Creating a new global standard for online payments

1. Creating a new global standard for online payments 10/07/04

2. 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 PayPal overview A growing community of users PayPal Member Account Growth through Q2 ‘04

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. TPV … and so is PayPal! (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.

5. How PayPal works Senders Receivers Bank Account Visa/MC, Amex, Discover PayPal Debit MasterCard Bank Account Another PayPal account eCheck Debit Card (e.g., Switch-Solo in UK) Paper Check Stored Value Account Stored Value Account

6. 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 Network Convenience Rewards/loyalty points Security Why PayPal works for buyers

7. 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 Why PayPal works for sellers

8. Complementary missions The world’s online payments standard The world’s online marketplace Powering Online Commerce

9. 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

10. Impact to eBay marketplace Year-over-year US transaction revenue growth PayPal integration 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. PayPal enables global trade Can be used in 45 countries Currencies Supported: US $, CA $, GBP £, Euro €, JP Yen ¥ Localized: US, UK, DE, FR, BE, CH, NL, AT PayPal available PayPal available + Local Bank Acct. Withdrawal

12. A Global Destiny • 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

13. 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

14. 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

15. 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 Partnering for success in remittances 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

16. Segment share (projected) • 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 Source: Financial DNA, June 2002; Celent Communications, August 2002

17. Preferred payment methods Source: BIS Red Book

18. Prioritizing segments for remittances # Segment size ($ Billions) EU UK CA High • Sophistication of bank system • Financial services coverage • Trustworthiness of financial institutions Philippines India China Eastern Europe Mexico Middle east LAC Low • Internet adoption • Online penetration • High-speed access Low High

19. Thank You!Merci Dankë Cheers! Domo arigatoXie xie Dhanyabad Abhar GraciasSpasibo Grazie Asante SipasGo raibh maith agaibh Murromboo KomapsumnidaShukriya Tashakkur Achiu WanìshiDoh je Mahalo Toda Shukran Aman Verjee Averjee@PayPal.com Dickson Chu Dickson.Chu@PayPal.com