Paypal in 2015 reshaping the financial services landscape

Competitive Review For Paypal

Competitive Review for PayPal must include analysis of the following three threats:

Threat of New Entrants

(how complicated is the technology? is it easy to duplicate? patent? regulatory restriction to enter the market?)

Threat of Substitutes

(main substitutes: Credit card, debit card, cash mostly used in stores while PayPal used for online shopping)

Threat of Rivals

Henry Lippincott (MBA 2014), Lecturer Robert Siegel, and Professor Robert Burgelman prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2015 by the Board of Trustees of the Leland Stanford Junior University. Publicly available cases are distributed through Harvard Business Publishing at hbsp.harvard.edu and The Case Centre at thecasecentre.org; please contact them to order copies and request permission to reproduce materials. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns, please contact the Case Writing Office at cwo@stanford.edu or write to Case Writing Office, Stanford Graduate School of Business, Knight Management Center, 655 Knight Way, Stanford University, Stanford, CA 94305-5015.

PAYPAL IN 2015: RESHAPING THE FINANCIAL SERVICES LANDSCAPE

The histories of the largest companies are that their biggest impediment to their future success is their past success

1 —Dan Schulman, CEO, PayPal

In 2015, PayPal sat at the epicenter of digital commerce, which expected to account for $2.3 trillion in global purchase volume by 2017 (see Exhibit 1). The company provided payment solutions to over 170 million active customers across more than 200 markets and was on track to process over five billion payments that year. PayPal was founded in 1998, at a time when e- commerce was the driving force behind digital payments, but the market had since grown in size and complexity over the subsequent 17 years. By 2015, PayPal’s platform spanned the entire digital financial system, offering services that included payment processing, digital wallets, merchant accounts, peer-to-peer money transfers, single touch transactions, consumer and merchant credit, risk analysis, fraud prevention, and regulatory compliance. On July 20, 2015, PayPal CEO Dan Schulman was excited to ring the opening bell at the NASDAQ Stock Exchange. PayPal was relisting on the exchange as an independent company after an absence of more than a decade, having last traded 13 years earlier before its acquisition by eBay. While excited about the company’s many new opportunities now that it was no longer owned by one of the world’s largest online marketplaces, Schulman pondered the changing landscape of financial services for global consumers. Individuals were now able to conduct transactions from their smartphones, loans could be sourced outside of traditional banking infrastructures and the very method of determining consumer credit worthiness was changing—

1 Interview with Dan Schulman, CEO of PayPal, September 8, 2015. Subsequent quotes are from this interview, unless otherwise noted.

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especially in emerging economies. PayPal, with its unique size and position as a global leader in digital financial services, had the chance to disproportionally impact the lives of people all over the world. Schulman had joined PayPal nine months earlier to prepare for its separation from eBay and ultimately lead PayPal into the next phase of its journey as an independent company. With the daunting task of decoupling PayPal from eBay’s business behind him, and the monumental task of guiding PayPal’s transformation in front of him, Schulman reflected on the previous nine months.

SEPARATION FROM THE MOTHER SHIP

Even before Schulman joined PayPal in September 2014, there were discussions of a split between eBay and PayPal. After a decade under eBay’s roof, PayPal’s business had fundamentally changed. PayPal was originally a payments provider for e-commerce transactions, many from within eBay, but had transformed alongside an increasingly complex digital payments industry. The share of PayPal’s business derived from eBay had steadily declined from 60 percent in 2002 to under 30 percent by 2014.2 With PayPal’s lessening dependence on eBay and the accelerating changes within the digital payments industry, many began to wonder whether PayPal could innovate fast enough within eBay’s walls. Carl Icahn, activist investor and 0.82 percent eBay owner, told a Forbes reporter in early 2014, “PayPal’s a jewel and eBay is covering up its value.”3 In February of that year, Icahn published an open letter to eBay shareholders urging PayPal’s spinoff (see Exhibit 2). Icahn claimed that a split would unleash unrealized value within both businesses, providing each with independent boards and sharper focus. He questioned the ability of eBay’s board to effectively manage two distinct businesses, which continued to decouple year after year. Icahn also believed separate businesses would make each more appealing to work for. Former PayPal CEO Elon Musk agreed with Icahn. “It doesn’t make sense that a global payment system is a subsidiary of an auction website… it’s as if Target owned Visa…”4 PayPal’s business had indeed blossomed under eBay (see Exhibit 3). In 2013, eBay’s marketplace brought in $9.9 billion in revenue compared to PayPal’s $7.2 billion, but PayPal would likely eclipse eBay in the coming years with a projected 19 percent growth rate compared to eBay’s 10 percent.5 Not everyone agreed with Icahn and Musk. The eBay board, in particular, believed that eBay and PayPal should remain together because of the inextricable link between commerce and

2 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20, 2015, p. 37. 3 “Elon Musk And David Sacks Say PayPal Could Top $100B Away From eBay,” Forbes, February 18, 2014, http://www.forbes.com/sites/stevenbertoni/2014/02/18/elon-musk-and-david-sacks-say-paypal-could-top-100- billion-away-from-ebay/ (September 10, 2015). 4 Ibid. 5 “eBay CEO: Why we're spinning off PayPal,” Fortune, September 30, 2014, http://fortune.com/2014/09/30/ebay- ceo-why-were-spinning-off-paypal/ (September 10, 2015).

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payments (see Exhibit 4). In a CNBC interview, eBay CEO John Donahoe responded to Icahn’s open letter:

What that argument is missing is the very strong synergies between the two businesses. It’s noteworthy that there has not been anyone else who has created another PayPal since PayPal was created. And that’s because commerce and payments are converging into one thing. A payments network needs a commerce network like eBay… As more online payment and commerce services converge into a more seamless experience, the growth of mobile shopping makes that trend even more important.6

Less than six months later, on September 30, 2014, eBay announced its plan to split the two businesses. According to Donahoe, eBay’s board concluded that a split would be best for both businesses. “The synergies which helped fuel [PayPal’s growth] are declining over time.”7 The eBay announcement highlighted the increasing competitiveness and speed of innovation within the markets of each business, requiring sharper strategic focus for both—and the belief that the relationship between the two companies could be optimized in arm’s-length operating agreements between the companies. Investors responded positively to the news, with eBay’s stock price jumping 7 percent that day. As part of the announcement, Schulman was named president of PayPal and CEO-designee once the separation from eBay was complete. Before Schulman had the opportunity to chart PayPal’s future as a separate company, he faced a monumental challenge: decoupling all of PayPal’s businesses and technologies from eBay, and building the new systems necessary for PayPal to stand as an independent Fortune 100 company, all within a nine-month span. Schulman took the opportunity to study PayPal’s history during those nine months while in the process of separating the firm’s past from its future.

