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PayPal Mobile Payments DRF Conference

April 26, 2006. PayPal Mobile Payments DRF Conference. PayPal: A Global Standard in Online Payments. 105 million PayPal accounts worldwide $27.5B payment volume in 2005 $8.8B in Q1 ‘06 10% of US e-commerce 5% of global e-commerce 55 markets & 6 core currencies 1.7M transactions daily.

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PayPal Mobile Payments DRF Conference

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  1. April 26, 2006 PayPal Mobile Payments DRF Conference

  2. PayPal: A Global Standard in Online Payments • 105 million PayPal accounts worldwide • $27.5B payment volume in 2005 • $8.8B in Q1 ‘06 • 10% of US e-commerce • 5% of global e-commerce • 55 markets & 6 core currencies • 1.7M transactions daily PayPal user accounts 46% YoY growth Millions 2001 2000 2002 2003 2005 2004 2006

  3. PayPal Enables Cross-Border Trade Can be used in 55 markets UK CA IE NL, DE, CH, AT FR, BE IT US ES CN Pre-2003 2003 AU 2004 2005 PayPal available PayPal available + Local Bank Acct. Withdrawal

  4. PayPal users are active PayPal users are active online shoppers • Are 2 ½ times more likely to have purchased a product online in the past week • Estimate that they spend 12% more online than do non-PayPal users PayPal users are highly loyal • Would prefer to purchase from an identical online business that offered PayPal as a payment option over one that did not (>80%) • State that they are more likely to buy from an online business a second time if that business accepts PayPal (>80%) How often do you use PayPal? Balanced gender representation: 50% Male : 50% Female Source: PayPal Brand Tracker, Ipsos-ASI, Q4 2005 Past 3 month online shoppers who currently use PayPal Source: Nielsen/NetRatings data. Monthly unique audience

  5. Merchant Value Proposition Seller online fraud losses, as a % of sales Typical incremental sales from PayPal 50-90% lower loss • Privacy / safety • 105M user accounts • “Wallet” convenience • Bank transfers • Balance payments • PayPal buyer credit • Fraud models • Card & bank verification • Economies of scale/skill • 600+ fraud ops team • Seller Protection Program

  6. Why Alternative Payments 4+ methods 72% 3methods 71% 2 methods 66% 1 method 60% Note: Payment methods include general purpose bank cards, private label cards, gift certificates, electronic checks, recurring billing, instant credit (‘bill me later”) and PayPal Source: CyberSource, May 2004

  7. Online Digital Content Market Digital Content is selling online • For consumption on every device imaginable and propelled by music and mobile • 2005 Online Music Sales topped $1.1B • 2004 Online Micropayments (<$5) grew 282% • One-time Micropayments grew from 7% of all on-time purchases to 18% PayPal’s Micropayments Initiative - PP enables producers and distributors to sell DC directly to consumers through multiple solutions • Announced Micropayments rate of 5% + $0.05 • Enabling new business models that aren’t viable with standard “fixed fees” • Leverage “Pre Approved Payments” to extend benefits to mobile • Subscriptions are an easy introduction through our standard subscription product or through PAP Trend: Convergence of online and mobile • Mobile generated content to PC/Web • Nikon’s focus on digital and WiFi capabilities • Podcasting to mobile phones • MobiTV, SLIDE and others

  8. PayPal’s “Pre Approved Payments” Gives Digital Content Merchants the Flexibility They Need

  9. Mobile vs. Internet Total world market (in millions) Internet users 1,046 PC Installed base 798 Mobile Handsets 1,977 PC/ internet centric Phone centric North America Japan and Asian tigers Western Europe China Rest of world Mobile Subscribers 199 167 367 394 598 Internet users 241 143 251 120 154 Source: Morgan Stanley; Economist Intelligence Unit; Gartner

  10. Mobile Payments Opportunity • 2B mobile users globally (2005) • 208M in US (68% nearly = internet penetration) • 65M in UK (114% penetration vs. 63% internet) • In 30 top countries avg. penetration rate is 80% • 2T GSM text msgs sent (5.5B/day) • Convergence of internet and mobile • Faster and faster networks (GPRS, 3G, 4G & WiFi) • Avg screen size is almost 5x bigger • Payment opportunity is as big as Internet advertising • Mobile Internet Premium Services $19B in 2005, vs $19B in all Internet advertising • High growth rate (to ~$50B by 2009) Sources: Portius Research, CTIA, Morgan Stanley

  11. Natural extension: e-commerce to m-commerce • Launched April 6 in North America and April 25 in UK • “Mobilized” PayPal accounts, access via SMS or IVR w/ PIN • Three services: • Person-to-person payments • Gifts, pay-backs, personal commerce • Text to Buy • Any advertisement becomes POS • Text to Give • Grassroots impulse donations Send money anytime, anywhere – securely with your phone

  12. To: BUYIT Msg: DVD To: BUYIT Msg: DVD Msg: Msg: The Text to Buy buyer experience is quick and easy EXPERIENCE FOR PAYPAL MOBILE ACTIVATED EXPERIENCE FOR NON-PAYPAL MOBILE ACTIVATED 1 1 “Wow – that will be huge.” “Instantly buy with no hassle.” “This is the future.” “I’d buy things… On the ‘L’ or the bus, I’d see an ad for a new CD…  It just comes in the mail.  It’s so simple.” (Source: Consumer reactions to Text to Buy , Qualitative User Research, August 2005, September 2005) Sam sees an ad and decides to buy. Sam sees an ad and decides to buy. 2 2 Sam texts “DVD” to “BUYIT”. Sam texts “DVD” to “BUYIT”. 3 3 To complete this trxn, activate at www.paypal.com/mobile. Offer will be held open for 5 days Hi Sam. You’ve asked to pay $20 for the DVD. Enter your PIN to confirm. Sam confirms payment via IVR and enters PIN. Sam receives a message to activate PayPal mobile. The offer will be held open. 4 4 Package arrives at Sam’s specified address. Sam goes online to activate PayPal mobile, then replies or tries again.

  13. Benefits of Text to Buy Brand/OEM • Incremental direct sales • Measurability/ROI of ad spend • Direct relationship with customer; CRM data • New, unique classes of purchase occasions; customer intimacy • Associate product and brand with hip, new channel Direct sales via ads & media Text to Buy Consumer • Purchase whenever you want, wherever you are • Convenience, speed, fun • Cool, new experience that fulfills the promise of m-commerce • New ways to use existing trusted accounts • Access to limited, exclusive offers

  14. Examples of Text to Buy Implementations • Bravo 10 & 20 second television spots with web support • Walk the Line print ad

  15. Go Forward. Go Mobile. • SMS Direct Response Sales (T2B) • Text to Give • Electronic rebate payments • Virtual merchant specific gift certificates • No inventory retail events Add another direct-to-consumer channel: • Bricks n’ mortar • MoTo • eTailing + Mobile

  16. THANK YOU! Kevin Dulsky Sr. Director & GM, PayPal Mobile KDulsky@paypal.com

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