An Overview of PayPal

An Overview of PayPal

An Overview of PayPal 6th ASEANPay Steering Committee Meeting Chiang Mai, 24-25 April 2008 Presented by: Foo Chek-Tchung Outline ƒ PayPal – An Ove...

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An Overview of PayPal

6th ASEANPay Steering Committee Meeting Chiang Mai, 24-25 April 2008 Presented by: Foo Chek-Tchung


ƒ PayPal – An Overview ƒ PayPal in Singapore ƒ Anti-Money Laundering and Fraud Risk Management

PayPal – An Overview

ƒ PayPal is a fast growing electronic micropayment system which serves as an alternative to traditional paper payment methods ƒ Launched in October 1999; acquired by eBay in 2002 ƒ Started as person-to-person payment service with growth driven by buyers sending payments to sellers on eBay ƒ Total of 141 million accounts ƒ Available in 190 markets and territories ƒ Supports payments in 17 currencies

Making and Receiving Payments via PayPal

ƒ Funding Source

Withdrawal Method

Credit/Debit Card

Bank Account





Buyer Bank Account


Seller Debit Card

Cash cannot be directly placed into the PayPal System, nor withdrawn

Products & Services

ƒ Primary products – Stored value facilities for online purchases – Payment processing for online vendors, auction sites and corporate users – Quasi-Cash P2P transfer

ƒ Other services* – PayPal Money Market fund – PayPal credit and debit cards – Invoicing services

* Only available in the United States

PayPal & Other Payment Systems

ƒ PayPal and credit cards – Channel for small businesses to accept credit card payments – About half of PayPal payments are funded with credit cards

ƒ PayPal and stored value facilities – Majority of payments are funded in real-time – Stored values earn no interest

ƒ PayPal and the banking system – Builds on existing financial infrastructure of bank accounts and credit cards

ƒ PayPal and P2P – Majority of payments are for purchase of goods or services


ƒ Net total payment value for 2007 was US$47 billion – Increase of 33% y-o-y

ƒ Revenues for Q42007 was US$563 million – Increase of 35% y-o-y – International business contributed 44% of Q42007 revenue

ƒ Transacted about US$1,806 in payment volume every second in Q42007

PayPal in Singapore

ƒ PayPal has established a regional headquarters (PayPal Pte Ltd) in Singapore in August 2006 ƒ Main functions of PayPal Pte Ltd are to: – Support PayPal’s expansion in the region – Provide service for PayPal customers outside the USA and European Union – Establish technology development centre for new payment strategies and products

Anti-Money Laundering and Fraud Risk Management – Global Regulatory Reporting ƒ United States – Regulated as a Money Service Business (i.e. Money Transmitter) in 29 U.S. jurisdictions – Compliance to U.S. Patriot Act and Banking Secrecy Act

ƒ European Union/United Kingdom – Licensed as an electronic money issuer under the FSA in the U.K. – Regulated as a bank by Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg – Compliance to the EU Anti-Money Laundering Directives

ƒ Australia – Granted Australian Financial Services license to operate as a non-cash payment facility – Compliance to AUSTRAC AML/CFT Act and Rules

Regulatory Oversight of PayPal in Singapore

ƒ Regulations under the Payment Systems (Oversight) Act – MAS has general oversight powers to request for information – Adoption of stored value facilities guidelines

ƒ Liquidity management program – Implementation of liquidity management program to protect funds-at-risk

ƒ Anti-money laundering compliance – PayPal is subject to AML/CFT requirements under the MAS Notice to Holders of Stored Value Facilities

ƒ Engagement – Regular meetings/dialogues with PayPal management on developmental and regulatory issues

PayPal’s Anti-Money Laundering Program

ƒ PayPal actively works with the US Treasury Department and other law enforcement agencies through various initiatives – – – – – – – –

No acceptance of cash or cheques Proprietary detection and prevention systems Global implementation of AML/CFT policies and strategies Worldwide team of assigned AML officers Annual global training for all employees Develop worldwide relationships with law enforcement Submission of SAR/STRs to various FIUs Enforce Acceptable User Policy

PayPal’s Fraud Risk Management

ƒ PayPal buyer protection programs – For most transactions on eBay, buyers are protected up to US$500

ƒ System safeguards – System leveraged on top of existing financial infrastructure – No anonymous transactions (mandatory customer name and address) – Anti-fraud models monitor payments and flags risky transactions for manual review – Low system limits for sending payments (US$500) and withdrawals (US$500 per month) until additional user information is obtained and verified – Additional manual reviews for large volume clients

Thank You!