BEGINNINGS AND EXPANSION WITHIN E BAY

PayPal began as the money transfer service of Confinity, a start-up founded in 1998 by Max Levchin and Peter Thiel.8 With a convenient and simple setup process (only a verified e-mail address and credit or bank card number were needed), a user could within minutes send and receive money to and from other PayPal users. The ease and convenience of PayPal registration quickly attracted eBay sellers, many of whom were too small to qualify for merchant accounts with credit card companies and thus lacked commercial credit histories. In March of 2000, with over 1 million accounts, Confinity merged with X.com, an online banking business founded by Elon Musk, with Musk taking the helm as chairman and CEO.

6 “PayPal is stronger staying with eBay: EBay CEO John Donahoe,” CNBC, January 23, 2014, http://www.cnbc.com/2014/01/23/paypal-is-stronger-staying-with-ebay-ebay-ceo-john-donahoe.html (September 10, 2015). 7 “eBay CEO: Why we're spinning off PayPal,” September 30, 2014, Fortune, http://fortune.com/2014/09/30/ebay- ceo-why-were-spinning-off-paypal/ (September 10, 2015). 8 PayPal Press Centre, “History,” https://www.paypal-media.com/au/history (September 10, 2015).

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PayPal became popular among eBay sellers because it covered their credit card processing fees. Importantly, PayPal served both sides of every transaction, enabling it to verify that both the buyer and seller had reputable histories, unlike traditional credit card transactions where different banks represented each party in a transaction. PayPal reduced the frequency of fraudulent transactions, requiring not only a credit or debit card number to complete a transaction, but a username and password combination as well. This “dual factor” authentication reduced dispute rates by as much as a factor of six.9 In addition to being popular among eBay sellers, PayPal was also popular among buyers because buyers did not need to disclose their credit card or bank account numbers to sellers when using PayPal, reducing the risk of fraud. By the end of 2001, more than 60 percent of PayPal’s business occurred between buyers and sellers on eBay and over 70 percent of eBay auctions accepted PayPal’s payments.10 PayPal’s presence did not go unnoticed at eBay headquarters. In an effort to capitalize on the opportunity that PayPal had uncovered, eBay launched Billpoint, its own payment service, in March of 2000. Billpoint never gained enough traction to become a viable alternative to PayPal and was shut down in 2002. PayPal went public in February of 2002 with 12.2 million personal accounts and 3.2 million business accounts, handling roughly 124 million transactions worth $6.8 billion.11 Just five months later in July of that year, eBay acquired PayPal for $1.5 billion.

BEYOND EBAY—MERCHANT SERVICES

Over the next several years, PayPal continued to be the preferred payment option for the majority of eBay transactions. By 2005, eBay represented 13 percent of all U.S. e-commerce transactions, making it the largest e-commerce company in the world, fueling PayPal’s concurrent growth.12 While PayPal was used in 78 percent of all eBay transactions, it processed less than 4 percent of all “off-eBay” U.S. e-commerce transactions.13 In an effort to pursue the $143 billion “off-eBay” opportunity, PayPal launched Merchant Services in late 2003.14 Merchant Services provided similar payment solutions to merchants outside the eBay auction community as PayPal had provided those within eBay. The company targeted small-to-medium and large online merchants ($250k to $5 million + in annual online sales), which collectively represented a $116 billion annual opportunity. Despite the dominant position of credit and debit cards as the main payment option for these merchants, PayPal offered a number of significant benefits to merchants and to their customers, which enabled the widespread adoption of Merchant Services. Like those within eBay, many small to midsized merchants “off-eBay” were too small to qualify for merchant accounts with credit card companies and were searching for alternative payment

9 For further information, see “PayPal Merchant Services,” HBS No. 9-806-188, p. 5. 10 For further information, see “eBay (C): PayPal Merger,” HBS No. 9-603-042, p. 2. 11 PayPal, Inc., March 31, 2002 Form S-1 (filed June 12, 2002), via Securities and Exchange Commission (September 10, 2015). 12 For further information, see “PayPal Merchant Services,” HBS No. 9-806-188, p. 1. 13 Ibid. 14 “Annual desktop B2C e-commerce sales in the United States from 2002 to 2014,” Statista, http://www.statista.com/statistics/271449/annual-b2c-e-commerce-sales-in-the-united-states/ (September 10, 2015).

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solutions. At the time, many consumers were still fearful of sharing credit and debit card information online. PayPal’s Merchant Services enabled merchants to reach those customers in addition to online shoppers who didn’t have credit or debit cards. By 2005, PayPal launched Website Payments Pro, which offered Express Checkout and Direct Payments API, both of which enabled sellers to accept credit card payments from buyers without PayPal accounts. This optionality enabled merchants to reach more shoppers and potentially increase sales. PayPal initially offered its payment services for free to both consumers and merchants, hoping to earn interest on users’ PayPal account balances. Unfortunately, users rarely kept balances in their PayPal accounts and funded most payments using credit cards. PayPal also covered the 2 percent card processing fees for merchants, which soon became unsustainable. Beginning in 2001, PayPal users receiving more than $500 worth of payments funded by credit cards were upgraded to “business accounts” and charged $0.25 per transaction in addition to 1.9 percent of transaction value.15 Over time these fees varied by market segment, and in the United States they grew to $0.30 per transaction and 2.9% of total transaction value. By 2014, these fees generated 89 percent of PayPal’s $8 billion in revenue for the year, with the remaining 11 percent driven by other services including subscription and gateway fees, and credit loans.16 PayPal’s continued success within and outside of eBay was celebrated in Silicon Valley and the broader business world. Many competing products and services backed by some of the world’s most renowned companies emerged to rival PayPal, but without success—Citigroup’s c2it, First Data Corp.’s BidPay, Yahoo!’s PayDirect—to name a few. Many thought PayPal’s dominance would end with the 2006 launch of Google Checkout, a service that enabled customers to store their payment and shipping information in their Google accounts to make purchases from participating online vendors with the click of an on-screen button. Google Checkout closed in 2013, never having gained substantive market traction. While PayPal continued to extend its e- commerce footprint within and outside of eBay, the digital payments industry was about to experience a fundamental change.

