Running head COMPETITIVE REVIEW FOR PAYPAL1COMPETITIVE REVI.docx

Running head: COMPETITIVE REVIEW FOR PAYPAL 1
COMPETITIVE REVIEW FOR PAYPAL 3
Competitive Review for Paypal
Student’s name
University affiliation
Competitive Review for Paypal
PayPal is a service that was initiated in 1998; its main
purpose was to send money and accept payment on a mechanism
that was fast, safer and easier to use. On the other hand, PayPal
is one popular online paying service that most people find to
have transparency with, it is out of this that the fraternity of
PayPal has grown with a big rate because it offers flexibility
and people are using it for daily services this is as stated by
Jackson, (2004). However, there are some threats that are
associated with the use of PayPal, and in this paper, I am
focusing on the analysis that makes PayPal no effective while
using it yet it is a transparent, fast and safe way that people use

while doing their business.
The threat of new entrance has been a major issue for most of
the customer that are willing to join this federation. Since the
technology has advanced in a great way people have become
innovative about forming the same web of PayPal and hence
hacking people money by this, I mean that the people who are
having the desire to join they end up registering to
unrecognized PayPal. It is out of this that I would justify that it
is simple to duplicate since the technology has advanced. Hence
it does not offer transparency while registering. However, they
are a regulatory restriction that prevails so that people that have
interest in the new market cannot be in a position to sing up I
the right PayPal platform Johnson, Scholes, & Whittington,
(2008).
As a result, the threat of substance is a risk that is offered by
other institution offering the same services that PayPal offer
and therefore the completion is high since PayPal has to come
up with a new mechanism that will enhance their transparency
on service. By this, it simply means that customers should be in
a position to do their shopping using these services so that the
threat of substance is not enhanced. By doing this, it simply
means that PayPal will be in a position to offer a stiff
completion in the market hence people will be in a position opt
to use PayPal. Also, Threat of Rivals is mainly portrayed when
other organizations are in a position to offer a great completion.
Hence this means that they should be in a position to come up
with new techniques that will serve the customers in a better
way by doing this Apple pay and Google checkout will not be in
a position to offer the competition that is being offered by
PayPal.

References
Jackson, E. (2004). The PayPal wars : battles with eBay, the
media, the mafia, and the rest of planet Earth. Los Angeles, CA:
World Ahead Pub.
Johnson, G., Scholes, K. & Whittington, R. (2008). Exploring
corporate strategy text & cases. Harlow (England: Financial
Times Prentice Hall.

CASE: E-572
DATE: 11/12/15
Henry Lippincott (MBA 2014), Lecturer Robert Siegel, and
Professor Robert Burgelman prepared this case as the
basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative
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PAYPAL IN 2015: RESHAPING THE
FINANCIAL SERVICES LANDSCAPE

The histories of the largest companies are that their biggest
impediment to their future success is
their past success
1
—Dan Schulman, CEO, PayPal
In 2015, PayPal sat at the epicenter of digital commerce, which
expected to account for $2.3
trillion in global purchase volume by 2017 (see Exhibit 1). The
company provided payment
solutions to over 170 million active customers across more than
200 markets and was on track to
process over five billion payments that year. PayPal was
founded in 1998, at a time when e-
commerce was the driving force behind digital payments, but
the market had since grown in size
and complexity over the subsequent 17 years. By 2015,
PayPal’s platform spanned the entire
digital financial system, offering services that included payment
processing, digital wallets,
merchant accounts, peer-to-peer money transfers, single touch
transactions, consumer and
merchant credit, risk analysis, fraud prevention, and regulatory
compliance.
On July 20, 2015, PayPal CEO Dan Schulman was excited to
ring the opening bell at the
NASDAQ Stock Exchange. PayPal was relisting on the
exchange as an independent company
after an absence of more than a decade, having last traded 13
years earlier before its acquisition
by eBay. While excited about the company’s many new
opportunities now that it was no longer
owned by one of the world’s largest online marketplaces,
Schulman pondered the changing

landscape of financial services for global consumers.
Individuals were now able to conduct
transactions from their smartphones, loans could be sourced
outside of traditional banking
infrastructures and the very method of determining consumer
credit worthiness was changing—
1 Interview with Dan Schulman, CEO of PayPal, September 8,
2015. Subsequent quotes are from this interview,
unless otherwise noted.
PayPal in 2015: Reshaping the Financial Services Landscape
E-572
p. 2
especially in emerging economies. PayPal, with its unique size
and position as a global leader in
digital financial services, had the chance to disproportionally
impact the lives of people all over
the world.
Schulman had joined PayPal nine months earlier to prepare for
its separation from eBay and
ultimately lead PayPal into the next phase of its journey as an
independent company. With the
daunting task of decoupling PayPal from eBay’s business
behind him, and the monumental task
of guiding PayPal’s transformation in front of him, Schulman

reflected on the previous nine
months.
SEPARATION FROM THE MOTHER SHIP
Even before Schulman joined PayPal in September 2014, there
were discussions of a split
between eBay and PayPal. After a decade under eBay’s roof,
PayPal’s business had
fundamentally changed. PayPal was originally a payments
provider for e-commerce
transactions, many from within eBay, but had transformed
alongside an increasingly complex
digital payments industry. The share of PayPal’s business
derived from eBay had steadily
declined from 60 percent in 2002 to under 30 percent by 2014.2
With PayPal’s lessening
dependence on eBay and the accelerating changes within the
digital payments industry, many
began to wonder whether PayPal could innovate fast enough
within eBay’s walls.
Carl Icahn, activist investor and 0.82 percent eBay owner, told a
Forbes reporter in early 2014,
“PayPal’s a jewel and eBay is covering up its value.”3 In
February of that year, Icahn published
an open letter to eBay shareholders urging PayPal’s spinoff (see
Exhibit 2). Icahn claimed that a
split would unleash unrealized value within both businesses,
providing each with independent
boards and sharper focus. He questioned the ability of eBay’s
board to effectively manage two
distinct businesses, which continued to decouple year after year.
Icahn also believed separate
businesses would make each more appealing to work for.

Former PayPal CEO Elon Musk agreed with Icahn. “It doesn’t
make sense that a global
payment system is a subsidiary of an auction website… it’s as if
Target owned Visa…”4
PayPal’s business had indeed blossomed under eBay (see
Exhibit 3). In 2013, eBay’s
marketplace brought in $9.9 billion in revenue compared to
PayPal’s $7.2 billion, but PayPal
would likely eclipse eBay in the coming years with a projected
19 percent growth rate compared
to eBay’s 10 percent.5
Not everyone agreed with Icahn and Musk. The eBay board, in
particular, believed that eBay
and PayPal should remain together because of the inextricable
link between commerce and
2 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20, 2015,
p. 37.
3 “Elon Musk And David Sacks Say PayPal Could Top $100B
Away From eBay,” Forbes, February 18, 2014,
http://www.forbes.com/sites/stevenbertoni/2014/02/18/elon-
musk-and-david-sacks-say-paypal-could-top-100-
billion-away-from-ebay/ (September 10, 2015).
4 Ibid.
5 “eBay CEO: Why we're spinning off PayPal,” Fortune,
September 30, 2014, http://fortune.com/2014/09/30/ebay-
ceo-why-were-spinning-off-paypal/ (September 10, 2015).
E-572

p. 3
payments (see Exhibit 4). In a CNBC interview, eBay CEO
John Donahoe responded to Icahn’s
open letter:
What that argument is missing is the very strong synergies
between the two
businesses. It’s noteworthy that there has not been anyone else
who has created
another PayPal since PayPal was created. And that’s because
commerce and
payments are converging into one thing. A payments network
needs a commerce
network like eBay… As more online payment and commerce
services converge
into a more seamless experience, the growth of mobile shopping
makes that trend
even more important.6
Less than six months later, on September 30, 2014, eBay
announced its plan to split the two
businesses. According to Donahoe, eBay’s board concluded
that a split would be best for both
businesses. “The synergies which helped fuel [PayPal’s
growth] are declining over time.”7 The
eBay announcement highlighted the increasing competitiveness
and speed of innovation within
the markets of each business, requiring sharper strategic focus
for both—and the belief that the
relationship between the two companies could be optimized in

arm’s-length operating
agreements between the companies. Investors responded
positively to the news, with eBay’s
stock price jumping 7 percent that day.
As part of the announcement, Schulman was named president of
PayPal and CEO-designee once
the separation from eBay was complete. Before Schulman had
the opportunity to chart PayPal’s
future as a separate company, he faced a monumental challenge:
decoupling all of PayPal’s
businesses and technologies from eBay, and building the new
systems necessary for PayPal to
stand as an independent Fortune 100 company, all within a nine-
month span. Schulman took the
opportunity to study PayPal’s history during those nine months
while in the process of separating
the firm’s past from its future.
BEGINNINGS AND EXPANSION WITHIN E BAY
PayPal began as the money transfer service of Confinity, a start-
up founded in 1998 by Max
Levchin and Peter Thiel.8 With a convenient and simple setup
process (only a verified e-mail
address and credit or bank card number were needed), a user
could within minutes send and
receive money to and from other PayPal users. The ease and
convenience of PayPal registration
quickly attracted eBay sellers, many of whom were too small to
qualify for merchant accounts
with credit card companies and thus lacked commercial credit
histories. In March of 2000, with
over 1 million accounts, Confinity merged with X.com, an
online banking business founded by
Elon Musk, with Musk taking the helm as chairman and CEO.

