eBay 2006 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 2006 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

PayPal Overview
Joining the Network
PayPal offers three types of accounts: Personal, Business, and Premier. A new account holder typically opens
an account to send money for an eBay purchase or a purchase on another website, a payment for services rendered,
or for a payment to an individual in lieu of cash. Allowing new account holders to join the network when they make
or receive payments encourages PayPal’s natural, user-driven growth. PayPal’s account sign-up process asks each
new account holder to provide PayPal his or her name, street address, phone number, and email address. The
account holder’s email address serves as the unique account identifier. PayPal also offers customers who sell on
their own websites the ability to accept credit card payments from buyers without requiring the buyer to open a
PayPal account.
Buyers make payments at the PayPal website, at an item listing on eBay.com or another online business or
platform where the seller has integrated PayPal’s Instant Purchase Feature, or at the sites of merchants that have
integrated PayPal’s Website Payments feature. To make a payment at PayPal’s website, a buyer logs in to his or her
account and enters the recipient’s email address and the amount of the payment. To make a payment through Instant
Purchase or Website Payments, a buyer selects an item for purchase, confirms the payment information and enters
his or her email address and password to authorize the payment. PayPal debits the money from the buyer’s PayPal
balance, credit card, or bank account and credits it to the recipient’s PayPal balance. In the case of an eCheck
payment, the transaction is held until the funds have cleared the sender’s bank, which typically takes three to five
business days. In turn, the recipient can make 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 revenues 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 an account holder 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 costs associated
with credit card and debit card funded payments being significantly higher than bank account or balance-funded
payments. U.S. account holders 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 5.02% as of January 3, 2007.
Verification of Account Holders
To fund payments from their bank accounts in the United States, account holders must first become verified by
PayPal. The primary method for verification is our Random Deposit technique. Under this technique, PayPal makes
two deposits ranging from 1 to 99 cents to the account holder’s bank account. To verify ownership of the account,
the account holder then enters the two amounts as a four-digit code at the PayPal website. In addition to allowing
funding through bank accounts, verification also removes some spending limits on account holders’ 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, 2006, in 34 other markets, may withdraw money from
his or her 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 five business days to arrive
in the account holder’s bank account, depending on the bank. However, everyone who can receive funds can
withdraw to a U.S. bank account. 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
6