THE MOBILE REVOLUTION

With the introduction of Apple’s first iPhone in 2007, the smartphone era and its corresponding impact on mobile computing took off. Within a year, smartphones drove 11 percent of all mobile phone sales and reached 40 percent market share by 2011. Soon after the wider adoption of smartphones came their use in making digital payments. Consumers began to use Web browsers on their smartphones to shop online, giving rise to mobile commerce, or m-commerce. By 2012, Walmart reported that 40 percent of all visits to their website were from smartphones.17

15 For further information, see “PayPal Merchant Services,” HBS No. 9-806-188, p. 3. 16 Deutsche Bank Markets Research, “The Way to Play Digital Payments,” July 12, 2015, p. 4. 17 “Mobile chief predicts 40% of Wal-Mart’s holiday web traffic will be mobile,” Internet Retailer, November 12, 2012, https://www.internetretailer.com/2012/11/12/40-wal-marts-holiday-web-traffic-will-be-mobile, (September 10, 2015).

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By 2011, just four years after the release of the first iPhone, m-commerce generated $10 billion annually and represented 7 percent of total e-commerce.18 Over 10 percent of PayPal customers had completed transactions on their smartphones and by 2014, PayPal was processing $27 billion in mobile payments (see Exhibits 5 and 6).19 With the phenomenal penetration rate of smartphones and growth in m-commerce, merchants began launching smartphone applications to enhance the customer browsing experience and wanted to add checkout functionality to drive more sales.

Mobile “In-App” Payments

When smartphones initially launched, consumers used the Web browser within their smartphones to shop on merchant websites. However, using a four-inch screen to browse a website designed for a larger computer monitor was challenging, evidenced by the fact that checkout conversion was significantly lower in mobile than on desktop devices. To solve this problem, merchants developed smartphone applications (apps) that provided a shopping experience optimized for smartphone use. As part of this process, merchants wanted payment solutions integrated into their applications to offer a seamless shopping and checkout experience without leaving the app. These “in-app” payment features offered customers convenience, with increased transaction speed and ease of use without having to pay by card. Merchants hoped in- app payment functionality would increase checkout conversion as well. Integrating a frictionless mobile payment experience within an app was incredibly complicated and building custom solutions were prohibitively expensive for all but the largest merchants. As a result, a new class of companies capitalized on this opportunity, providing both “payment gateway” and merchant account services for m-commerce merchants and mobile app developers. Braintree Founded in 2007, Braintree offered a platform of white-label tools for mobile app developers and m-commerce merchants to easily and securely accept payments within their mobile apps. Braintree could store credit and debit card credentials, authorize payments, and process them securely with a user’s merchant account (see Exhibit 7). Customers could experience a complete, frictionless shopping and checkout experience, all without leaving the app. Unlike traditional payment gateways including Visa’s Authorize.net, which were cumbersome to integrate, Braintree offered an extensive set of application programming interfaces (APIs), which were available more than a year before other alternative solutions and meant the company’s technology could easily be embedded within a mobile app with just a few lines of code. As a result, developers could quickly implement payment solutions on their websites or in their mobile apps. Braintree also found an opportunity to offer payment solutions to companies wanting to digitize the payments of historically offline physical transactions, such as paying a taxi driver or booking a last-minute hotel room. Braintree was responsible for building the payment platform that

18 “Q2 M-Commerce Explodes to 47% Y/Y Gain: What it Means for the Growth of Mobile,” comScore, August 19, 2014, https://www.comscore.com/Insights/Blog/Q2-M-Commerce-Explodes-to-47-YY-Gain-What-it-Means-for- the-Growth-of-Mobile (September 10, 2015). 19 “PayPal Processed $27 Billion in Mobile Payments in 2013,” Bank Innovation, January 23, 2014, http://bankinnovation.net/2014/01/paypal-processed-27-billion-in-mobile-payments-in-2013/ (September 10, 2015).

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enabled mobile payments in many of the apps that shaped the beginning and growth of mobile commerce, including Uber Technologies’ ride-hailing app launched in 2009, Airbnb’s room booking app in 2009, and Hotel Tonight’s last-minute hotel booking app launched in 2010. In-app payment revenue reached a mere $712 million in 2011, but was expected to balloon to $37 billion by 2017.20 By 2013, in-app payment revenue accounted for 70 percent of U.S. iPhone app revenue and 90 percent of iPhone app revenue in Asian markets.21 One of Braintree’s main competitors, Stripe, also gained traction within the market after Braintree launched, and by 2015 was valued at $5 billion (see Exhibit 8). To capitalize on this opportunity, PayPal acquired Braintree in 2013 for $800 million. PayPal’s acquisition extended its reach to in-app payments in addition to Braintree’s list of significant customers, which included OpenTable, LivingSocial, Uber Technologies, and Airbnb, among others. Braintree’s then-CEO, William Ready, went on to become PayPal’s senior vice President and global head of product and engineering.

From “In-App” to “In-Store”

Traditional brick-and-mortar merchants also found use in smartphone devices as replacements for the age-old physical point-of-sale (POS) cash registers. In 2009, Twitter cofounder Jack Dorsey launched Square, which offered a small, square-shaped piece of hardware that plugged into a smartphone’s audio jack and translated the information from a credit card’s magnetic strip into an audio signal that was then processed by a downloadable smartphone app (see Exhibit 8). The customer would then sign for the purchase on the smartphone using his or her finger. The device, affectionately known as a dongle, essentially transformed a smartphone into a mobile POS (mPOS) cash register. When PayPal launched its competing mPOS product in 2012, Square was already processing $4 billion worth of transactions annually.22 PayPal Here relied on the same technology as Square and at its launch, the only notable difference between the two products seemed to be their shape—PayPal’s was triangular. PayPal Here had the added ability to accept checks and could be directly linked to a PayPal account. mPOS terminals like Square and PayPal Here became popular among small to medium-sized brick-and-mortar merchants as well as sole proprietorships. Unlike traditional POS systems which were expensive, most new mPOS terminals offered customers no upfront cost and were ideal for wireless transactions in temporary locations like conventions, mobile repair businesses, and other professional services.

20 “Gartner Says Worldwide Mobile Payment Transaction Value to Surpass $235 Billion in 2013,” Gartner, June 4, 2013, http://www.gartner.com/newsroom/id/2504915 (September 10, 2015). 21 “In-App Purchase Revenue Hits Record High: Accounts For 76% Of U.S. iPhone App Revenue, 90% In Asian Markets,” TechCrunch, March 28, 2013, http://techcrunch.com/2013/03/28/in-app-purchase-revenue-hits-record- high-accounts-for-76-of-u-s-iphone-app-revenue-90-in-asian-markets/ (September 10, 2015). 22 Ibid.