6 “PayPal is stronger staying with eBay: EBay CEO John
Donahoe,” CNBC, January 23, 2014,
http://www.cnbc.com/2014/01/23/paypal-is-stronger-staying-
with-ebay-ebay-ceo-john-donahoe.html
(September 10, 2015).
7 “eBay CEO: Why we're spinning off PayPal,” September 30,
2014, Fortune, http://fortune.com/2014/09/30/ebay-
ceo-why-were-spinning-off-paypal/ (September 10, 2015).
8 PayPal Press Centre, “History,” https://www.paypal-
media.com/au/history (September 10, 2015).
E-572
p. 4
PayPal became popular among eBay sellers because it covered
their credit card processing fees.
Importantly, PayPal served both sides of every transaction,
enabling it to verify that both the
buyer and seller had reputable histories, unlike traditional credit
card transactions where different
banks represented each party in a transaction. PayPal reduced
the frequency of fraudulent
transactions, requiring not only a credit or debit card number to
complete a transaction, but a
username and password combination as well. This “dual factor”

authentication reduced dispute
rates by as much as a factor of six.9 In addition to being
popular among eBay sellers, PayPal was
also popular among buyers because buyers did not need to
disclose their credit card or bank
account numbers to sellers when using PayPal, reducing the risk
of fraud.
By the end of 2001, more than 60 percent of PayPal’s business
occurred between buyers and
sellers on eBay and over 70 percent of eBay auctions accepted
PayPal’s payments.10 PayPal’s
presence did not go unnoticed at eBay headquarters. In an
effort to capitalize on the opportunity
that PayPal had uncovered, eBay launched Billpoint, its own
payment service, in March of 2000.
Billpoint never gained enough traction to become a viable
alternative to PayPal and was shut
down in 2002. PayPal went public in February of 2002 with
12.2 million personal accounts and
3.2 million business accounts, handling roughly 124 million
transactions worth $6.8 billion.11
Just five months later in July of that year, eBay acquired PayPal
for $1.5 billion.
BEYOND EBAY—MERCHANT SERVICES
Over the next several years, PayPal continued to be the
preferred payment option for the majority
of eBay transactions. By 2005, eBay represented 13 percent of
all U.S. e-commerce
transactions, making it the largest e-commerce company in the
world, fueling PayPal’s
concurrent growth.12 While PayPal was used in 78 percent of
all eBay transactions, it processed
less than 4 percent of all “off-eBay” U.S. e-commerce

transactions.13 In an effort to pursue the
$143 billion “off-eBay” opportunity, PayPal launched Merchant
Services in late 2003.14
Merchant Services provided similar payment solutions to
merchants outside the eBay auction
community as PayPal had provided those within eBay. The
company targeted small-to-medium
and large online merchants ($250k to $5 million + in annual
online sales), which collectively
represented a $116 billion annual opportunity. Despite the
dominant position of credit and debit
cards as the main payment option for these merchants, PayPal
offered a number of significant
benefits to merchants and to their customers, which enabled the
widespread adoption of
Merchant Services.
Like those within eBay, many small to midsized merchants “off-
eBay” were too small to qualify
for merchant accounts with credit card companies and were
searching for alternative payment
9 For further information, see “PayPal Merchant Services,” HBS
No. 9-806-188, p. 5.
10 For further information, see “eBay (C): PayPal Merger,”
HBS No. 9-603-042, p. 2.
11 PayPal, Inc., March 31, 2002 Form S-1 (filed June 12, 2002),
via Securities and Exchange Commission
12 For further information, see “PayPal Merchant Services,”
HBS No. 9-806-188, p. 1.
13 Ibid.
14 “Annual desktop B2C e-commerce sales in the United States
from 2002 to 2014,” Statista,

http://www.statista.com/statistics/271449/annual-b2c-e-
commerce-sales-in-the-united-states/ (September 10, 2015).
E-572
p. 5
solutions. At the time, many consumers were still fearful of
sharing credit and debit card
information online. PayPal’s Merchant Services enabled
merchants to reach those customers in
addition to online shoppers who didn’t have credit or debit
cards. By 2005, PayPal launched
Website Payments Pro, which offered Express Checkout and
Direct Payments API, both of
which enabled sellers to accept credit card payments from
buyers without PayPal accounts. This
optionality enabled merchants to reach more shoppers and
potentially increase sales.
PayPal initially offered its payment services for free to both
consumers and merchants, hoping to
earn interest on users’ PayPal account balances. Unfortunately,
users rarely kept balances in
their PayPal accounts and funded most payments using credit
cards. PayPal also covered the 2
percent card processing fees for merchants, which soon became
unsustainable. Beginning in
2001, PayPal users receiving more than $500 worth of payments

funded by credit cards were
upgraded to “business accounts” and charged $0.25 per
transaction in addition to 1.9 percent of
transaction value.15 Over time these fees varied by market
segment, and in the United States
they grew to $0.30 per transaction and 2.9% of total transaction
value. By 2014, these fees
generated 89 percent of PayPal’s $8 billion in revenue for the
year, with the remaining 11
percent driven by other services including subscription and
gateway fees, and credit loans.16
PayPal’s continued success within and outside of eBay was
celebrated in Silicon Valley and the
broader business world. Many competing products and services
backed by some of the world’s
most renowned companies emerged to rival PayPal, but without
success—Citigroup’s c2it, First
Data Corp.’s BidPay, Yahoo!’s PayDirect—to name a few.
Many thought PayPal’s dominance
would end with the 2006 launch of Google Checkout, a service
that enabled customers to store
their payment and shipping information in their Google
accounts to make purchases from
participating online vendors with the click of an on-screen
button. Google Checkout closed in
2013, never having gained substantive market traction. While
PayPal continued to extend its e-
commerce footprint within and outside of eBay, the digital
payments industry was about to
experience a fundamental change.
THE MOBILE REVOLUTION
With the introduction of Apple’s first iPhone in 2007, the
smartphone era and its corresponding

impact on mobile computing took off. Within a year,
smartphones drove 11 percent of all
mobile phone sales and reached 40 percent market share by
2011. Soon after the wider adoption
of smartphones came their use in making digital payments.
Consumers began to use Web
browsers on their smartphones to shop online, giving rise to
mobile commerce, or m-commerce.
By 2012, Walmart reported that 40 percent of all visits to their
website were from smartphones.17
15 For further information, see “PayPal Merchant Services,”
HBS No. 9-806-188, p. 3.
16 Deutsche Bank Markets Research, “The Way to Play Digital
Payments,” July 12, 2015, p. 4.
17 “Mobile chief predicts 40% of Wal-Mart’s holiday web
traffic will be mobile,” Internet Retailer, November 12,
2012, https://www.internetretailer.com/2012/11/12/40-wal-
marts-holiday-web-traffic-will-be-mobile, (September
10, 2015).
E-572
p. 6
By 2011, just four years after the release of the first iPhone, m-

commerce generated $10 billion
annually and represented 7 percent of total e-commerce.18
Over 10 percent of PayPal customers
had completed transactions on their smartphones and by 2014,
PayPal was processing $27 billion
in mobile payments (see Exhibits 5 and 6).19 With the
phenomenal penetration rate of
smartphones and growth in m-commerce, merchants began
launching smartphone applications to
enhance the customer browsing experience and wanted to add
checkout functionality to drive
more sales.
Mobile “In-App” Payments
When smartphones initially launched, consumers used the Web
browser within their
smartphones to shop on merchant websites. However, using a
four-inch screen to browse a
website designed for a larger computer monitor was
challenging, evidenced by the fact that
checkout conversion was significantly lower in mobile than on
desktop devices. To solve this
problem, merchants developed smartphone applications (apps)
that provided a shopping
experience optimized for smartphone use. As part of this
process, merchants wanted payment
solutions integrated into their applications to offer a seamless
shopping and checkout experience
without leaving the app. These “in-app” payment features
offered customers convenience, with
increased transaction speed and ease of use without having to
pay by card. Merchants hoped in-
app payment functionality would increase checkout conversion
as well. Integrating a frictionless
mobile payment experience within an app was incredibly

complicated and building custom
solutions were prohibitively expensive for all but the largest
merchants. As a result, a new class
of companies capitalized on this opportunity, providing both
“payment gateway” and merchant
account services for m-commerce merchants and mobile app
developers.
Braintree
Founded in 2007, Braintree offered a platform of white-label
tools for mobile app developers and
m-commerce merchants to easily and securely accept payments
within their mobile apps.
Braintree could store credit and debit card credentials, authorize
payments, and process them
securely with a user’s merchant account (see Exhibit 7).
Customers could experience a
complete, frictionless shopping and checkout experience, all
without leaving the app. Unlike
traditional payment gateways including Visa’s Authorize.net,
which were cumbersome to
integrate, Braintree offered an extensive set of application
programming interfaces (APIs), which
were available more than a year before other alternative
solutions and meant the company’s
technology could easily be embedded within a mobile app with
just a few lines of code. As a
result, developers could quickly implement payment solutions
on their websites or in their
mobile apps.
Braintree also found an opportunity to offer payment solutions
to companies wanting to digitize
the payments of historically offline physical transactions, such
as paying a taxi driver or booking
a last-minute hotel room. Braintree was responsible for

building the payment platform that
18 “Q2 M-Commerce Explodes to 47% Y/Y Gain: What it
Means for the Growth of Mobile,” comScore, August 19,
2014, https://www.comscore.com/Insights/Blog/Q2-M-
Commerce-Explodes-to-47-YY-Gain-What-it-Means-for-
the-Growth-of-Mobile (September 10, 2015).
19 “PayPal Processed $27 Billion in Mobile Payments in 2013,”
Bank Innovation, January 23, 2014,
http://bankinnovation.net/2014/01/paypal-processed-27-billion-
in-mobile-payments-in-2013/ (September 10, 2015).
E-572
p. 7
enabled mobile payments in many of the apps that shaped the
beginning and growth of mobile
commerce, including Uber Technologies’ ride-hailing app
launched in 2009, Airbnb’s
room booking app in 2009, and Hotel Tonight’s last-minute
hotel booking app launched in 2010.
In-app payment revenue reached a mere $712 million in 2011,
but was expected to balloon to
$37 billion by 2017.20 By 2013, in-app payment revenue
accounted for 70 percent of U.S.
iPhone app revenue and 90 percent of iPhone app revenue in

