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Creating a new global standard for online payments 10/07/04
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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
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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.
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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.
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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
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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
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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
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Complementary missions
The world’s online marketplace
The world’s online
payments standard
Powering Online
Commerce
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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
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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.
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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
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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
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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
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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
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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
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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 $2 billion
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Preferred payment methods
0
10
20
30
40
50
60
70
80
90
100
% o
f V
olu
me
US Canada France UK Italy Germany
Cashless Payment Usage
Checks Cards Bank Transfer
Source: BIS Red Book
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Mexico
India
Prioritizing segments for remittances
• Sophistication of bank system
• Financial services coverage
• Trustworthiness of financial institutions
EU
# Segment size
($ Billions)
China
LAC
CAUK
• Internet adoption• Online penetration• High-speed access
High
Low
Low High
Philippines
Eastern Europe
Middle east
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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 [email protected]
Dickson [email protected]