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The market for mPOS terminals was growing rapidly at the time—sales grew from 4.5 million terminals in 2011 to 9.5 million in 2012, and were forecasted to reach annual sales of 38 million terminals by 2017.23 mPOS penetration in the broader POS market was deepening quickly as well, from 17 percent in 2012 to a forecasted 47 percent by 2017.24

The Wallet Wars

As digital payments continued to integrate more seamlessly into the smartphone experience, companies attempted to develop products for smartphones that would securely store a user’s payment information to be used anytime and anywhere for payments and transfers. Digital wallets, as they came to be known, securely stored multiple payment credentials and could be used online, on mobile devices, in mobile apps, and at physical POS locations. Many digital wallets in development had the ability to store loyalty cards and coupons as well. In addition to aggregating and storing payment credentials, most digital wallets relied on an embedded technology (Near Field Communication [NFC] chips, QR codes, or Bluetooth Low Energy [BLE], for example), which enabled users to complete transactions without actually having to swipe their cards at physical POS locations. Depending on the embedded technology used, instead of swiping, users would tap or scan their mobile smartphones on a physical payment terminal to complete a transaction. Convenience and security were seen as the clear benefits for consumer adoption of digital wallets, and the potential for superior customer engagement, loyalty, and higher checkout conversion were seen as the benefits for merchant adoption. With the successful digitization of payments in e-commerce and mobile, it only seemed intuitive that one of the next advances in digitization would be found in the consumer’s back pocket when shopping in stores. The year 2010 marked the beginning of an era for various digital wallet products from a variety of different companies (see Exhibit 8). Internet companies including Amazon; payment gateways including Stripe; the major payment networks including Visa, MasterCard, American Express, and Discover; acquirers including Vantiv and Global Payments, Inc.; and phone manufacturers including Apple and Samsung all entered the race to build the market-leading digital wallet. Even mobile carriers including AT&T, T-Mobile, and Verizon were drawn to the potential of digital wallets, developing their own digital wallet platform known as Softcard (formerly Isis). Despite all of these efforts, digital wallet platforms had been unsuccessful at gaining traction in stores among merchants and consumers alike by 2014. The significant majority of POS terminals in use at the time were incompatible with the embedded technologies used by most

23 “Research Reveals Growth and Challenges of Mobile POS,” April 23, 2013, Hospitality Technology, http://hospitalitytechnology.edgl.com/news/Research-Reveals-Growth-and-Challenges-of-Mobile-POS--86071 (September 10, 2015). 24 Ibid.

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digital wallets. NFC technology in particular was not an industry standard at the time. Even by 2014, less than 3 percent of POS terminals were NFC-enabled.25 Upgrading to NFC-enabled terminals was expensive for retailers and consumers seemed ambivalent towards digital wallets. A 2014 survey conducted by Thrive Analytics showed that while 80 percent of consumers were aware of the existence of digital wallets, less than a third used one.26 As Braintree CEO Bill Ready phrased it, “In the life of a consumer, there are few things a consumer will ever do that are easier than swiping their cards at checkout. Consumers adopt solutions to pain points very quickly. Tap and Pay wasn’t really solving a pain point for consumers with credit cards. No one’s waking up saying ‘you know if only I could tap my phone instead of swipe my card.’” Additionally, the competing interests among the various players inhibited widespread adoption of digital wallets. Mobile carriers and smartphone manufacturers blocked operating system (OS) platforms, and OS platforms blocked PayPal. PayPal Mobile Payments In 2012, PayPal launched PayPal Mobile Payments in stores. Users could download the PayPal app onto their smartphone devices and use their smartphone cameras to scan product bar codes within participating stores to authorize payment. Within the app, the users would then choose which stored payment method to use for transactions and tap a button on their smartphones to pay. PayPal also piloted a number of other in-store payment methods for its digital wallet including the use of PIN pads, mobile bar code readers, and QR codes, to a name a few. By January 2013, PayPal was available at 18,000 retail locations around the United States with 23 major retailers as customers including Home Depot, Office Depot, Toys “R” Us, Abercrombie & Fitch, Barnes & Noble, and Foot Locker.27 Unlike Apple, Microsoft, and Google, all of which had competing operating systems, PayPal had the potential to offer a digital wallet that was OS-agnostic. And unlike Apple, Samsung, and PC manufacturers, all of which manufactured competing smartphone devices, PayPal could offer a digital wallet that was hardware-agnostic. Consequently, PayPal had the potential for widespread adoption, particularly among consumers who used multiple devices from multiple companies. Perhaps expectedly, Apple and Samsung decided not to natively support PayPal functionality on their iPhone and Galaxy devices. Paydiant In an effort to strengthen and broaden its position among competing digital wallets, PayPal acquired Paydiant for $280 million in April of 2015. Founded in 2010, Paydiant offered a patented cloud-based digital wallet and payment platform, which allowed merchants and banks 25 “Apple Pay Is Here — and There’s Just One Big Problem,” Money, September 9, 2014, http://time.com/money/3311917/apple-pay-iphone-iwatch-passbook/ (September 10, 2015). 26 “Why Amazon, Google and Apple Haven't Been Able to Crack the Code of Digital Wallets,” Inc., July 23, 2014, http://www.inc.com/jeremy-quittner/amazon-digital-wallet-is-latest-entrant-in-crowded-field.html (September 10, 2015). 27 “Startups clear out cash registers to usher in retail revolution,” Venturebeat, March 28, 2013, http://venturebeat.com/2013/03/28/startups-clear-out-cash-registers-to-usher-in-retail-revolution/ (September 10, 2015).

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to deploy their own secure mobile wallet solutions under their own brand and within their own apps. Unlike competing branded digital wallets including PayPal’s, Paydiant’s strategy was to offer a white-label platform upon which merchants could customize their own unique customer experiences. Additionally, Paydiant differed from most competing digital wallets in that the scope of its solutions went beyond payments. Paydiant addressed customer engagement more broadly, offering in-store customer engagement technology, marketing, rewards, and other merchant- specific features. Paydiant was technology-agnostic, which enabled merchants to employ the mobile payment technology that was most suitable for their needs—QR codes, NFC, or otherwise. By 2015, Paydiant powered the mobile wallets for Subway, Target, Capital One, FIS, Barclaycard, Vantiv, and Harris Teeter, as well as the CurrentC app for the Merchant Customer Exchange (MCX) consortium of retailers.