Asian markets.21 One of
Braintree’s main competitors, Stripe, also gained traction within
the market after Braintree
launched, and by 2015 was valued at $5 billion (see Exhibit 8).
To capitalize on this opportunity, PayPal acquired Braintree in
2013 for $800 million. PayPal’s
acquisition extended its reach to in-app payments in addition to
Braintree’s list of significant
customers, which included OpenTable, LivingSocial, Uber
Technologies, and Airbnb, among
others. Braintree’s then-CEO, William Ready, went on to
become PayPal’s senior vice President
and global head of product and engineering.
From “In-App” to “In-Store”
Traditional brick-and-mortar merchants also found use in
smartphone devices as replacements
for the age-old physical point-of-sale (POS) cash registers. In
2009, Twitter cofounder Jack
Dorsey launched Square, which offered a small, square-shaped
piece of hardware that plugged
into a smartphone’s audio jack and translated the information
from a credit card’s magnetic strip
into an audio signal that was then processed by a downloadable
smartphone app (see Exhibit 8).
The customer would then sign for the purchase on the
smartphone using his or her finger. The
device, affectionately known as a dongle, essentially
transformed a smartphone into a mobile
POS (mPOS) cash register.
When PayPal launched its competing mPOS product in 2012,
Square was already processing $4
billion worth of transactions annually.22 PayPal Here relied on

the same technology as Square
and at its launch, the only notable difference between the two
products seemed to be their
shape—PayPal’s was triangular. PayPal Here had the added
ability to accept checks and could
be directly linked to a PayPal account.
mPOS terminals like Square and PayPal Here became popular
among small to medium-sized
brick-and-mortar merchants as well as sole proprietorships.
Unlike traditional POS systems
which were expensive, most new mPOS terminals offered
customers no upfront cost and were
ideal for wireless transactions in temporary locations like
conventions, mobile repair businesses,
and other professional services.
20 “Gartner Says Worldwide Mobile Payment Transaction Value
to Surpass $235 Billion in 2013,” Gartner, June 4,
2013, http://www.gartner.com/newsroom/id/2504915
21 “In-App Purchase Revenue Hits Record High: Accounts For
76% Of U.S. iPhone App Revenue, 90% In Asian
Markets,” TechCrunch, March 28, 2013,
http://techcrunch.com/2013/03/28/in-app-purchase-revenue-hits-
record-
high-accounts-for-76-of-u-s-iphone-app-revenue-90-in-asian-
markets/ (September 10, 2015).
22 Ibid.

E-572
p. 8
The market for mPOS terminals was growing rapidly at the
time—sales grew from 4.5 million
terminals in 2011 to 9.5 million in 2012, and were forecasted to
reach annual sales of 38 million
terminals by 2017.23 mPOS penetration in the broader POS
market was deepening quickly as
well, from 17 percent in 2012 to a forecasted 47 percent by
2017.24
The Wallet Wars
As digital payments continued to integrate more seamlessly into
the smartphone experience,
companies attempted to develop products for smartphones that
would securely store a user’s
payment information to be used anytime and anywhere for
payments and transfers. Digital
wallets, as they came to be known, securely stored multiple
payment credentials and could be
used online, on mobile devices, in mobile apps, and at physical
POS locations. Many digital
wallets in development had the ability to store loyalty cards and
coupons as well.
In addition to aggregating and storing payment credentials, most
digital wallets relied on an
embedded technology (Near Field Communication [NFC] chips,
QR codes, or Bluetooth Low
Energy [BLE], for example), which enabled users to complete

transactions without actually
having to swipe their cards at physical POS locations.
Depending on the embedded technology
used, instead of swiping, users would tap or scan their mobile
smartphones on a physical
payment terminal to complete a transaction.
Convenience and security were seen as the clear benefits for
consumer adoption of digital
wallets, and the potential for superior customer engagement,
loyalty, and higher checkout
conversion were seen as the benefits for merchant adoption.
With the successful digitization of
payments in e-commerce and mobile, it only seemed intuitive
that one of the next advances in
digitization would be found in the consumer’s back pocket when
shopping in stores.
The year 2010 marked the beginning of an era for various
digital wallet products from a variety
of different companies (see Exhibit 8). Internet companies
including Amazon; payment
gateways including Stripe; the major payment networks
including Visa, MasterCard, American
Express, and Discover; acquirers including Vantiv and Global
Payments, Inc.; and phone
manufacturers including Apple and Samsung all entered the race
to build the market-leading
digital wallet. Even mobile carriers including AT&T, T-
Mobile, and Verizon were drawn to the
potential of digital wallets, developing their own digital wallet
platform known as Softcard
(formerly Isis).
Despite all of these efforts, digital wallet platforms had been
unsuccessful at gaining traction in

stores among merchants and consumers alike by 2014. The
significant majority of POS
terminals in use at the time were incompatible with the
embedded technologies used by most
23 “Research Reveals Growth and Challenges of Mobile POS,”
April 23, 2013, Hospitality Technology,
http://hospitalitytechnology.edgl.com/news/Research-Reveals-
Growth-and-Challenges-of-Mobile-POS--86071
24 Ibid.
E-572
p. 9
digital wallets. NFC technology in particular was not an
industry standard at the time. Even by
2014, less than 3 percent of POS terminals were NFC-
enabled.25
Upgrading to NFC-enabled terminals was expensive for retailers
and consumers seemed
ambivalent towards digital wallets. A 2014 survey conducted
by Thrive Analytics showed that
while 80 percent of consumers were aware of the existence of
digital wallets, less than a third
used one.26 As Braintree CEO Bill Ready phrased it, “In the

life of a consumer, there are few
things a consumer will ever do that are easier than swiping their
cards at checkout. Consumers
adopt solutions to pain points very quickly. Tap and Pay wasn’t
really solving a pain point for
consumers with credit cards. No one’s waking up saying ‘you
know if only I could tap my
phone instead of swipe my card.’”
Additionally, the competing interests among the various players
inhibited widespread adoption
of digital wallets. Mobile carriers and smartphone
manufacturers blocked operating system (OS)
platforms, and OS platforms blocked PayPal.
PayPal Mobile Payments
In 2012, PayPal launched PayPal Mobile Payments in stores.
Users could download the PayPal
app onto their smartphone devices and use their smartphone
cameras to scan product bar codes
within participating stores to authorize payment. Within the
app, the users would then choose
which stored payment method to use for transactions and tap a
button on their smartphones to
pay. PayPal also piloted a number of other in-store payment
methods for its digital wallet
including the use of PIN pads, mobile bar code readers, and QR
codes, to a name a few. By
January 2013, PayPal was available at 18,000 retail locations
around the United States with 23
major retailers as customers including Home Depot, Office
Depot, Toys “R” Us, Abercrombie &
Fitch, Barnes & Noble, and Foot Locker.27
Unlike Apple, Microsoft, and Google, all of which had
competing operating systems, PayPal had

the potential to offer a digital wallet that was OS-agnostic. And
unlike Apple, Samsung, and PC
manufacturers, all of which manufactured competing
smartphone devices, PayPal could offer a
digital wallet that was hardware-agnostic. Consequently,
PayPal had the potential for
widespread adoption, particularly among consumers who used
multiple devices from multiple
companies. Perhaps expectedly, Apple and Samsung decided
not to natively support PayPal
functionality on their iPhone and Galaxy devices.
Paydiant
In an effort to strengthen and broaden its position among
competing digital wallets, PayPal
acquired Paydiant for $280 million in April of 2015. Founded
in 2010, Paydiant offered a
patented cloud-based digital wallet and payment platform,
which allowed merchants and banks
25 “Apple Pay Is Here — and There’s Just One Big Problem,”
Money, September 9, 2014,
http://time.com/money/3311917/apple-pay-iphone-iwatch-
passbook/ (September 10, 2015).
26 “Why Amazon, Google and Apple Haven't Been Able to
Crack the Code of Digital Wallets,” Inc., July 23, 2014,
http://www.inc.com/jeremy-quittner/amazon-digital-wallet-is-
latest-entrant-in-crowded-field.html
27 “Startups clear out cash registers to usher in retail
revolution,” Venturebeat, March 28, 2013,
http://venturebeat.com/2013/03/28/startups-clear-out-cash-
registers-to-usher-in-retail-revolution/

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p. 10
to deploy their own secure mobile wallet solutions under their
own brand and within their own
apps. Unlike competing branded digital wallets including
PayPal’s, Paydiant’s strategy was to
offer a white-label platform upon which merchants could
customize their own unique customer
experiences.
Additionally, Paydiant differed from most competing digital
wallets in that the scope of its
solutions went beyond payments. Paydiant addressed customer
engagement more broadly,
offering in-store customer engagement technology, marketing,
rewards, and other merchant-
specific features. Paydiant was technology-agnostic, which
enabled merchants to employ the
mobile payment technology that was most suitable for their
needs—QR codes, NFC, or
otherwise. By 2015, Paydiant powered the mobile wallets for
Subway, Target, Capital One, FIS,
Barclaycard, Vantiv, and Harris Teeter, as well as the CurrentC
app for the Merchant Customer
Exchange (MCX) consortium of retailers.
From Online to Offline

In September 2013, PayPal announced the launch of PayPal
Beacon, a technology that would
enable consumers to pay at participating merchants completely
hands-free and faster than
swiping a credit card or tapping a mobile phone at the POS.
PayPal Beacon was a small device
that plugged into any merchant’s power outlet and connected
the merchant’s POS system to
customers’ digital wallets via BLE.28 Transactions could take
place without customers having to
open up an app, without GPS being turned on, and even without
a phone signal. Additionally,
BLE was superior to older technologies, which required users to
proactively open an app in their
smartphones to activate the technology. PayPal Beacon enabled
merchants to connect
automatically with customers, offering a completely passive and
frictionless payment experience
to customers.
When a customer would come within range of a Beacon, the
PayPal app on the customer’s
smartphone would automatically activate and connect to the
Beacon. If the customer’s
smartphone had never connected with the location or merchant
before, the app would ask the
customer whether they would like to check in. If the customer
checked in, his or her profile
would appear on the merchant’s POS system. At checkout,
payment would only require a verbal
confirmation.
PayPal Beacon did not launch without competition. Among
others, Apple’s iBeacon also
launched in 2013 and Samsung’s Proximity released a year
later. Adoption was light despite

