Trend # 1: Cash is dying a slow death Good riddance. Cash doesn’t work online and checks don’t travel at Internet speed Cash is not only germy, it’s also hugely expensive to produce Tens of billions of dollars drain from the economy each year to pay for the printing, trucking, safekeeping, vending and collecting of our currency Britain’s banking system recently announced that paper checks will be abolished by a target date of 2018Check processing costs are huge UK announcement alone will save the financial system over $2 billion in processing costs, not to mention the eco-friendly bonus of saving 45,000 trees Not saying that cash will ever die completely. Will always be the currency of choice for tooth fairies and off-the-books kind of stuff But in the future, cash will be virtually obsolete. Digital money is the wave of the future
Trend #2: Mobile Payments“Mobile payments” is a bit of a catch phrase these days. What I mean is device payments from a smartphone (such as an iPhone, hold up)The increase in use of smartphones such as the iPhone or the Blackberry has changed consumer behavior. We’re seeing trends in mobile commerce much like Internet adoption in the mid-‘90s. As soon as retailers initiate a firm mobile presence, then m-commerce is expected to grow rapidly. Anyone with kids knows that the mobile phone is used for MUCH more than talking. In fact, I don’t think I’ve ever even seen my kids talk on their phones. They use it to text each other and surf the Web. We think the world is finally ready for mobile payments, too. The time is now. In the Netherlands -- you can now walk up to a vending machine, text the item code via your mobile device and the soda will drop automatically. In Kenya, a company called MPESA, has revolutionized the way people can make payments. Through the mobile phone, people can send money across the country and pay their employees - in a place where PCs are almost nonexistent and it could take all day to travel to the nearest bank. Mobile payments are still in the early phase in the United States as compared to Asia and India, but IDC (International Data Corp.) predicts more than a billion mobile devices will be connected to the web by the end of 2010 That’s almost as many mobile devices as internet-connected PCs, and the growth rate of mobile devices is 2.5 times that of PCs. PayPal already has mobile “Send Money” applications on the iPhone, Android and Blackberry. And we are rolling out a mobile toolkit to help developers integrate PayPal and monetize their mobile apps. We expect a whole new wave of innovation in mobile payments over the next few years, and we’re excited to encourage this innovation.
Trend #3: Micropayments and Digital GoodsDigital goods presents a compelling revenue opportunity that spans several market segments and transaction types, by 2012 we expect it will be an 85 billion dollar marketMore than $500 million was spent on virtual goods on social networking platforms in the US in 2009. The market has more than doubled over 2008. Digital goods are purchased for use in online communities or online games and have no intrinsic value. This could be a new horse on FarmVille, a 99-cent song on itunes or a sword for your World of Warcraft game. This doesn’t necessarily seem like an industry ripe for profits. But get this. Zynga developed FarmVille on Facebook, and now sells more virtual tractors in a day than John Deere does in a year! And if you saw the news today, we just signed a deal with Facebook to be featured on their site. Because virtual goods are non-physical objects they usually cost very little. This is why micropayments are suddenly so important. Micropayments are hard to do, because you have to keep the cost of payments smaller than the transaction … which is hard to do when you’re talking about 25-cent or 50-cent transactions. Apple has tried to solve this problem by aggregating and consolidating purchases. So for example, if you order 1 song on Monday and 2 more on Wednesday, they’d charge you for all 3 songs by the end of the week, thus reducing the number of processing fees incurred.But the real future is in true on-demand micropayments. PayPal offers reduced fees for micropayment transactions. In August 2009, PayPal’s number two merchant partner, after eBay, became Zynga, a social gaming company that produces well-known Facebook games such as FarmVille and Mafia Wars. You can expect to see a lot more solutions entering the market to try to solve for micropayments. At PayPal, we’re excited about the innovation ahead for this market.
Our customer base has grown tremendously over the years, from 8 million when I started to over 90 million active accounts today.PayPal had previously been the payment method of choice by more than fifty percent of eBay users, so the acquisition allowed us to acquire a large segment of customers. Since then, we’ve been focused on growing our merchant services business and reaching customers off-eBay and around the world.