From Online to Offline

In September 2013, PayPal announced the launch of PayPal Beacon, a technology that would enable consumers to pay at participating merchants completely hands-free and faster than swiping a credit card or tapping a mobile phone at the POS. PayPal Beacon was a small device that plugged into any merchant’s power outlet and connected the merchant’s POS system to customers’ digital wallets via BLE.28 Transactions could take place without customers having to open up an app, without GPS being turned on, and even without a phone signal. Additionally, BLE was superior to older technologies, which required users to proactively open an app in their smartphones to activate the technology. PayPal Beacon enabled merchants to connect automatically with customers, offering a completely passive and frictionless payment experience to customers. When a customer would come within range of a Beacon, the PayPal app on the customer’s smartphone would automatically activate and connect to the Beacon. If the customer’s smartphone had never connected with the location or merchant before, the app would ask the customer whether they would like to check in. If the customer checked in, his or her profile would appear on the merchant’s POS system. At checkout, payment would only require a verbal confirmation. PayPal Beacon did not launch without competition. Among others, Apple’s iBeacon also launched in 2013 and Samsung’s Proximity released a year later. Adoption was light despite BLE technology being supported by most smartphones on the market at the time and despite the fact that merchants could purchase the hardware for as little as $5.29 By 2014, less than 1 percent of the 3.6 million retail stores in the United States used beacons.30 28 Bluetooth Low Energy (BLE) was a new technology that enabled connected devices to communicate with each other seamlessly at very low energy-usage levels. 29 “Building Cross-Platform iBeacon Apps for iOS, Android and Windows with C# and Xamarin,” Vincenth, April 24, 2014, http://vincenth.net/blog/archive/2014/04/24/building-cross-platform-ibeacon-apps-for-ios-android-and- windows-with-c-and-xamarin.aspx (September 10, 2015). 30 “Consumers to Beacons: We’re Just Not That into You,” Pymnts.com, November 20, 2014, http://www.pymnts.com/news/2014/can-samsung-boost-retail-beacon-use-where-apple-hasnt/#.VgUcyctViko (September 10, 2015).

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PAYPAL REIMAGINED : THE NEXT PHASE

When Schulman joined PayPal in September 2014, he was excited to work with PayPal’s lineup of world-class products and technologies despite the arduous task of preparing it to be an independent company over the following nine months. The announced separation energized the organization he was about to lead. “For the overwhelming majority [of PayPal employees], it was an incredibly galvanizing event.” Schulman and his new team at PayPal had a lot to be excited about. According to Forrester Research, PayPal was the most trusted brand of any payment solution on the market at the time.31 The separation from eBay opened up the potential for new partnership opportunities with companies such as Amazon and Alibaba, both of which were considered off-limits when PayPal was still under eBay’s umbrella. Additionally, Schulman was able to benefit from PayPal’s new independent board of directors, enabling the company to have oversight from a group solely focused on the payments ecosystem. PayPal’s robust balance sheet would enable it to fuel its innovation further through acquisitions as well as organic development to fill the gaps in its lineup of products and services. Indeed, PayPal began its new journey as a standalone company with momentum and significant assets to leverage. Despite the incredible assets at PayPal’s disposal as a standalone company, careful planning and significant changes would be required for PayPal to succeed on its own. The digital payments industry, originally dominated by e-commerce, was growing rapidly in new segments which were becoming increasingly competitive. The continued adoption of smartphones globally increased the importance of mobile payments. U.S. m-commerce was forecasted to account for half of all digital commerce revenue by 2017.32 U.S. mobile payments had already surpassed $52 billion in 2014 and were expected to nearly triple to $142 billion by 2019.33 Schulman believed that PayPal needed to dramatically reinvent itself to remain competitive. As Schulman phrased it, “We can no longer be a proprietary digital button on a website and hope to have the same growth going forward as we did in the past.” Digital payments had moved beyond this simple feature. Offering value-added services was required to remain competitive with some of the largest technology companies that had entered the race.

A New Vision

Schulman believed that the new PayPal had to accomplish two goals to succeed in the long term: First, PayPal needed to be an everyday part of consumers’ financial lives; and second, PayPal had to serve as a comprehensive commerce partner for merchants.

31 “PayPal, Amazon Top Consumers’ List for Trusted Digital Wallet,” Forrester Research, December 3, 2013, https://www.forrester.com/PayPal+Amazon+Top+Consumers+List+For+Trusted+Digital+Wallet/-/E-PRE6464 (September 10, 2015). 32 “Gartner Says By 2017, U.S. Customers' Mobile Engagement Behavior Will Drive Mobile Commerce Revenue to 50 percent of U.S. Digital Commerce Revenue,” Gartner, January 28, 2015, http://www.gartner.com/newsroom/id/2971917 (September 10, 2015). 33 “US Mobile Payments Will Reach $142B By 2019,” Forrester, November 17, 2014, http://blogs.forrester.com/denee_carrington/14-11-17-us_mobile_payments_will_reach_142b_by_2019 (September 10, 2015).

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To achieve this, PayPal would need to expand its products and services to accommodate the many ways people move and manage their money. “Instead of somebody using us two to three times a month on average, we want them to use us two to three to four times a week,” Schulman noted. Schulman envisioned PayPal users being able to load their paychecks right onto PayPal’s platform and to pay their bills directly from their PayPal accounts. Schulman believed that the best way to be central in how both consumers and merchants manage and move their money was by becoming the operating system for digital commerce. PPaaS: PayPal as a Service Under Schulman’s vision, PayPal as a Service would be a payments operating system upon which merchants could build applications tailored to their unique customer experiences. Schulman believed this was the path to success because of several key trends. First, consumers had become operating system agnostic. “You’ve got Windows on your desktop at home, you’re carrying an iPad, and you’re using an Android phone,” he explained. As a result, a successful payments solution would need to function across all operating systems. Second, payment optionality was still critical for consumers. “People pick out their credit cards for certain transactions, cash for others, debit cards for others.” And while one of Schulman’s other goals was to increase PayPal’s share of these transactions, to be truly customer-centric would require the company to build a platform that could accommodate all payment preferences. Bill Ready, PayPal’s senior vice president and global head of product and engineering, recognized the importance of partnering with other players in the industry. “There are certainly places where we will be sworn enemies, but there are a lot of other places where we can work together.”34 While PayPal’s branded products and services would continue to compete with those of other players like Visa, Apple, and Google, Ready saw significant opportunity to partner on unbranded payments solutions. Schulman wanted merchants to be able to write their own applications on PayPal’s platform, noting that “We don’t know quick service restaurants better than Subway and Burger King… but what we know is payments inside and out.” By serving merchants as a comprehensive payments partner, Schulman believed PayPal would have the power to recreate the physical retail shopping experience by making it more personal, convenient, and secure. Schulman was quick to point out that nowhere in PayPal’s new vision or goals was a desire to become a bank. “Banks are the analog manifestation of what happened last century. You would never build your financial system today around bank branches and infrastructure. For basic financial services, you have all the power of a bank branch in the power of your hand today, but at a fraction of the cost, and you can do it faster, easier.”

