></ul></ul>High Low Low High Philippines Eastern Europe Middle east
    19. 19. Thank You! Merci Dank ë Cheers! Domo arigato Xie xie Dhanyabad Abhar Gracias Spasibo Grazie Asante Sipas Go raibh maith agaibh Murromboo Komapsumnida Shukriya Tashakkur Achiu Wanìshi Doh je Mahalo Toda Shukran Aman Verjee [email_address] Dickson Chu [email_address]

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