BLE technology being supported by most smartphones on the
market at the time and despite the
fact that merchants could purchase the hardware for as little as
$5.29 By 2014, less than 1 percent
of the 3.6 million retail stores in the United States used
beacons.30
28 Bluetooth Low Energy (BLE) was a new technology that
enabled connected devices to communicate with each
other seamlessly at very low energy-usage levels.
29 “Building Cross-Platform iBeacon Apps for iOS, Android
and Windows with C# and Xamarin,” Vincenth, April
24, 2014, http://vincenth.net/blog/archive/2014/04/24/building-
cross-platform-ibeacon-apps-for-ios-android-and-
windows-with-c-and-xamarin.aspx (September 10, 2015).
30 “Consumers to Beacons: We’re Just Not That into You,”
Pymnts.com, November 20, 2014,
http://www.pymnts.com/news/2014/can-samsung-boost-retail-
beacon-use-where-apple-hasnt/#.VgUcyctViko
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p. 11
PAYPAL REIMAGINED : THE NEXT PHASE
When Schulman joined PayPal in September 2014, he was
excited to work with PayPal’s lineup

of world-class products and technologies despite the arduous
task of preparing it to be an
independent company over the following nine months. The
announced separation energized the
organization he was about to lead. “For the overwhelming
majority [of PayPal employees], it
was an incredibly galvanizing event.”
Schulman and his new team at PayPal had a lot to be excited
about. According to Forrester
Research, PayPal was the most trusted brand of any payment
solution on the market at the time.31
The separation from eBay opened up the potential for new
partnership opportunities with
companies such as Amazon and Alibaba, both of which were
considered off-limits when PayPal
was still under eBay’s umbrella. Additionally, Schulman was
able to benefit from PayPal’s new
independent board of directors, enabling the company to have
oversight from a group solely
focused on the payments ecosystem. PayPal’s robust balance
sheet would enable it to fuel its
innovation further through acquisitions as well as organic
development to fill the gaps in its
lineup of products and services. Indeed, PayPal began its new
journey as a standalone company
with momentum and significant assets to leverage.
Despite the incredible assets at PayPal’s disposal as a
standalone company, careful planning and
significant changes would be required for PayPal to succeed on
its own. The digital payments
industry, originally dominated by e-commerce, was growing
rapidly in new segments which
were becoming increasingly competitive. The continued
adoption of smartphones globally

increased the importance of mobile payments. U.S. m-
commerce was forecasted to account for
half of all digital commerce revenue by 2017.32 U.S. mobile
payments had already surpassed
$52 billion in 2014 and were expected to nearly triple to $142
billion by 2019.33
Schulman believed that PayPal needed to dramatically reinvent
itself to remain competitive. As
Schulman phrased it, “We can no longer be a proprietary digital
button on a website and hope to
have the same growth going forward as we did in the past.”
Digital payments had moved beyond
this simple feature. Offering value-added services was required
to remain competitive with some
of the largest technology companies that had entered the race.
A New Vision
Schulman believed that the new PayPal had to accomplish two
goals to succeed in the long term:
First, PayPal needed to be an everyday part of consumers’
financial lives; and second, PayPal
had to serve as a comprehensive commerce partner for
merchants.
31 “PayPal, Amazon Top Consumers’ List for Trusted Digital
Wallet,” Forrester Research, December 3, 2013,
https://www.forrester.com/PayPal+Amazon+Top+Consumers+Li
st+For+Trusted+Digital+Wallet/-/E-PRE6464
32 “Gartner Says By 2017, U.S. Customers' Mobile Engagement
Behavior Will Drive Mobile Commerce Revenue to
50 percent of U.S. Digital Commerce Revenue,” Gartner,
January 28, 2015,

http://www.gartner.com/newsroom/id/2971917 (September 10,
2015).
33 “US Mobile Payments Will Reach $142B By 2019,”
Forrester, November 17, 2014,
http://blogs.forrester.com/denee_carrington/14-11-17-
us_mobile_payments_will_reach_142b_by_2019
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p. 12
To achieve this, PayPal would need to expand its products and
services to accommodate the
many ways people move and manage their money. “Instead of
somebody using us two to three
times a month on average, we want them to use us two to three
to four times a week,” Schulman
noted. Schulman envisioned PayPal users being able to load
their paychecks right onto PayPal’s
platform and to pay their bills directly from their PayPal
accounts. Schulman believed that the
best way to be central in how both consumers and merchants
manage and move their money was
by becoming the operating system for digital commerce.
PPaaS: PayPal as a Service
Under Schulman’s vision, PayPal as a Service would be a

payments operating system upon
which merchants could build applications tailored to their
unique customer experiences.
Schulman believed this was the path to success because of
several key trends. First, consumers
had become operating system agnostic. “You’ve got Windows
on your desktop at home, you’re
carrying an iPad, and you’re using an Android phone,” he
explained. As a result, a successful
payments solution would need to function across all operating
systems. Second, payment
optionality was still critical for consumers. “People pick out
their credit cards for certain
transactions, cash for others, debit cards for others.” And while
one of Schulman’s other goals
was to increase PayPal’s share of these transactions, to be truly
customer-centric would require
the company to build a platform that could accommodate all
payment preferences.
Bill Ready, PayPal’s senior vice president and global head of
product and engineering,
recognized the importance of partnering with other players in
the industry. “There are certainly
places where we will be sworn enemies, but there are a lot of
other places where we can work
together.”34 While PayPal’s branded products and services
would continue to compete with those
of other players like Visa, Apple, and Google, Ready saw
significant opportunity to partner on
unbranded payments solutions. Schulman wanted merchants to
be able to write their own
applications on PayPal’s platform, noting that “We don’t know
quick service restaurants better
than Subway and Burger King… but what we know is payments
inside and out.” By serving

merchants as a comprehensive payments partner, Schulman
believed PayPal would have the
power to recreate the physical retail shopping experience by
making it more personal,
convenient, and secure.
Schulman was quick to point out that nowhere in PayPal’s new
vision or goals was a desire to
become a bank. “Banks are the analog manifestation of what
happened last century. You would
never build your financial system today around bank branches
and infrastructure. For basic
financial services, you have all the power of a bank branch in
the power of your hand today, but
at a fraction of the cost, and you can do it faster, easier.”
Reconstructing PayPal
With a new vision in hand, Schulman and his team went about
the physical decoupling of
PayPal’s technology and systems from eBay and recreating
PayPal’s products, leadership,
34 Interview with William Ready, PayPal Senior Vice President,
Product and Engineering, August 18, 2015.
Subsequent quotes are from this interview, unless otherwise
noted.
E-572

p. 13
organizational structure, and culture. This was no small task
given the organizational and
industry changes that PayPal was enduring at the time.
PayPal 1.0
Over the course of PayPal’s 15-year history, its technology had
become increasingly complex.
Even before the separation from eBay, PayPal’s leadership
acknowledged the need to update its
technology in order to simplify and speed up the innovation
process. “Without a flexible
infrastructure, and platform, you have no chance of innovating
in a timely, speedy way,” said
Schulman. Recruiting top talent to work on PayPal’s older
technology was also difficult. It was
even a challenge to recruit from within eBay. “You couldn’t
recruit anybody,” noted James
Barrese, who had been PayPal’s CTO since 2012.35
By 2015, PayPal had grown to over 17,000 employees, a true
symbol of its success. But as is the
case with most large companies, PayPal had to balance the
desire for internal consensus with the
need to innovate quickly. When Ready joined PayPal through
its acquisition of Braintree, he
was surprised with the amount of time and energy devoted to
planning and buy-in before
execution. “As an entrepreneur, you have a heavy bias towards
action. In a big company, you
have a heavy bias towards consensus.” As PayPal grew,
coordination and alignment became a
challenge due to its size. “If only people could have all been

aligned on day one, you could’ve
moved twice as fast,” Ready lamented about being part of a
large organization. Without
alignment, it was difficult to gain support throughout the
organization on tasks and roadmaps.
As PayPal grew in size, friction between its organizational
structure and its evolving product
development process became increasingly evident. When
Schulman arrived in 2014, the product
and engineering groups were separated within different
divisions. As a result, few employees
saw the problems they were solving for customers from end-to-
end. “One of the hardest things
about being inside a big company is that you have to go deal
with people that see just their piece
of the problem. And it was really hard to drive stuff through,”
noted Ready. With many of the
teams siloed, integrating new technology across products was
also challenging. When PayPal
acquired Braintree, Ready was frustrated with how long it took
to integrate its One Touch
technology with PayPal’s other products. However, he
acknowledged the benefits of being part
of such a large company. “Had it been entirely up to us we
could’ve built PayPal One Touch
twice as fast. I’m frustrated it took us as long as we did; but on
the other hand, the day we
launched, we launched to 165 million users.”
Ready was also struck by the significant influence of the PayPal
sales team on product
development. Salespeople would document feedback and
feature requests from customers,
which would then inform product development decisions.
Making incremental changes to

optimize products based on incremental feedback from
customers had been effective in the past,
but in an industry undergoing revolutionary changes, “the
customers… sometimes don’t know to
ask for what’s coming next,” according to Ready. PayPal’s
sales team was also slow to push
innovation to customers. “It was almost a year after Braintree
came in before PayPal sales reps
started selling Braintree products. They had feature-function
checklists and would say, ‘Here are
all the reasons why your product won’t sell.’”
35 Interview with James Barrese, PayPal CTO, August 11,
2015. Subsequent quotes are from this interview, unless
otherwise noted.
E-572
p. 14
PayPal 2.0
When Schulman arrived in 2014, he was determined to make the
drastic changes required to
remain competitive in the new payments ecosystem, more
fearful of changing too little than
changing too much. In particular, Schulman recognized the
inertia in large companies to

maintain the status quo. “In times of stress particularly, you
tend to want to go back to what you
know and what’s made you successful when that’s absolutely
the wrong thing to go do. You
actually need to reimagine what could be, not what was, and
extrapolate from that.” Schulman
accelerated the multi-year transformation of PayPal’s vision,
leadership, and organizational
structure, building on the momentum generated from PayPal’s
technology overhaul.
The transformation of PayPal’s technology had actually been
underway several years before
Schulman joined the company. CTO James Barrese was in the
midst of what would become a
four-year technical overhaul. Barrese recalled, “We brought in
a number of new people and each
one of us was really trying to reinvent our respective areas and
kicked off a number of strategic
re-platform initiatives. We rewrote pretty much every major
product for PayPal.” Prior to the
overhaul, the opportunity to maintain PayPal’s 15-year old
technology was a challenging sell to
most technologists in Silicon Valley. Fundamentally revamping
PayPal’s architecture, on the
other hand, was an opportunity that enticed many.
Additionally, PayPal’s new technology
architecture would be much more services-oriented and much
easier on which to innovate.
However, Schulman knew that reinventing a tech company with
17,000 employees was easier
said than done and carried significant risks. “There are many
risks in reorganization. You break
apart a lot of things, but we really, fundamentally need to
reimagine our value proposition to