Reconstructing PayPal

With a new vision in hand, Schulman and his team went about the physical decoupling of PayPal’s technology and systems from eBay and recreating PayPal’s products, leadership,

34 Interview with William Ready, PayPal Senior Vice President, Product and Engineering, August 18, 2015. Subsequent quotes are from this interview, unless otherwise noted.

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organizational structure, and culture. This was no small task given the organizational and industry changes that PayPal was enduring at the time. PayPal 1.0 Over the course of PayPal’s 15-year history, its technology had become increasingly complex. Even before the separation from eBay, PayPal’s leadership acknowledged the need to update its technology in order to simplify and speed up the innovation process. “Without a flexible infrastructure, and platform, you have no chance of innovating in a timely, speedy way,” said Schulman. Recruiting top talent to work on PayPal’s older technology was also difficult. It was even a challenge to recruit from within eBay. “You couldn’t recruit anybody,” noted James Barrese, who had been PayPal’s CTO since 2012.35 By 2015, PayPal had grown to over 17,000 employees, a true symbol of its success. But as is the case with most large companies, PayPal had to balance the desire for internal consensus with the need to innovate quickly. When Ready joined PayPal through its acquisition of Braintree, he was surprised with the amount of time and energy devoted to planning and buy-in before execution. “As an entrepreneur, you have a heavy bias towards action. In a big company, you have a heavy bias towards consensus.” As PayPal grew, coordination and alignment became a challenge due to its size. “If only people could have all been aligned on day one, you could’ve moved twice as fast,” Ready lamented about being part of a large organization. Without alignment, it was difficult to gain support throughout the organization on tasks and roadmaps. As PayPal grew in size, friction between its organizational structure and its evolving product development process became increasingly evident. When Schulman arrived in 2014, the product and engineering groups were separated within different divisions. As a result, few employees saw the problems they were solving for customers from end-to-end. “One of the hardest things about being inside a big company is that you have to go deal with people that see just their piece of the problem. And it was really hard to drive stuff through,” noted Ready. With many of the teams siloed, integrating new technology across products was also challenging. When PayPal acquired Braintree, Ready was frustrated with how long it took to integrate its One Touch technology with PayPal’s other products. However, he acknowledged the benefits of being part of such a large company. “Had it been entirely up to us we could’ve built PayPal One Touch twice as fast. I’m frustrated it took us as long as we did; but on the other hand, the day we launched, we launched to 165 million users.” Ready was also struck by the significant influence of the PayPal sales team on product development. Salespeople would document feedback and feature requests from customers, which would then inform product development decisions. Making incremental changes to optimize products based on incremental feedback from customers had been effective in the past, but in an industry undergoing revolutionary changes, “the customers… sometimes don’t know to ask for what’s coming next,” according to Ready. PayPal’s sales team was also slow to push innovation to customers. “It was almost a year after Braintree came in before PayPal sales reps started selling Braintree products. They had feature-function checklists and would say, ‘Here are all the reasons why your product won’t sell.’”

35 Interview with James Barrese, PayPal CTO, August 11, 2015. Subsequent quotes are from this interview, unless otherwise noted.

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PayPal 2.0 When Schulman arrived in 2014, he was determined to make the drastic changes required to remain competitive in the new payments ecosystem, more fearful of changing too little than changing too much. In particular, Schulman recognized the inertia in large companies to maintain the status quo. “In times of stress particularly, you tend to want to go back to what you know and what’s made you successful when that’s absolutely the wrong thing to go do. You actually need to reimagine what could be, not what was, and extrapolate from that.” Schulman accelerated the multi-year transformation of PayPal’s vision, leadership, and organizational structure, building on the momentum generated from PayPal’s technology overhaul. The transformation of PayPal’s technology had actually been underway several years before Schulman joined the company. CTO James Barrese was in the midst of what would become a four-year technical overhaul. Barrese recalled, “We brought in a number of new people and each one of us was really trying to reinvent our respective areas and kicked off a number of strategic re-platform initiatives. We rewrote pretty much every major product for PayPal.” Prior to the overhaul, the opportunity to maintain PayPal’s 15-year old technology was a challenging sell to most technologists in Silicon Valley. Fundamentally revamping PayPal’s architecture, on the other hand, was an opportunity that enticed many. Additionally, PayPal’s new technology architecture would be much more services-oriented and much easier on which to innovate. However, Schulman knew that reinventing a tech company with 17,000 employees was easier said than done and carried significant risks. “There are many risks in reorganization. You break apart a lot of things, but we really, fundamentally need to reimagine our value proposition to consumers and to merchants.” Like Barrese, Schulman believed that a reinvention was required not only to improve its technology, but also to attract the best talent in the industry. “People want to feel they’re making a difference in the world… if you want to attract the best and the brightest to a company, they need to be inspired.” Schulman furthered PayPal’s transformation by making significant changes to PayPal’s leadership and organizational structure. No longer under the oversight of eBay’s board, PayPal could now build its own leadership team, which would focus exclusively on strategic decision- making in PayPal’s best interest. While part of eBay, PayPal’s leadership reported to eBay’s board, which became problematic at times when the interests of eBay and PayPal were not fully aligned. In his open letter to eBay shareholders, Carl Icahn claimed conflicts of interest between PayPal and several eBay board members. Specifically, Icahn noted that eBay board members Marc Andreessen and Scott Cook actively advised and were invested in several PayPal competitors (See Exhibit 2). Schulman had the opportunity to rebuild and align PayPal’s new independent board with its interests and vision in mind. “We have a board that understands the chess game probably better than they ever have before,” he noted. Schulman also melded the product and engineering teams around customer segments. Much of PayPal’s talent had previously been siloed in different areas. Because PayPal had become a two- sided platform for both merchants and customers, Schulman believed optimal teamwork and communication across groups was essential for PayPal’s future success, and thus an organizational structure reflecting that was necessary. “I think that’s really been helpful in the communications piece of this and our speed to market,” noted Schulman. Cognizant of the

