Paypal: e-commerce payments

Editor's Notes

• #4: 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
• #5: 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.
• #6: 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.
• #11: 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.
• #12: 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.