consumers and to merchants.” Like Barrese, Schulman believed
that a reinvention was required
not only to improve its technology, but also to attract the best
talent in the industry. “People
want to feel they’re making a difference in the world… if you
want to attract the best and the
brightest to a company, they need to be inspired.”
Schulman furthered PayPal’s transformation by making
significant changes to PayPal’s
leadership and organizational structure. No longer under the
oversight of eBay’s board, PayPal
could now build its own leadership team, which would focus
exclusively on strategic decision-
making in PayPal’s best interest. While part of eBay, PayPal’s
leadership reported to eBay’s
board, which became problematic at times when the interests of
eBay and PayPal were not fully
aligned. In his open letter to eBay shareholders, Carl Icahn
claimed conflicts of interest between
PayPal and several eBay board members. Specifically, Icahn
noted that eBay board members
Marc Andreessen and Scott Cook actively advised and were
invested in several PayPal
competitors (See Exhibit 2). Schulman had the opportunity to
rebuild and align PayPal’s new
independent board with its interests and vision in mind. “We
have a board that understands the
chess game probably better than they ever have before,” he
noted.
Schulman also melded the product and engineering teams
around customer segments. Much of
PayPal’s talent had previously been siloed in different areas.
Because PayPal had become a two-
sided platform for both merchants and customers, Schulman

believed optimal teamwork and
communication across groups was essential for PayPal’s future
success, and thus an
organizational structure reflecting that was necessary. “I think
that’s really been helpful in the
communications piece of this and our speed to market,” noted
Schulman. Cognizant of the
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p. 15
nature of PayPal’s two-sided platform, Schulman also brought
both the merchant and customer
segment teams under Bill Ready’s leadership. This ensured that
new product development was
aligned with the needs of both merchants and customers, and
employees had end-to-end
ownership of products. The new organizational structure
allowed for more employees to see the
products and technologies that they were building from the
customer’s perspective.
Additionally, while customer feedback on product
improvements was still documented by the
sales team and used to help inform the product development
process, it was no longer treated as
an instruction list and instead was reviewed in the context of
PayPal’s greater vision.

While PayPal’s new organizational structure was more open and
interconnected, senior
management was careful to provide autonomy to those units and
products that would benefit
from it. In particular, PayPal management carefully limited the
integration of Braintree and its
popular social payments platform, Venmo. According to Ready,
“For certain parts of the
business, Braintree for example, we kept as a standalone unit,
so Braintree can move fast
enough. That’s a very conscious choice. Had we integrated
Braintree, we’d be at major risk of
others coming in and moving faster.” Bill Me Later, which
PayPal acquired in 2008, remained a
standalone unit for six years until it was fully integrated and
rebranded to PayPal Credit in
2014.36
To promote PayPal’s reorientation, Schulman repetitiously
emphasized PayPal’s new focus on
the customer in team meetings. “In all of my all-hands meeting
that I have Thursdays, we’ll talk
about what it means to be a customer champion.” Additionally,
PayPal’s senior leadership spent
significant time and energy on bottom-up initiatives to align
employees with PayPal’s new
vision. “We’ve really had to pair great top-down support with
really good bottom-up proof
points,” noted Ready. He developed case studies demonstrating
the positive results of new
product initiatives on customers, which he presented internally
to many of PayPal’s groups and
regional sales teams. Ready even enlisted his own team of
lieutenants to take on this
communications task globally.

STRATEGIC CHALLENGES MOVING FORWARD
By mid-2015, PayPal’s separation from eBay was almost
complete and with PayPal’s
reconstruction well underway, Schulman devoted his energy on
the journey ahead as an
independent company. He had studied PayPal’s history
carefully and developed an intimate
understanding of the industry’s complex competitive dynamics,
but several issues were top-of-
mind.
Acquisition as a Tool for Growth
Given the intense competition within the market, Schulman
knew that PayPal would have to
rigorously invest in innovation to remain a leader. While
PayPal continued to innovate from
within on such products as One Touch, v.zero, PayPal Here, and
PayPal.me, Schulman also
prepared his team to leverage PayPal’s sizable balance sheet to
innovate through acquisition.
36 TechCrunch, “PayPal’s ‘Bill Me Later’ Service Becomes
‘PayPal Credit,’ As Company Expands Credit Products
Globally,” July 30, 2014,
http://techcrunch.com/2014/07/30/paypals-bill-me-later-service-
becomes-paypal-credit-as-
company-expands-credit-products-globally/ (September 10,
2015).

E-572
p. 16
Fortunately, acquisition was part of PayPal’s DNA. After itself
being acquired by eBay for $1.5
billion in 2002, PayPal went on to invest $3 billion in
acquisitions over the subsequent ten years.
PayPal leveraged these acquisitions to expand its product
lineup, enhance its technology, and
extend into new markets.
New products
In 2008, PayPal made a significant acquisition of Bill Me Later,
for $820 million. Bill Me Later
offered a revolving line of credit to online shoppers, who would
complete purchases by
submitting their birthdates and the last four digits of their social
security numbers for an instant
credit check. If approved, they were to repay Bill Me Later
within six months, after which they
would begin accumulating interest. Bill Me Later remained a
non-PayPal branded product until
2014, when it became PayPal Credit, serving as the foundation
for PayPal’s broader efforts to
expand its credit offering.
New technology
PayPal’s 2013 acquisition of Braintree also enhanced and
expanded PayPal’s technology. Not
only did PayPal expand its product offering with Braintree’s
suite of white-label mobile app
tools and the Venmo peer-to-peer (P2P) service, PayPal also

enhanced its technology with
Braintree’s patented One Touch solution. One Touch allowed
users to login once per device
across all One Touch-enabled apps, which could then accept
PayPal payments with just a
fingerprint. PayPal integrated One Touch into several of its
other products including PayPal’s
online services and digital wallet. By 2015, PayPal One Touch
was available in 16 markets37
and half of the 500 largest U.S. e-commerce sites.38
Exceptional talent
PayPal’s acquisitions brought in exceptional talent as well. In
particular, PayPal’s Braintree
acquisition brought along CEO Bill Ready, who became
PayPal’s senior vice president and
global head of product and engineering after its separation from
eBay. In an industry where
leaders of acquired companies rarely join the senior ranks of
their parent companies, Ready’s
successful retention at PayPal was indicative of PayPal’s
renewed reputation as a desirable place
to work.
New markets
PayPal’s acquisitions also extended its access to new markets
and market segments. PayPal’s
acquisition of Paydiant provided access to some of the largest
U.S. retailers through Paydiant’s
partnership with MCX. MCX was a consortium of retailers
including Walmart, Target, Exxon,
and many others developing a customer payments and loyalty
app known as CurrentC, which
was powered by Paydiant. Historically, most of PayPal’s
business was driven by small to
medium-sized companies, but this relationship enabled PayPal

to expand further into a new
market segment.
37 PayPal, “PayPal One Touch is Now Being Used By Millions
of People and Available in16 Countries,” August 25,
2015, https://stories.paypal-corp.com/home/paypal-one-touch-
is-now-being-used-by-millions-of-people-and-
available-in-16-countries (October 6, 2015).
38 “More Than Half of Top 500 Online Retailers Offer PayPal’s
One Touch Checkout,” Recode.net, September 17,
2015, http://recode.net/2015/09/17/more-than-half-of-top-500-
online-retailers-offer-paypals-one-touch-checkout/
(October 6, 2015).
E-572
p. 17
Braintree’s social payments service, Venmo, deepened PayPal’s
presence in the rapidly growing
P2P payment segment (see Exhibit 9). Venmo was a free P2P
payment service that allowed
users to send money to other users, and was thought to be the
fastest growing and most-used P2P
provider in the market in 2015, having processed $2.3 billion in
2014 with a 200 percent annual
growth rate.39 Domestic P2P bank transfer volume reached $21

billion in 2014 and was expected
to reach $86 billion by 2018.40 Venmo’s strong position in
U.S. P2P payments set PayPal up
comfortably to capitalize on the rapidly growing segment and
compete with other popular
services including Snapcash, the P2P payment service for
messaging app Snapchat.
PayPal’s announced 2015 acquisition of Xoom for an enterprise
value of approximately $890
million was expected to further extend its access to the global
P2P market, specifically
international remittances.41 The global remittance market was
significant, reaching $583 billion
annually in 2014 and expected to reach $636 billion by 2017.42
Xoom was considered a leader in
international remittances with 1.3 million active users sending
remittances worth $7 billion
across 37 countries in 2014.43 Traditionally, the market had
been dominated by incumbents
Western Union and MoneyGram, but Xoom’s digital model was
less expensive because it
required significantly fewer physical agents. In 2014, Xoom’s
average transaction costs were
$12.3 vs. Western Union’s $21.9.44 Additionally, half of
Xoom’s transactions were initiated on
mobile devices, aligning well with PayPal’s new “mobile first”
platform, compared to less than 6
percent for both Western Union and MoneyGram.45
Emerging Economies
Non-U.S. e-commerce was expected to drive 80 percent of total
global e-commerce volume
growth through 2018, representing a significant opportunity for
PayPal.46 By 2014, just over

half of PayPal’s business came from overseas, but most was in
developed countries. 47
Financial services in emerging markets were growing rapidly as
mobile device penetration
increased. The number of registered mobile money accounts in
emerging markets was forecast
to grow from 323 million in 2011 to 1.24 billion by 2017 and
the total value of mobile money
transactions in emerging markets was forecast to grow from $44
billion in 2011 to $395 billion
in 2017.48 While PayPal’s own branded international services
offered money transfer across
more than 200 countries in over 20 currencies, its acquisition of
Xoom was expected to
significantly expand PayPal’s cross-border business and other
PayPal services in developing
39 BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p.
18.
40 Javelin Strategy & Research Report; Business Insider
41 At the time of the case the Xoom acquisition had not closed,
but was expected to do so in Q4 2015.
42 World Bank, “World Bank Migration and Development,”
April 2015.
43 Deutsche Bank Markets Research, page 22.
44 BMO Capital Markets, op. cit., p. 23.
45 BMO Capital Markets, op. cit., p. 24.
46 Morgan Stanley, “PayPal Holdings, Inc.,” July 23, 2015,
Page 12.
47 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20,
2015, p. 6.
48 VAS Research Series, “Mobile Money in Emerging
Markets,”
http://www.berginsight.com/reportpdf/productsheet/bi-mm2-