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nature of PayPal’s two-sided platform, Schulman also brought both the merchant and customer segment teams under Bill Ready’s leadership. This ensured that new product development was aligned with the needs of both merchants and customers, and employees had end-to-end ownership of products. The new organizational structure allowed for more employees to see the products and technologies that they were building from the customer’s perspective. Additionally, while customer feedback on product improvements was still documented by the sales team and used to help inform the product development process, it was no longer treated as an instruction list and instead was reviewed in the context of PayPal’s greater vision. While PayPal’s new organizational structure was more open and interconnected, senior management was careful to provide autonomy to those units and products that would benefit from it. In particular, PayPal management carefully limited the integration of Braintree and its popular social payments platform, Venmo. According to Ready, “For certain parts of the business, Braintree for example, we kept as a standalone unit, so Braintree can move fast enough. That’s a very conscious choice. Had we integrated Braintree, we’d be at major risk of others coming in and moving faster.” Bill Me Later, which PayPal acquired in 2008, remained a standalone unit for six years until it was fully integrated and rebranded to PayPal Credit in 2014.36 To promote PayPal’s reorientation, Schulman repetitiously emphasized PayPal’s new focus on the customer in team meetings. “In all of my all-hands meeting that I have Thursdays, we’ll talk about what it means to be a customer champion.” Additionally, PayPal’s senior leadership spent significant time and energy on bottom-up initiatives to align employees with PayPal’s new vision. “We’ve really had to pair great top-down support with really good bottom-up proof points,” noted Ready. He developed case studies demonstrating the positive results of new product initiatives on customers, which he presented internally to many of PayPal’s groups and regional sales teams. Ready even enlisted his own team of lieutenants to take on this communications task globally.

STRATEGIC CHALLENGES MOVING FORWARD

By mid-2015, PayPal’s separation from eBay was almost complete and with PayPal’s reconstruction well underway, Schulman devoted his energy on the journey ahead as an independent company. He had studied PayPal’s history carefully and developed an intimate understanding of the industry’s complex competitive dynamics, but several issues were top-of- mind.

Acquisition as a Tool for Growth

Given the intense competition within the market, Schulman knew that PayPal would have to rigorously invest in innovation to remain a leader. While PayPal continued to innovate from within on such products as One Touch, v.zero, PayPal Here, and PayPal.me, Schulman also prepared his team to leverage PayPal’s sizable balance sheet to innovate through acquisition. 36 TechCrunch, “PayPal’s ‘Bill Me Later’ Service Becomes ‘PayPal Credit,’ As Company Expands Credit Products Globally,” July 30, 2014, http://techcrunch.com/2014/07/30/paypals-bill-me-later-service-becomes-paypal-credit-as- company-expands-credit-products-globally/ (September 10, 2015).

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Fortunately, acquisition was part of PayPal’s DNA. After itself being acquired by eBay for $1.5 billion in 2002, PayPal went on to invest $3 billion in acquisitions over the subsequent ten years. PayPal leveraged these acquisitions to expand its product lineup, enhance its technology, and extend into new markets. New products In 2008, PayPal made a significant acquisition of Bill Me Later, for $820 million. Bill Me Later offered a revolving line of credit to online shoppers, who would complete purchases by submitting their birthdates and the last four digits of their social security numbers for an instant credit check. If approved, they were to repay Bill Me Later within six months, after which they would begin accumulating interest. Bill Me Later remained a non-PayPal branded product until 2014, when it became PayPal Credit, serving as the foundation for PayPal’s broader efforts to expand its credit offering. New technology PayPal’s 2013 acquisition of Braintree also enhanced and expanded PayPal’s technology. Not only did PayPal expand its product offering with Braintree’s suite of white-label mobile app tools and the Venmo peer-to-peer (P2P) service, PayPal also enhanced its technology with Braintree’s patented One Touch solution. One Touch allowed users to login once per device across all One Touch-enabled apps, which could then accept PayPal payments with just a fingerprint. PayPal integrated One Touch into several of its other products including PayPal’s online services and digital wallet. By 2015, PayPal One Touch was available in 16 markets37 and half of the 500 largest U.S. e-commerce sites.38 Exceptional talent PayPal’s acquisitions brought in exceptional talent as well. In particular, PayPal’s Braintree acquisition brought along CEO Bill Ready, who became PayPal’s senior vice president and global head of product and engineering after its separation from eBay. In an industry where leaders of acquired companies rarely join the senior ranks of their parent companies, Ready’s successful retention at PayPal was indicative of PayPal’s renewed reputation as a desirable place to work. New markets PayPal’s acquisitions also extended its access to new markets and market segments. PayPal’s acquisition of Paydiant provided access to some of the largest U.S. retailers through Paydiant’s partnership with MCX. MCX was a consortium of retailers including Walmart, Target, Exxon, and many others developing a customer payments and loyalty app known as CurrentC, which was powered by Paydiant. Historically, most of PayPal’s business was driven by small to medium-sized companies, but this relationship enabled PayPal to expand further into a new market segment.

37 PayPal, “PayPal One Touch is Now Being Used By Millions of People and Available in16 Countries,” August 25, 2015, https://stories.paypal-corp.com/home/paypal-one-touch-is-now-being-used-by-millions-of-people-and- available-in-16-countries (October 6, 2015). 38 “More Than Half of Top 500 Online Retailers Offer PayPal’s One Touch Checkout,” Recode.net, September 17, 2015, http://recode.net/2015/09/17/more-than-half-of-top-500-online-retailers-offer-paypals-one-touch-checkout/ (October 6, 2015).

