eBay 2004 Annual Report Download - page 10

payments to others or withdraw his or her funds at any time via check (in the U.S.), electronic funds transfer,
or via a PayPal-branded debit card (which is only available to U.S. users).
PayPal earns revenue in five ways. First, PayPal earns transaction fees when a Business or Premier account
receives a payment. Second, PayPal earns a foreign exchange fee when a user converts a balance from one
currency to another. Third, PayPal may earn fees when a user withdraws money to a non-U.S. bank account,
depending on the amount of the withdrawal. Fourth, PayPal earns a return on certain customer balances. Finally,
PayPal may earn ancillary revenues from a suite of financial products, including the PayPal-branded debit card,
the PayPal-branded credit card and the PayPal Buyer Credit offering.
We incur funding costs on payments at varying levels based on the source of the payment, with credit
card and debit card funding costs being signiÑcantly higher than bank account or balance-funded payments.
U.S. users who choose to maintain PayPal balances in U.S. dollars have the ability to sweep balances into the
PayPal Money Market Fund. This Money Market Fund, which is invested in a portfolio managed by Barclays
Global Fund Advisors, bore a current compound annual yield of 2.03% as of December 31, 2004.
VeriÑcation of PayPal's Account Holders
To fund payments from their bank accounts in the United States, the United Kingdom and Canada,
senders must Ñrst become veriÑed PayPal users. The primary method for veriÑcation is our Random Deposit
technique. Under this technique, PayPal makes two deposits ranging from 1 to 99 cents to the user's bank
account. To verify ownership of the account, the user then enters the two amounts as a four-digit code at the
PayPal website. In addition to allowing funding through bank accounts, veriÑcation also removes some
spending limits on users' accounts and gives them reputational advantages when transacting with other
members of the PayPal community.
Withdrawing Money
Each account holder in the U.S. and, as of December 31, 2004, in 23 other countries, may withdraw
money from their PayPal account through an electronic fund transfer to his or her bank account or, in the
U.S., by a mailed check from PayPal. Automated Clearing House, or ACH, withdrawals may take three to
Ñve business days to arrive in the account holder's bank account, depending on the bank. Mailed checks may
take one to two weeks to arrive, and PayPal charges $1.50 per check. Qualifying PayPal business users in the
U.S. can receive a PayPal ATM/debit card, which provides instant liquidity to their PayPal account balances.
ATM/debit cardholders can withdraw cash, for a $1.00 fee per transaction, from any ATM connected to the
Cirrus or Maestro networks and can make purchases at any merchant accepting MasterCard.
PayPal Value Proposition
Providing more eÇcient and eÅective payment methods is essential to creating a faster, easier and safer
online trading experience. Traditional payment methods such as checks, money orders and credit cards
processed through merchant accounts, all present various obstacles to the online trading experience, including
lengthy processing time, inconvenience and high costs. Our PayPal online payments solution allows our
community of eBay users, as well as users of other online businesses, to pay for their transactions securely,
easily and quickly.
PayPal enables buyers to store their sensitive Ñnancial information online, and to pay merchants without
sharing this information with them, or entering their information onto a website each time they make a
purchase. To make payments, senders need to disclose only their email addresses to recipients. Similarly, to
receive payments, recipients need to disclose only their email addresses to senders. Many buyers and sellers
wary of disclosing Ñnancial information online Ñnd this high level of personal privacy attractive.
PayPal oÅers online merchants an all-in-one payment processing solution that is cheaper than most
merchant accounts, oÅers industry-leading fraud prevention, and enables merchants to access approximately
64 million customers in 45 countries.
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