ps.pdf (September 10, 2015).
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p. 18
countries, several in which PayPal had previously experienced
mixed results gaining acceptance,
including China and India.
In China, PayPal had been unsuccessful in gaining the requisite
licenses to process domestic e-
commerce transactions, and in India the Reserve Bank of India
in 2011 restricted PayPal
payments to merchants to amounts under $500.49 However,
PayPal was able to launch PayPal
China Connect in 2015, which would link Chinese consumers
directly with PayPal’s network of
global merchants.50 In the same year, PayPal announced a
strategic partnership with India’s
largest bank, the State Bank of India (SBI), which enabled SBI
customers to use their debit cards
on PayPal for buying products from overseas websites.51
While PayPal’s growing presence in the developing world made
financial sense, it was also
aligned with PayPal’s vision and Schulman’s own personal
mission to improve financial
inclusion globally. As Schulman phrased it, “It’s expensive to

be poor.” More than 1 billion
people in emerging and developing countries had mobile
phones, but no bank account.52 PayPal
had the potential to make these people the first to access
modern financial tools and services
without needing a bank account.
Security
When Schulman joined PayPal, he was also chairman of
Symantec Corporation, one of the
world’s largest Internet security companies (see Exhibit 10).
He understood the challenges
Symantec faced in developing state-of-the-art security
solutions, and hence the security dangers
PayPal faced as it was about to operate on its own with a
complete reconstruction of its
technology.
Historically, PayPal had been an Internet security pioneer.
Cofounder Max Levchin co-created
the Gausebeck-Levchin test, one of the first implementations of
CAPTCHA.53 Over the course
of its history, PayPal invested heavily in its security
capabilities, with over $200 million in
acquisitions including Fraud Science in 2008 and CyActive in
2015.
Unfortunately, PayPal’s separation from eBay had a potentially
negative impact on PayPal’s
security. While part of eBay, PayPal had access to eBay’s
extensive data, which was fed into
PayPal’s risk algorithms. Additionally, PayPal’s growing range
and complexity of products,

49 “Reserve Bank Of India Restricts PayPal Payments To
Merchants To Under $500,” TechCrunch, January 28,
2011, http://techcrunch.com/2011/01/28/reserve-bank-of-india-
restricts-paypal-payments-to-merchants-to-under-
500/ (September 10, 2015).
50 Morgan Stanley, ob.cit., p. 14.
51 “SBI partners with PayPal to enable debit card payments
online,” The Economic Times, May 21, 2015,
http://articles.economictimes.indiatimes.com/2015-05-
21/news/62460120_1_paypal-debit-state-bank (September
10, 2015).
52 McKinsey & Company, “Mobile money: Getting to scale in
emerging markets,” May 2012,
http://www.mckinsey.com/insights/social_sector/mobile_money
_getting_to_scale_in_emerging_markets
53 Completely Automated Public Turing Test To Tell
Computers and Humans Apart (CAPTCHA) was a test that
required new PayPal account users to type a word depicted in a
small image that bots would be unable to read,
preventing criminals from using malware to open dozens of
fraudulent accounts with stolen credit card numbers.
E-572
p. 19
channels, and technologies significantly increased the number
of points of vulnerability to cyber-

attacks. While PayPal had not suffered any significant security
breaches, others in the industry
had and at great expense.
In early 2009, New Jersey-based Heartland Payment Systems, a
payments processor, suffered the
largest data breach ever to affect an American company.
Heartland’s breach exposed
information from approximately 130 million credit and debit
cards to cybercriminals.54
Heartland paid out roughly $140 million in fines as a result.
New Entrants with Substantive Resources
PayPal flourished under eBay’s umbrella after its acquisition in
2002, dominating e-commerce
payments with 40 percent market share in the United States by
2014.55 During that time, PayPal
coexisted without much conflict with the card networks, which
had only materially entered the
digital payments market in 2012 and 2013 with the launches of
Visa Checkout and MasterPass.56
But the world in which PayPal operated gradually grew more
complex and competitive. By
2015, PayPal was no longer competing in just e-commerce, no
longer just online, no longer just
on desktop computers, and no longer just in the United States.
Spanning technologies, channels,
devices, and countries, PayPal no longer relied on eBay for 60
percent of its business. PayPal
was an independent company operating in a complex ecosystem
of competing interests among
new entrants with substantive resources including technology
giants Google, Apple, and
Samsung, mobile carriers AT&T, T-Mobile, and Verizon, and

traditional players Visa,
MasterCard, American Express, and Discover, among others.
By 2015, PayPal had mixed
results competing against and partnering with many of these
players.
In 2012, PayPal successfully partnered with Home Depot and
Discover Financial Services to
accept PayPal at Home Depot’s 2,000 stores nationwide.
PayPal users completed in-store
transactions by typing their telephone and PIN numbers into
payment terminals or by using
Discover Cards linked to their PayPal accounts.
However, when Apple in 2014 launched its digital wallet, Apple
Pay, it excluded PayPal and
instead partnered with American Express, MasterCard, and
Visa. PayPal had earlier teamed up
with Samsung on its competing mobile wallet, Samsung Pay,
which apparently alienated Apple.
Six months later in a soap-opera-like turn of events, Home
Depot, which supported Apple Pay
upon its launch, stopped accepting it at its stores. Despite
PayPal’s exclusion, Braintree’s white-
label payment solutions powered many Apple Pay mobile apps.
According to Bill Ready,
Braintree was processing a significant share of Apple Pay
mobile app transactions by 2015. “We
power more Apple Pay than anybody else. When you press that
Apple Pay button, there’s a
good chance that Braintree is still handling the transaction.”
54 “10 Worst Data Breaches of All Time,” Tom’s Guide,
February 6, 2015, http://www.tomsguide.com/us/biggest-

data-breaches,news-19083.html (September 10, 2015).
55 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20,
2015, p 8.
56 Visa and MasterCard’s digital wallets.
E-572
p. 20
Another 2015 chapter in the increasingly complex digital
payments saga revealed the underlying
tensions between several of the industry’s many players. In
July of 2015, Visa and American
Express invested in Braintree’s main rival, Stripe. Responding
to questions regarding the
investment and its impact on Visa’s relationship with PayPal,
Visa’s CEO Charlie Scharf
acknowledged that Visa was used in a sizeable share of PayPal
transactions, but noted its unique
relationship with PayPal:
They also have a very big business that they then use our
transactions to mine
from, to disintermediate out clients’ relationship with us, and so
that’s something
which has to evolve, and is not something that we think is
sustainable for the long
term. PayPal’s strategy involves guiding users’ hands away

from using payment
cards and toward leveraging [PayPal’s] checking accounts,
which increases
PayPal margins significantly. Stripe, on the other hand, is seen
as more of a
partner because it does not subscribe to this approach.57
LOOKING AHEAD
On Schulman’s return flight home after ringing the opening bell
at the NASDAQ stock
exchange, mid-air between New York City, the financial capital
of the world, and Silicon Valley,
the technology capital of the world, he wondered what type of a
company PayPal would become
over the next five years. Former eBay CEO Meg Whitman
described PayPal’s success a decade
earlier in simple terms. “First, PayPal focused on expanding its
service among eBay users in the
U.S. Second, we began expanding PayPal to eBay’s
international sites. And third, we started to
build PayPal’s business off eBay.” Unfortunately, PayPal’s
business was no longer so simple.
Would PayPal’s technology reconstruction be a success and
completed on time? Would PayPal
be able to innovate fast enough to respond to the ever-
increasing competitive threats within the
rapidly evolving digital payments industry? And lastly, would
PayPal lead the global effort to
improve financial inclusion?
57 The Street, “PayPal Faces New Threat as Visa Partners With
Payments Startup Stripe,” July 29, 2015,
http://www.thestreet.com/story/13234280/1/paypal-faces-new-

threat-as-visa-partners-with-payments-startup-
stripe.html (September 10, 2015).
E-572
p. 21
Exhibit 1
Global Online Commerce Retail Sales
Source: BMO Capital Markets, “PayPal Holdings,” July 20,
2015, p. 33.
E-572
p. 22
Exhibit 2

Carl Icahn—Letter to eBay Shareholders
Dear Fellow eBay Stockholders,
We have recently accumulated a significant position in eBay’s
common stock because we believe there is great
long-term value in the business. However, after diligently
researching this company we have discovered multiple
lapses in corporate governance. These include certain material
conflicts of interest, which we believe could put the
future of our company in peril. We have found ourselves in
many troubling situations over the years, but the
complete disregard for accountability at eBay is the most
blatant we have ever seen. Indeed, for the first time in our
long history, we have encountered a situation where we believe
we should not even have to run a proxy fight to
change the board composition. Rather, we believe that in any
sane business environment these directors would
simply resign immediately from the eBay Board, either out of
pure decency or sheer embarrassment at the public
exposure of the extent of their self-serving activities.
How is it possible for the current board to engage in any
meaningful discussions about long-term stockholder value
while: (1) at least two board members are directly competing
with eBay, (2) one board member is demanding eBay
cease hiring the most talented employees, (3) another board
member is routinely funding competitors while buying
companies from eBay and reaping significant personal riches,
(4) at least two board members appear to have put
their own financial gain in ongoing conflict with their fiduciary
responsibilities to stockholders and (5) the CEO
seems to be completely asleep or, even worse, either naive or
willfully blind to these grave lapses of accountability
and stockholder value destruction?

