eBay 2011 Annual Report Download - page 10

Our PayPal payment solution offers merchants an all-in-one payment processing experience that is generally less expensive than payment
card alternatives.
PayPal offers online and mobile-enabled merchants an all-in-one payment processing solution that we believe is generally less expensive per
transaction than most credit card and debit card merchant accounts. A merchant can typically open a PayPal account and begin accepting
payments through PayPal within a few minutes. Most merchants are approved instantly for a PayPal account and do not need to provide a personal
guarantee, acquire specialized hardware or software, prepare an application or contact a payment gateway. PayPal can reduce or eliminate the
need for merchants to receive and store sensitive customer financial information. Furthermore, PayPal charges merchants no setup fees and few or
no recurring monthly fees, and we believe that PayPal charges lower transaction fees than many U.S. merchant accounts.
We offer consumers choice by providing a variety of funding and withdrawal mechanisms.
Buyers can fund their PayPal accounts and payments using PayPal in a variety of ways, including by credit card, debit card, electronic funds
transfers from their bank account and through a PayPal balance if the buyer has previously received payments or chosen to pre-
fund a balance. We
also provide a credit offering through the Bill Me Later service, which allows qualifying U.S. buyers to obtain a revolving line of credit at the
point of sale from a third-party chartered financial institution, WebBank. Bill Me Later is not a chartered financial institution nor is it licensed to
make loans in any state. Accordingly, Bill Me Later must rely on a bank or licensed lender to issue the Bill Me Later credit products and extend
credit to customers. U.S. buyers may also be offered an opportunity to defer payments for purchases made using Bill Me Later; under some
promotional arrangements offered on select merchant sites, interest on such payments can be deferred for as long as six months.
When a consumer makes a purchase using a Bill Me Later credit product issued by a chartered financial institution, the chartered financial
institution extends credit to the consumer, funds the extension of credit at the point of sale and remits funds to the merchant. We subsequently
purchase the receivables related to the extensions of credit made by the chartered financial institution and, as a result of that purchase, bear the risk
of loss in the event of loan defaults. Although the chartered financial institution continues to own each customer account, we own the related
receivable and are responsible for all servicing functions related to the account. For information regarding risks related to our Bill Me Later
business, see the information in “Item 1A: Risk Factors”
under the captions "Bill Me Later's operations depend on lending services provided by an
unaffiliated lender" and "Bill Me Later's operations expose us to additional risks."
Each PayPal account holder in the U.S. and in 109 other countries may withdraw money from his or her PayPal account through an electronic
fund transfer to his or her U.S. bank account or, in approximately 45 of those countries, to their local bank account. In the U.S. and in five other
countries, users can withdraw their funds by directing that PayPal mail them a check. Qualifying PayPal merchants in the U.S. are eligible to
receive a PayPal ATM/debit card, which allows them to withdraw cash from any ATM connected to the Cirrus or Maestro networks and to make
purchases at any merchant accepting MasterCard. In the U.K. and Italy, PayPal customers can apply for a prepaid card, which can be linked to a
customer's PayPal account to add or withdraw funds. In certain markets, customers can also have funds in their PayPal account applied as a credit
to their MasterCard credit card or debit card account.
We have embarked on plans to enable local merchants to offer PayPal at point of sale terminals.
In 2011, we began work on a PayPal point of sale payments solution for the U.S. and select European markets. In the U.S., the point of sale
solution is intended to allow PayPal users who sign up for the service the ability to use their PayPal accounts to make purchases at participating
local retailers. We expect that users will be able to access their PayPal account via a PayPal Access Card, mobile phone number and personal
identification number (PIN), or near field communication-enabled device depending on what the retailer offers. This initiative is an important part
of PayPal's strategy to provide a comprehensive payment solution for both online and brick-and-mortar retailers. We expect the pricing for
PayPal's point of sale payments solution to be comparable to the pricing merchants would pay to competing processors for offline transactions.
We expect the point of sale payments solution to be available, on a limited basis, as we roll out the product offering to more retailers in 2012.
PayPal also plans to leverage technology from our recent acquisition of WHERE.com to help merchants connect with local customers.
WHERE.com is a local mobile discovery application and location-based mobile advertising network that provides personalized, hyper-local
advertising, offers and deals to mobile consumers. We expect that integrating PayPal into the WHERE.com mobile application will enable
merchants that integrate PayPal's new capabilities to push offers to a wider user base.
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