eBay 2009 Annual Report Download - page 17

other countries), electronic funds transfer, a PayPal-branded debit card (available only to U.S. users), a prepaid
card (in the U.K. and Italy), or through a credit to a recipient’s credit card account (in limited markets).
PayPal earns revenues in several ways:
• PayPal earns transaction fees when a Business or Premier account receives a payment or, in certain
qualified transactions, when a sender elects to pay the fee in lieu of the recipient;
• PayPal earns a foreign exchange fee when an account holder converts a balance from one currency to
another;
• PayPal earns fees from merchants who utilize PayPal’s Pro direct payment card processing services or
Payflow gateway processing services;
• PayPal earns fees when a user receives payments from outside the user’s country of residence;
• PayPal may earn fees when a user withdraws money to certain bank accounts, depending on the
amount of the withdrawal;
• PayPal earns a return on certain customer balances; and
• Ancillary revenues are earned from a suite of financial products.
PayPal incurs funding costs on payments at varying levels depending on the source of the payment. Funding
costs associated with credit card and debit card funded payments are significantly higher than bank account, Bill
Me Later, 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. The PayPal Money Market
Fund, which is invested in a portfolio managed by BlackRock Fund Advisors, bore a current compound annual
yield of 0.08% as of December 30, 2009.
Verification of Account Holders
To fund payments from their bank accounts in the U.S., account holders must first become verified by
PayPal. The primary method for verification is our patented Random Deposit technique. Under this technique,
PayPal makes two deposits ranging from 1 cent 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. We also automatically verify select accounts when certain other proprietary conditions have been met.
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. Outside of the U.S., similar verification processes are used for credit card accounts and in the
limited number of countries where PayPal offers bank funding. In certain cases specific to local markets, bank
funded transactions are permitted up to set limits before additional verification is required.
Withdrawing Money
Each account holder in the U.S. and in 64 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 44 of those
countries, to their local bank account. In the U.S. and five other countries, users can withdraw their funds by a
mailed check. Withdrawals by electronic transfer in the U.S. may take three to five business days to arrive in the
account holder’s bank account, depending on the bank, and may take longer in other countries. Mailed checks
may take one to two weeks to arrive. Qualifying PayPal business users in the U.S. can receive a PayPal ATM/
debit card, which provides these users with instant access to their PayPal account balances. ATM/debit
cardholders can withdraw cash from any ATM connected to the Cirrus or Maestro networks and can make
purchases at any merchant accepting MasterCard. PayPal offers customers the opportunity to apply for a prepaid
card in the U.K. and Italy, which can be linked to a customer’s PayPal account to add or withdraw funds. In some
markets, customers can also access their money by generating a credit to their credit card account.
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