Beverley Bergin discusses opportunities for growth in future payment trends, including declining cash usage and rising mobile payments and micropayments. PayPal is well-positioned for this growth as alternative payment methods become more important in Europe. PayPal has over 230 million users globally and drives incremental sales for merchants by offering a secure and convenient payment option. It aims to become the standard for online payments in the UK.
7. 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
8. Becoming the UK Online Payment Standard
CONSUMER INTERNET PAYMENTS BY METHOD 2009
OTHER
6%
Continued growth in the shares of
payments made through PayPal PAYPAL
and by debit card 19%
CREDIT
CARD
39%
Correspondingly, the share of
payments made by credit card
has been falling
PayPal’s estimated share of
consumer internet payments DEBIT
rose to 19% in 2009 CARD
36%
TOTAL NUMBER OF PAYMENTS : 711 MILLION
Source: Payments Council: UK Payments Markets 2009 Report
OPPORTUNITIES FOR GROWTH 8
9. 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
10. What is PayPal?
» Founded in 1998
» Over 230 million registered accounts globally including more than 22
million in the UK
» Available in 190 markets and supports payments in 24 currencies
» 90 million accounts have been active in last 12 months
12. How does PayPal work?
BUYERS CAN PAY WITH:
OPPORTUNITIES FOR GROWTH 12
13. PayPal Balance
There is over $3bn in PayPal account balances
Users build a balance from selling on eBay or receiving funds
Many users spend this money as a ‘treat’ rather than withdraw it to
their bank account
This $3 billion turns over
every fortnight
13 OPPORTUNITIES FOR GROWTH 13
14. Leading Brands in the UK accept PayPal
Retail
Electronics
Travel and Event Tickets
Gaming
Other
OPPORTUNITIES FOR GROWTH 14
15. 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. • It's 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
16. 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
17. PayPal Express Checkout in Action
1 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
address
Buyer inputs
email Address
and Password
17 OPPORTUNITIES FOR GROWTH 17
18. Driving Incremental Sales: Sales lift survey
Over 30,000 consumer transactions were surveyed after making
a 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 PayPal's share of
checkout quantifies the incremental sales lift
2/8/2012 OPPORTUNITIES FOR GROWTH 18
19. Sample of Survey Results
FOR ALL 27 LARGE ONLINE
RETAILERS INCLUDED IN
THE SURVEY, AN AVERAGE
OF 25% OF CONSUMERS
SAID THEY WOULD NOT
HAVE MADE THEIR
PURCHASE IF PAYPAL HAD
NOT 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
20. Sample of Survey Results
Users who only made
PayPal share Incremental
purchase because
of checkout sales
PayPal was available
LEADING UK HIGH
25% 10% 2.5%
STREET CHEMIST
LEADING UK HIGH
STREET CONSUMER 19% 21% 4%
ELECTRONICS RETAILER
LEADING HIGH STREET
33% 8% 2.6%
FASHION RETAILER
LEADING UK FLORIST 14% 15% 2.1%
LEADING PURE PLAY CD
AND 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
21. 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
22. How does PayPal Drive Incremental Sales?
Preference at Increased
checkout conversion
Driven by the Driven by the speed
security, convenience and and simplicity of
choice PayPal Express Checkout
PayPal offers consumers
2/8/2012 OPPORTUNITIES FOR GROWTH 22
23. 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
24. TEAM OF 2000+ DEDICATED TO FRAUD PREVENTION
Prevention Detection Recovery
Risk Analytics
– Develop fraud-predicting models that stop bad transactions
– Build queues that filter transactions for human review
Fraud Operations
– Investigate queued accounts
– Review large merchants and manage credit process
– Assist law enforcement agencies with investigations
Risk 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
26. 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
27. Marketing – PayPal Offers
5 different
merchants
featured weekly
Revolving 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
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.