A lot of people know PayPal, but they’re not sure what PayPal does…PayPal is the only online global financial system that successfully bridges two worlds: the traditional financial networks and the Internet.
Opportunities for GrowthBeverley BerginBusiness Development ManagerMerchant ServicesPayPal UK
4. Business Payments OPPORTUNITIES FOR GROWTH 6
Not all methods are created equal Usage Online Mobile Consider to Wallets E-Bank Transfers Large Offer Potential for Growth PayPal these Pre Paid Tomorrow Utility Billing Need to Offer these Today Cash Debit Cards Moderate Phase out Cheques Credit Cards Small Large Current user base 7 OPPORTUNITIES FOR GROWTH 7
Becoming the UK Online Payment Standard CONSUMER INTERNET PAYMENTS BY METHOD 2009 OTHER 6%Continued growth in the shares ofpayments made through PayPal PAYPALand by debit card 19% CREDIT CARD 39%Correspondingly, the share ofpayments made by credit cardhas been fallingPayPal’s estimated share ofconsumer internet payments DEBITrose to 19% in 2009 CARD 36% TOTAL NUMBER OF PAYMENTS : 711 MILLION Source: Payments Council: UK Payments Markets 2009 Report OPPORTUNITIES FOR GROWTH 8
EU Shoppers – Payment Preference Alternative payment methods to credit cards are essential for success in Europe “Which payment method(s) do you prefer when you buy products online?” Credit card 40% 60% 35% 26% 51% 51% 19% 34%Electronic bank transfer 26% 3% 3% 56% 20% 14% 43% 43% Debit/payment card 24% 43% 57% 3% 14% 10% 14% 17% PayPal 23% 35% 16% 22% 14% 26% 11% 11% Cheque/accept giro 19% 5% 17% 31% 2% 19% 37% 13% Cash 10% 3% 3% 10% 32% 19% 16% 24% Source :: Forrester Research Inc OPPORTUNITIES FOR GROWTH 9
What is PayPal?» Founded in 1998» Over 230 million registered accounts globally including more than 22million in the UK» Available in 190 markets and supports payments in 24 currencies» 90 million accounts have been active in last 12 months
How does PayPal work? BUYERS CAN PAY WITH: OPPORTUNITIES FOR GROWTH 12
PayPal BalanceThere is over $3bn in PayPal account balancesUsers build a balance from selling on eBay or receiving fundsMany users spend this money as a ‘treat’ rather than withdraw it totheir bank account This $3 billion turns over every fortnight 13 OPPORTUNITIES FOR GROWTH 13
Leading Brands in the UK accept PayPalRetailElectronicsTravel and Event TicketsGamingOther OPPORTUNITIES FOR GROWTH 14
PayPal offers a range of Payment Solutions Website Email Express Website Virtual Payments Payments/ Checkout Payments Pro Terminal Standard Send Money The Our Express Just add a complete, all- payment Accept credit Easy way to Checkout in-one online button to your and debit card send and option allows payment site and you payments over receive you to add the solution. will be able to the phone, fax money, with or familiar PayPal accept or mail orders. without a button – a payments from website. magnet for • Allows you to regular PayPal all around the accept card customers. world. • Its like a card payment swipe machine •Request money directly on your in retail website • Send an• A simple, 3- •Hosted by outlets, but all without invoice click process to PayPal – PCI done online redirects Compliant • Send money buy • No technical • No need for a via email• Get up to 14% • You can get up integration separate and running in needed •Mass Pay more sales Merchant minutes Account You Maintain Control of the checkout and your customers from OPPORTUNITIES FOR GROWTH start to finish 15 15
The one-stop-shop » Website Payments Pro provides all the benefits of a merchant account and gateway in one solution plus PayPal Express Checkout. » Website Payments Pro allows you to accept PayPal and card payments directly on your website, through Express Checkout or card payments by phone, fax and mail using the included Virtual Terminal package.Website Payments Pro Payment Flow Virtual Terminal Payment Flow Customer Merchant Payment steps with Virtual Terminal 1. Customer orders by phone, fax or post with debit or credit car 2. You enter order into Virtual Terminal. 3. PayPal processes the transaction and you get paid. 16
