A brief Study of Pay pall.

2.  Company Background
 Introduction
 History
 Related Technology
 Relation with company’s
 Working Operation & Importance
 Case study
 Advantages & Problem
 Summary
 References

3. Service that allows members to send/receive money
Website: https://www.paypal.com
Corporate Headquarters
2211 North First Street
San Jose, California 95131
PayPal's president is David Marcus; Marcus joined
PayPal in August 2011 after its acquisition of Zong of
which he was the founder and CEO
PayPal operates in 190 markets and manages more
than 100 million active accounts in 25 currencies
PayPal’s 2010 annual revenue was $3.4 billion, up
23 percent year over year (PayPal, 2011)

4. What is PAYPAL?
Peer-to-peer money transfer
Low cost – credibility
Provides limited fraud protection
Attractive:
Acts as a master merchant for credit card processing
No cost to establish seller accounts
Easy to integrate into a website
Can be use to accept major credit cards
Has very competitive transaction rates

5. From PayPal homepage:
Sign Up Now button
Choose account type
(upgrade in the future possible)
Credit card is required to use many features
Activation:
PayPal:
debiting a small amount from the credit card
User:
Credit card statement number sent back to
PayPal
account activated

6. Founded in December 1998 by Peter Thiel and Max Levchin in
Silicon Valley, California.
Nowadays headquarters are located in San Jose.
Early PayPal product development focused on building
functionality to enable people to "beam“ money to each other
using handheld devices.
In October 2002 PayPal was acquired by eBay.
eBay phased out Billpoint and integrated PayPal intoits
services

7. Merchant Services Total Payment Volume as percentof Total
Payment Volume was approximately 53percent in Q1 2009.
Bill Me Later Total Payment Volume as percent of Total
Payment Volume was approximately 1 percentin Q1 2009.
PayPal transacted about $2,039 in Total PaymentVolume
every second in Q1 2009.
PayPal accounts contain approximately $3 billion instored
value that is spent every 2 weeks

8. The technologies used by PayPal consist of the main security
mechanisms that most sites would employ.
PayPal uses HTTPS and SSL to encrypt the data stream
when a user establishes a session with the PayPal site.
It is unknown what security mechanisms are used to protect
their databases containing information about their customers.

13. 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
12
14
17
19
23
27
32
35
40
46
50
1Q
00
2Q
00
3Q
00
4Q
00
1Q
01
2Q
01
3Q
01
4Q
01
1Q
02
2Q
02
3Q
02
4Q
02
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
PayPal Member Account Growth through Q2 ‘04
A growing
community
of users

14. Senders
Visa/M
C,
Amex,
Discov
er
Bank
Accoun
t
Debit
Card
(e.g.,
Switch-
Solo in
UK)
Stored
Value
Accou
nt
Bank
Accou
ntPayPal
Debit
Master
Card
Paper
Check
Another
PayPal
accountStored
Value
Accou
nt
Receivers
eCheck

15. 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

16. 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

17. Case Study: 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 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.

18. 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

19. 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%
1Q
01
2Q
01
3Q
01
4Q
01
1Q
02
2Q
02
3Q
02
4Q
02
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
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.

20. PayPal enables global
tradeCan 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

21. A Global DestinyPayPal 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
$4.46
Q1
01
Q2
01
Q3
01
Q4
01
Q1
02
Q2
02
Q3
02
Q4
02
Q1
03
Q2
03
Q3
03
Q4
03
Q1
04
Q2
04
US$Billions
• 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
03
Q2
03
Q3
03
Q4
03
Q1
04
Q2
04

22. Preferred payment
methods
0
10
20
30
40
50
60
70
80
90
100
%ofVolume
US Canada France UK Italy Germany
Cashless Payment Usage
Checks Cards Bank Transfer
Source: BIS Red Book

23. 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

24. Can banks profit from “remittances”?
Yes, but…
• Market competition is fierce
– MTOs have 90% of the “official” market (Western Union, Money Gram)
– MTOs have robust physical distribution, low access barriers, real time
funds transfer
– Internet P2P players (e.g., Yahoo Pay Direct)
• 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

25. A fraudster attack to our business:
The email address of our PayPal account
The URL a buyer is returned to after making a
purchase
Any custom fields we have defined
Spoof Email - red flags:
o Generic greeting
o False sense of urgency
o Fake links
o Request for personal information
o Insecure URL
o Pop-up boxes
o Attachments

26. Payment button – security: Encrypted Website
Payments (EWP)
Security of Transactions
oPhishing Emails and Spoof Sites
oSecurity Vulnerability of Mobile App
oBackend System Security Holes

27. Advantages:
oIncreased Sales
oCredibility
oSecurity
oThe Checkout Experience
Problems:
o Biggest criticism: PayPal acts like a bank, but it isn't
regulated like one
o Sudden and inexplicable freezing of accounts
long, complicated process to verify identity
o A long and confusing Terms of Service Agreement
o Rude customer service representatives

28.  PayPal continues to be the most popular money
transfer service for online transactions
 Currently the most popular online payment system.
 PayPal has Addressed Issues Effectively
 Company is Leader in Industry
 Customers Trust the Service
 Company Committed to Quality/Integrity

29.  Company Timeline
1998 Founded by Peter Thiel and Max Levchin
2002 Acquired by eBay
2005 PayPal Acquires VeriSign's Payment Gateway
2006 PayPal Expands Internationally
 Language/Currency Compatibility Issue
2009 Offer Bill Me Later Option
2010 Now on Facebook, iPhone, and Android