The Board’s Transgressions and CEO Mr. John Donahoe’s
Ineptitude in Addressing Them
Mr. Marc Andreessen – Independent Director
Since Mr. Andreessen has been an eBay insider, he has engaged
in several transactions that lead us to question his
loyalty to eBay. During Mr. Andreessen’s time on the eBay
Board he has purchased large stakes in two former eBay
subsidiaries, reaping significant personal riches. In September
2009, an investor group that included Mr.
Andreessen, preempted a planned Skype IPO (in which
stockholders would have ended up making multiple billions
of dollars) and bought 70% of Skype for less than what eBay
had paid to acquire it. Mr. Andreessen basked in the
purchase, saying that “Skype is the archetypal phenomenon: a
breakthrough technology”. His partner was even more
excited, stating that “Skype is on its way to becoming one of the
most important companies in the world”. One
cannot help but wonder what happened to Mr. Andreessen’s
fiduciary responsibility to share his feelings with Mr.
Donahoe and the board rather than preempt the planned IPO to
further his own interests. A mere 18 months later,
Mr. Andreessen’s investor group flipped Skype to Microsoft for
$8.5 billion, a value three times what they paid for
it, netting approximately $4 billion at the expense of eBay
stockholders. After the sale to Microsoft, Mr.
Andreessen, a sitting eBay Board member and fiduciary to
stockholders, stated: “one reason we were enthusiastic
about buying Skype was that even though we thought it would
be a tremendous standalone business, we also knew
that for Microsoft and a number of other companies Skype
would be an obvious thing to buy. We knew we’d always
have the fallback of selling to strategic buyers”. Did Mr.
Andreessen share this strong view with Mr. Donahoe? Was

Mr. Donahoe completely asleep, or even worse, so naive and
deferential to his “world-class board” that he allowed a
sitting board member and several private equity firms to walk
away with over $4 billion in what was essentially
stockholder’s money after a sale to a strategic that he obviously
should have orchestrated himself? Many others have
been vocally critical of the Skype transaction, but, until now,
none have taken on the task of standing up to Mr.
Donahoe and this board.
Mr. Andreessen’s next eBay sourced grand slam was his
investment in Kynetic. In March 2011, as part of eBay’s
$2.4 billion acquisition of GSI Commerce, the eBay Board
decided they no longer wanted the Kynetic portion of
GSI Commerce and sold it back to the company’s founder for
just $31 million in cash and a $467 million sellers
note at below market interest. In June 2012, Mr. Andreessen
pounced, making a $150 million investment in Kynetic
at a $1.5 billion valuation, leveraging the low sale price and
below market financing which the eBay Board had
recently approved. Just a year later, Kynetic was valued at $3.1
billion, giving Mr. Andreessen a paper gain of more
than 100%.
E-572
p. 23

Exhibit 2 (continued)
Carl Icahn—Letter to eBay Shareholders
Additionally, during Mr. Andreessen’s time on the eBay Board
– a time when he has been privy to nonpublic eBay
Board information – he has made investments in and actively
advised, no less than five direct competitors of eBay
(four of which are competitors of PayPal), including Boku
(mobile payments platform), Coinbase (Bitcoin wallet),
Dwolla (secure online money management), Jumio (online and
mobile credit card payments) and Fab (design e-
commerce). How can Mr. Donahoe and the eBay Board allow
Mr. Andreessen to advise these competitors while he
simultaneously possesses not only nonpublic eBay Board
information but also intimate proprietary information
about PayPal’s operations? But perhaps more importantly, how
can Mr. Andreessen be trusted to objectively advise
Mr. Donahoe and the eBay Board about the strategic direction
of PayPal when he has vested interest in so many of
its competitors? Regarding Square, another powerful PayPal
competitor, Mr. Andreessen publicly lamented his
regret in passing on the opportunity to invest in that company as
well.
Mr. Scott Cook – Independent Director and Member of the
Corporate Governance & Nominating Committee
Mr. Cook is the founder, former CEO and a current board
member of Intuit Inc. Mr. Cook has retained almost $1
billion of Intuit stock (~100x the $9 million of eBay stock he
owns). Intuit and PayPal are direct competitors in
payment processing as Intuit Go-Payment provides virtually the
same capabilities to merchants as PayPal Here.
How can the board have a conversation about the strategy or
performance of PayPal when a representative of a

direct competitor who has so much at stake is in the room?
Even worse, Mr. Cook also apparently believes he can
tell eBay whom the company cannot hire. Unbelievably,
according to a pending DOJ complaint, “eBay ultimately
agreed to an expansive no-solicitation and no-hire agreement in
large part to placate Intuit’s Mr. Cook, who was
serving as a member of eBay’s Board of Directors and who, at
the same time, was making several complaints on
behalf of Intuit about eBay’s hiring practices.” Furthermore,
according to the complaint, in an effort to placate Mr.
Cook, eBay instructed its employees not to pursue potential
hires from Intuit and to discard their resumes. Is Mr.
Cook wary of how a standalone PayPal could impact the
company he founded? Is he worried that it would diminish
the value of his $1 billion in Intuit stock?
The best question, however, is where has Mr. Donahoe been
when all of this has been going on?
Mr. John Donahoe – Chief Executive Officer, President and
Director
While Mr. Donahoe is feeding information to competitors on the
eBay Board and selling the company’s assets to
board members, notable PayPal architects including Elon Musk
and David Yammer are publicly questioning his
strategy. David Yammer recently stated that “if you allowed
PayPal to pursue its destiny there are moves it could
make to become the largest financial company in the world.”
Elon Musk has said “it doesn’t make sense that a
global payment system is a subsidiary of an auction
website…it’s as if Target owned Visa or something” and that
“(PayPal) will either wither or be spun out.”
Mr. Donahoe has resoundingly highlighted the strength of his
“world-class board of directors,” including Mr.

Andreessen and Mr. Cook. In our opinion, world-class directors
focus on creating long-term stockholder value, not
furthering their own financial and professional interests at the
expense of stockholders. Amazingly, Mr. Donahoe
has also publicly boasted about eBay’s sale of Skype, claiming
that it was an opportunity for eBay to “have its cake
and eat it, too.” The facts, however, show that the transaction
was disastrous for stockholders to the tune of more
than $4 billion. Additionally, Mr. Donahoe has touted his record
of creating stockholder value over handpicked time
periods. The more applicable facts show that not only from the
time Mr. Donahoe took over as CEO, but also since
the beginning of 2013, the stock has dramatically
underperformed its applicable peers. From March 31, 2008
through our initial involvement on January 10, 2014, eBay stock
returned 75% while Amazon, Visa and MasterCard
returned 462%, 271% and 285%, respectively. For all of 2013
through our initial involvement on January 10, 2014,
Amazon, Visa and MasterCard returned 60%, 48%, and 73%,
respectively, while eBay stock returned only 2%.
It is very sad to us that Mr. Donahoe appears to lack awareness
about what is going on around him on his board and
in the marketplace. It makes us seriously question his judgment
and ability to make the crucial decisions that must
E-572
p. 24

Carl Icahn – Letter to eBay Shareholders
be made concerning the future of PayPal. How can Mr. Donahoe
be the right person to make the strategic decisions
necessary to achieve long-term value creation when he relies on
his “world-class board of directors” with competing
interests that challenge their fiduciary responsibility to eBay
stockholders? We are convinced that not only has Mr.
Donahoe failed to address eBay’s corporate governance crisis
but also that his general stewardship of the company
has been myopic. Elon Musk, one of the most preeminent
technological visionaries of our generation, predicts that
“(PayPal) will get cut to pieces by Amazon Payments, or by
others such as Apple and by startups if it continues to
be part of eBay.” It is time for us to address this critical
problem that now faces the company.
Our Proposal
We believe creating two dedicated and highly focused
independent businesses would provide employees and
stockholders the best opportunity to remain competitive over
the long term. We believe that the separation of the
traditional eBay and PayPal businesses will: (1) highlight the
significant value of the disparate businesses currently
shrouded by a conglomerate discount the market has afforded
eBay; (2) focus and empower independent
management teams to most effectively build two very different
business platforms, make economic decisions
independent of each other and, most importantly, foster
innovation; and (3) provide an even more valuable currency
for future bolt-on acquisition opportunities and for recruiting
the top talent necessary for PayPal to remain the

market leader in payment technology.
In an environment where an accomplished leader such as Scott
Thompson, the former CEO of Yahoo, is dismissed
for adding two words, Computer Science, to a degree from
Stonehill College, it is incredible that so many blatant
indiscretions at eBay have been tolerated by Mr. Donahoe and
the other board members. We believe eBay needs
fresh stockholder representation on the board to steer it towards
long-term success and away from becoming yet
another example of a technology company with a management
team and board that refused to adapt (such as Nokia,
Blackberry, Dell, Eastman Kodak, Polaroid, Nintendo, Xerox,
Sony, Palm, and AOL, among many others). Our
experience creating long-term stockholder value at companies
such as Chesapeake Energy, Forest Labs, Motorola
and R.J. Reynolds Tobacco, among many others, has showcased
our ability to influence boards to meaningfully
enhance long-term stockholder value by, among other things,
holding management, and in certain cases other
directors, accountable. We hope you will VOTE FOR OUR
SLATE OF DIRECTORS and afford us the opportunity
to represent and serve all eBay stockholders as members of the
eBay Board, just as we have successfully done at
many other companies in the past.
Even more importantly, however, we urge you to vote in favor
of our precatory proposal in order to send a clear
message to the eBay Board that eBay and PayPal must be
separated – NOW. We hope that all eBay stockholders
recognize that PayPal is at a critical point in its development
and that the payments market is rapidly evolving
around it. Particularly with respect to technology, business
opportunities are either seized by those who truly
appreciate their potential, or they vanish and are relegated to
the dustbin of history. Do not allow PayPal to be, in the

words of Elon Musk, “cut to pieces” because it remains part of
eBay. VOTE FOR OUR PRECATORY TO
SEPARATE PAYPAL FROM EBAY NOW.
Sincerely,
Carl C. Icahn
Source: http://www.businessinsider.com/carl-icahn-ebay-letter-
2014-2
E-572
p. 25
Exhibit 3
eBay and PayPal Revenue Growth ($billions)
Source: http://walkthechat.com/wechat-payment-5-reasons-
tencent-might-kill-alipay/.