PayPal Express Checkout in Action1 4 Buyer places Buyer clicks the product the Express into the basket Buyer Confirms Checkout details button Buyer Confirms Transaction 3 2 Buyer Confirms payment options and delivery addressBuyer inputsemail Addressand Password 17 OPPORTUNITIES FOR GROWTH 17
Driving Incremental Sales: Sales lift surveyOver 30,000 consumer transactions were surveyed after makinga purchase using PayPal with various large online merchants Would you have made If no, Why do you this purchase if PayPal say you would not have made this had not been offered as purchase if you had a payment option? not been able to pay Yes No with PayPal? Multiplying the survey results by PayPals share of checkout quantifies the incremental sales lift 2/8/2012 OPPORTUNITIES FOR GROWTH 18
Sample of Survey ResultsFOR ALL 27 LARGE ONLINERETAILERS INCLUDED INTHE SURVEY, AN AVERAGEOF 25% OF CONSUMERSSAID THEY WOULD NOTHAVE MADE THEIRPURCHASE IF PAYPAL HADNOT BEEN AVAILABLE Results from a series of online surveys of over 30,000 PayPal transactions on large online retailer websites. Conducted by Northstar Research Partners on behalf of PayPal, across 2008 and 2009 2/8/2012 OPPORTUNITIES FOR GROWTH 19
Sample of Survey Results Users who only made PayPal share Incremental purchase because of checkout sales PayPal was availableLEADING UK HIGH 25% 10% 2.5%STREET CHEMISTLEADING UK HIGHSTREET CONSUMER 19% 21% 4%ELECTRONICS RETAILERLEADING HIGH STREET 33% 8% 2.6%FASHION RETAILERLEADING UK FLORIST 14% 15% 2.1%LEADING PURE PLAY CDAND ENTERTAINMENT 19% 24% 4.6%RETAILER Results from a series of online surveys of over 30,000 PayPal transactions on large online retailer websites. Conducted by Northstar Research Partners on behalf of PayPal, across 2008 and 2009 2/8/2012 OPPORTUNITIES FOR GROWTH 20
Security and Convenience: Top drivers of sales lift 70% 60% 50% 40% 30% 20% 10% 0% Security Convenience Balance Loyalty Results from a series of online surveys of over 30,000 PayPal transactions on large online retailer websites. Conducted by Northstar Research Partners on behalf of PayPal, across 2008 and 2009 2/8/2012 OPPORTUNITIES FOR GROWTH 21
How does PayPal Drive Incremental Sales? Preference at Increased checkout conversion Driven by the Driven by the speedsecurity, convenience and and simplicity of choice PayPal Express Checkout PayPal offers consumers 2/8/2012 OPPORTUNITIES FOR GROWTH 22
Our Fees PayPal pricing banded according to merchant volume with PayPal No Setup costs No Monthly Fees No Cancelation Fees 2/8/2012 OPPORTUNITIES FOR GROWTH 23
TEAM OF 2000+ DEDICATED TO FRAUD PREVENTION Prevention Detection RecoveryRisk Analytics– Develop fraud-predicting models that stop bad transactions– Build queues that filter transactions for human reviewFraud Operations– Investigate queued accounts– Review large merchants and manage credit process– Assist law enforcement agencies with investigationsRisk Operations– Dispute wrongful chargebacks and bank returns– Enforce and manage our buyer and seller protection programs– Assist customers with fraud complaints or process 2/8/2012 OPPORTUNITIES FOR GROWTH 24
PayPal Shopping 2/8/2012 OPPORTUNITIES FOR GROWTH 25
Marketing – PayPal Shopping PayPal Shopping features merchants that accept PayPal and provides consumers with unique ‘offers’ to choose from if they checkout with PayPal The site receives an average of 500,000 unique impressions per week 26 OPPORTUNITIES FOR GROWTH 26
Marketing – PayPal Offers 5 different merchants featured weeklyRevolving carousel of featured merchants Search by ‘item’ or by ‘brand’ 4 more offers; changes weekly Revolving carousel of merchants that accept PayPal Links in with Facebook 27 OPPORTUNITIES FOR GROWTH 27