E-572
p. 26
Exhibit 4
eBay’s Response to Carl Icahn’s Letter
New eBay shareholder Carl Icahn has cherry-picked old news
clips and anecdotes out of context to attack the
integrity of two of the most respected, accomplished and value-
driven technology leaders in Silicon Valley. Marc
Andreessen and Scott Cook bring extraordinary insight,
expertise and leadership to eBay’s board, which is
scrupulous in its governance practices and fully transparent
with regard to its directors’ other affiliations and
businesses. And eBay Inc. President and CEO John Donahoe is
widely respected for his turnaround of eBay and
leadership of the company over the past six years.
As we are sure our other shareholders would agree, we prefer to
engage in more constructive and substantive
discussions of why, in our view, PayPal and eBay are better
together. Instead, Mr. Icahn unfortunately has resorted
to mudslinging attacks against two impeccably qualified

directors.
Mr. Icahn has nominated two of his employees to eBay’s board.
As we have said, the board’s nominating committee
will review the nominations of his employees in due course.
Even if our board does not support the nominations,
ultimately shareholders will decide whether they believe Mr.
Icahn's employees are better qualified than directors
such as Mr. Cook (Mr. Andreessen is not up for re-election this
year) to sit on the board of a leading technology
company.
The board has been clear in its view that shareholders are best
served by keeping PayPal part of eBay. The board
regularly assesses all strategic options for the company; should
circumstances change the board is entirely capable
of evaluating alternatives for optimizing shareholder value.
In response to Mr. Icahn’s specific claims, the facts are:
1) Skype: Skype was a great stand-alone business but had
limited synergies with eBay’s global commerce and
payments businesses. Consistent with its practice of regularly
reviewing all of eBay’s operations, the Board
determined that because of these limited synergies, it would be
in the best longer term interest of stockholders to
explore a divestiture of Skype. The company explored all
options for divesting Skype, including an IPO and sale to
a strategic buyer, and pursued the option that offered the
highest return at the time, which was the sale of a
controlling stake. We retained a 30% stake upon the sale to a
private equity group led by Silver Lake Partners. That
stake meant that the company earned a total of $1.4 billion
when Microsoft acquired Skype. Because Mr.
Andreessen’s fund had a small stake in the acquiring group, Mr.
Andreessen was recused from all decision making.

This recusal was dictated by eBay’s published Board
Governance Guidelines and Code of Business Conduct, and
Mr. Andreessen fully supported his recusal. Separating Skype
enabled eBay to invest in its core growth engines of
e-commerce and online payments, while allowing for potential
upside if Skype’s potential was fully realized.
2) Marc Andreessen: Andreessen Horowitz is one of the most
successful venture capital firms in the world, and Mr.
Andreessen’s track record of creating value and driving
innovation makes him an extraordinary asset on eBay’s
board. Regarding other investments Mr. Andreessen and his
firm have made, this sort of potential conflict exists
whenever venture capitalists serve on a Board of Directors. This
is true for many public companies which have
found experienced venture capital investors to be
extraordinarily valuable directors, especially in high tech. The
eBay Board has guidelines to minimize the impact of any such
conflicts. Also, in regards to Kynetic, any benefits
from the terms of eBay’s purchase of GSI Commerce accruing
to Kynetic would have been built into the price at
which Andreessen Horowitz purchased their shares; as such, any
relationship with eBay was irrelevant. eBay
subsequently disposed of its note and equity interests in Kynetic
and related Rubin enterprises at a profit.
3) Scott Cook: As founder of Intuit and chairman of the
company’s executive committee, Mr. Cook also has an
exceptional track record of creating value and driving
innovation. He has been an enormous asset to eBay’s board
for many years. The overlap between Intuit and eBay is small,
fully disclosed and within the safe harbor for
interlocking directorates. Regarding hiring, this is old news,
any restrictions ended years ago, and Intuit historically
had not been a source of talent for eBay Inc.

Source: https://www.ebayinc.com/stories/news/ebay-inc-
responds-carl-icahns-feb-24-open-letter-
stockholders/?utm_source=301Redirect&utm_medium=301Redir
ect&utm_campaign=301Redirect
E-572
p. 27
Exhibit 5
PayPal Payment Volume through Mobile Devices
2015, p. 31.
E-572

p. 28
Exhibit 6
PayPal Share of Online and Mobile
2015, p. 32.
E-572
p. 29
Exhibit 7
Payments Ecosystem
2015, p. 13.
Note: In some instances both Braintree and Stripe can also act

as gateways and payment processors.
E-572
p. 30
Exhibit 8
Competitive Landscape
Mobile In-App
Stripe
Founded in 2010, Stripe was one of the newer class of payment
gateway start-ups to emerge and
provided the technical, fraud, prevention, and banking
infrastructure required to operate online
payment systems. Stripe’s white-labeled technology enabled
websites and mobile applications to
accept payments from anybody, whether they were using a
credit card, Bitcoin, or even new
services such as Apple Pay or Android Pay. Like Braintree,
Stripe’s open APIs and development
software became popular among mobile application developers
for their ease of integration into
both online and mobile applications. This open infrastructure

made Stripe popular among
mobile application developers, which led to its early adoption
by several sizeable companies
including Twitter and Salesforce. By mid-2015, the company
had raised $280 million in venture
capital funding at a $5 billion valuation from leading firms
including Sequoia Capital,
Andreessen Horowitz, Khosla Ventures, and several of PayPal’s
founders: Elon Musk, Peter
Thiel, and Max Levchin.
Mobile Point-of-Sale
Square
In 2009, Twitter co-founder Jack Dorsey launched Square,
which offered a small, square-shaped
piece of hardware that plugged into a smartphone’s audio jack
and translated the information
from a credit card’s magnetic strip into an audio signal that was
then processed by a
downloadable smartphone app. Over time, Square released
additional products and services
including Square Register, which included an entire suite of
customizable checkout features and
solutions, management tools, and data analytics capabilities.
Square’s cloud-based POS system
also provided access to business applications including
inventory management, time and
attendance, among others. Value-added services such as loyalty
programs, coupon redemption
and gift cards were also easily integrated. By 2012, Square’s
products were being used by large
retailers as well, announcing a partnership with Starbucks to
power their credit and debit
transactions in the U.S. By 2015, Square was a top ten
merchant on Visa’s credit card

processing system and had raised a total of $500 million in
venture capital funding.58 Later that
year, Square confidentially filed for an IPO.
58 “The extraordinary reinvention of Square,” Fortune, August
2, 2015, http://fortune.com/2015/08/02/square-
reinvention-ipo-dorsey/ (September 10, 2015).
E-572
p. 31
Competitive Landscape
Digital Wallets
Android Pay
Google launched a digital wallet thrice: Google Checkout in
2011, Google Wallet in 2013, and
Android Pay in 2015. The latest, Android Pay, was embedded
in the latest Android operating
system and relied on NFC technology and MasterCard’s PayPass
technology to securely store
users’ payment credentials. Google had the advantage of pre-
installing its second digital wallet

iteration, Google Wallet, on all Android-operated phones, but
failed to partner with mobile
carriers, and was completely blocked by Verizon. The interests
of AT&T, T-Mobile, and
Verizon were with their own digital wallet joint venture,
Softcard (formerly Isis). Google solved
this problem by acquiring Softcard in 2015 prior to its launch of
Android Pay, which was
subsequently supported by all major mobile carriers.
Unfortunately, Google faced another
hurdle at the time of Android Pay’s launch: Most Android-
operated phones were built by
Samsung and Samsung had its own digital wallet in
development.
Samsung Pay
Samsung planned to launch Samsung Pay late in 2015 on all of
its new Samsung Galaxy devices.
Samsung acquired LoopPay in 2015 for its proprietary
contactless payments technology called
Magnetic Secure Transmission (MST), which was compatible
with 90 percent of the existing
payment terminals in the United States. Samsung’s devices
supported NFC as well, making
them operable with both NFC-enabled and older magnetic-strip-
only POS terminals.
Apple Pay
Apple’s attempt in 2014 at producing a widely adopted digital
wallet seemed to many the most
hopeful. Apple Pay came pre-installed on all Apple devices and
Apple succeeded in partnering
with both the credit card networks and mobile carriers.
Surprisingly, Apple Pay relied on NFC
technology despite NFC’s limited market penetration at the
time. Before Apple Pay launched,

the major credit card networks announced that they would
transfer any counterfeit liabilities onto
merchants that did not update their POS terminals to more
secure and EMV-compliant terminals
by October 1, 2015. By 2015, Apple Pay was being accepted at
700,000 merchant locations
across the United States.59
59 Deutsche Bank Markets Research, “The Way to Play Digital
Payments,” July 12, 2015, p. 50.
E-572
p. 32
Exhibit 9
Venmo Payment Volume
2015, p. 18.

E-572
p. 33
Exhibit 10
Biographies
Dan Schulman
Chief Executive Officer, PayPal
Mr. Schulman joined PayPal in 2014 following the
announcement of the eBay/PayPal separation.
Dan will serve as President and CEO of PayPal. He previously
served as Group President of
Enterprise Growth at American Express from August 2010 to
August 2014 where he led global
strategy to expand the alternative mobile and online payment
services. At American Express,
Dan helped the company launch its next gen digital payment
products platform, developed non-
traditional sources of revenue and introduced a suite of payment
products helping to expand the
company’s demographic and geographic reach. Prior to
American Express, Dan was President of
the Prepaid Group at Sprint Nextel, from November 2009 until
August 2010, post its acquisition
of Virgin Mobile, USA.
James Barrese

CTO and Senior Vice President, Payment Services, PayPal
Mr. Barrese will serve as CTO and Senior VP of Payment
Services for PayPal; prior to the
separation he served as Senior VP and CTO at PayPal from
October 2013. He was CTO from
February 2012 to October 2013 and was VP of Global Product
Development prior to that for
PayPal from August 2011 to February 2012. James served
previously in a variety of leadership
roles in the technology organization at eBay after joining in
2001.
William Ready
Senior Vice President, Product and Engineering, PayPal
Mr. Ready joined PayPal in 2013 when the company acquired
Braintree where he was CEO from
October 2011 until December 2013 helping to fuel the mobile
commerce revolution by building
one of the most innovative and influential startups in the
payments industry. Prior to Braintree,
he was executive in residence at Accel Partners, a leading
Silicon Valley venture capital and
growth equity firm, from July 2011 to October 2011. Bill has
also served as president of iPay
Technologies starting in 2008 until 2011 where he helped guide
the company through a period of
strong growth and its sale to Jack Henry & Associates for
$300m in 2010. He was a strategy
consultant at McKinsey & Company advising leading financial
technology companies and was
an early engineer at two other successful start-ups including

emphesys and Netzee.
Source: PayPal.

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