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Braintree’s social payments service, Venmo, deepened PayPal’s presence in the rapidly growing P2P payment segment (see Exhibit 9). Venmo was a free P2P payment service that allowed users to send money to other users, and was thought to be the fastest growing and most-used P2P provider in the market in 2015, having processed $2.3 billion in 2014 with a 200 percent annual growth rate.39 Domestic P2P bank transfer volume reached $21 billion in 2014 and was expected to reach $86 billion by 2018.40 Venmo’s strong position in U.S. P2P payments set PayPal up comfortably to capitalize on the rapidly growing segment and compete with other popular services including Snapcash, the P2P payment service for messaging app Snapchat. PayPal’s announced 2015 acquisition of Xoom for an enterprise value of approximately $890 million was expected to further extend its access to the global P2P market, specifically international remittances.41 The global remittance market was significant, reaching $583 billion annually in 2014 and expected to reach $636 billion by 2017.42 Xoom was considered a leader in international remittances with 1.3 million active users sending remittances worth $7 billion across 37 countries in 2014.43 Traditionally, the market had been dominated by incumbents Western Union and MoneyGram, but Xoom’s digital model was less expensive because it required significantly fewer physical agents. In 2014, Xoom’s average transaction costs were $12.3 vs. Western Union’s $21.9.44 Additionally, half of Xoom’s transactions were initiated on mobile devices, aligning well with PayPal’s new “mobile first” platform, compared to less than 6 percent for both Western Union and MoneyGram.45

Emerging Economies

Non-U.S. e-commerce was expected to drive 80 percent of total global e-commerce volume growth through 2018, representing a significant opportunity for PayPal.46 By 2014, just over half of PayPal’s business came from overseas, but most was in developed countries. 47 Financial services in emerging markets were growing rapidly as mobile device penetration increased. The number of registered mobile money accounts in emerging markets was forecast to grow from 323 million in 2011 to 1.24 billion by 2017 and the total value of mobile money transactions in emerging markets was forecast to grow from $44 billion in 2011 to $395 billion in 2017.48 While PayPal’s own branded international services offered money transfer across more than 200 countries in over 20 currencies, its acquisition of Xoom was expected to significantly expand PayPal’s cross-border business and other PayPal services in developing

39 BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 18. 40 Javelin Strategy & Research Report; Business Insider 41 At the time of the case the Xoom acquisition had not closed, but was expected to do so in Q4 2015. 42 World Bank, “World Bank Migration and Development,” April 2015. 43 Deutsche Bank Markets Research, page 22. 44 BMO Capital Markets, op. cit., p. 23. 45 BMO Capital Markets, op. cit., p. 24. 46 Morgan Stanley, “PayPal Holdings, Inc.,” July 23, 2015, Page 12. 47 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20, 2015, p. 6. 48 VAS Research Series, “Mobile Money in Emerging Markets,” http://www.berginsight.com/reportpdf/productsheet/bi-mm2-ps.pdf (September 10, 2015).

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countries, several in which PayPal had previously experienced mixed results gaining acceptance, including China and India. In China, PayPal had been unsuccessful in gaining the requisite licenses to process domestic e- commerce transactions, and in India the Reserve Bank of India in 2011 restricted PayPal payments to merchants to amounts under $500.49 However, PayPal was able to launch PayPal China Connect in 2015, which would link Chinese consumers directly with PayPal’s network of global merchants.50 In the same year, PayPal announced a strategic partnership with India’s largest bank, the State Bank of India (SBI), which enabled SBI customers to use their debit cards on PayPal for buying products from overseas websites.51 While PayPal’s growing presence in the developing world made financial sense, it was also aligned with PayPal’s vision and Schulman’s own personal mission to improve financial inclusion globally. As Schulman phrased it, “It’s expensive to be poor.” More than 1 billion people in emerging and developing countries had mobile phones, but no bank account.52 PayPal had the potential to make these people the first to access modern financial tools and services without needing a bank account.

Security

When Schulman joined PayPal, he was also chairman of Symantec Corporation, one of the world’s largest Internet security companies (see Exhibit 10). He understood the challenges Symantec faced in developing state-of-the-art security solutions, and hence the security dangers PayPal faced as it was about to operate on its own with a complete reconstruction of its technology. Historically, PayPal had been an Internet security pioneer. Cofounder Max Levchin co-created the Gausebeck-Levchin test, one of the first implementations of CAPTCHA.53 Over the course of its history, PayPal invested heavily in its security capabilities, with over $200 million in acquisitions including Fraud Science in 2008 and CyActive in 2015. Unfortunately, PayPal’s separation from eBay had a potentially negative impact on PayPal’s security. While part of eBay, PayPal had access to eBay’s extensive data, which was fed into PayPal’s risk algorithms. Additionally, PayPal’s growing range and complexity of products,

49 “Reserve Bank Of India Restricts PayPal Payments To Merchants To Under $500,” TechCrunch, January 28, 2011, http://techcrunch.com/2011/01/28/reserve-bank-of-india-restricts-paypal-payments-to-merchants-to-under- 500/ (September 10, 2015). 50 Morgan Stanley, ob.cit., p. 14. 51 “SBI partners with PayPal to enable debit card payments online,” The Economic Times, May 21, 2015, http://articles.economictimes.indiatimes.com/2015-05-21/news/62460120_1_paypal-debit-state-bank (September 10, 2015). 52 McKinsey & Company, “Mobile money: Getting to scale in emerging markets,” May 2012, http://www.mckinsey.com/insights/social_sector/mobile_money_getting_to_scale_in_emerging_markets (September 10, 2015). 53 Completely Automated Public Turing Test To Tell Computers and Humans Apart (CAPTCHA) was a test that required new PayPal account users to type a word depicted in a small image that bots would be unable to read, preventing criminals from using malware to open dozens of fraudulent accounts with stolen credit card numbers.

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channels, and technologies significantly increased the number of points of vulnerability to cyber- attacks. While PayPal had not suffered any significant security breaches, others in the industry had and at great expense. In early 2009, New Jersey-based Heartland Payment Systems, a payments processor, suffered the largest data breach ever to affect an American company. Heartland’s breach exposed information from approximately 130 million credit and debit cards to cybercriminals.54 Heartland paid out roughly $140 million in fines as a result.

New Entrants with Substantive Resources

PayPal flourished under eBay’s umbrella after its acquisition in 2002, dominating e-commerce payments with 40 percent market share in the United States by 2014.55 During that time, PayPal coexisted without much conflict with the card networks, which had only materially entered the digital payments market in 2012 and 2013 with the launches of Visa Checkout and MasterPass.56 But the world in which PayPal operated gradually grew more complex and competitive. By 2015, PayPal was no longer competing in just e-commerce, no longer just online, no longer just on desktop computers, and no longer just in the United States. Spanning technologies, channels, devices, and countries, PayPal no longer relied on eBay for 60 percent of its business. PayPal was an independent company operating in a complex ecosystem of competing interests among new entrants with substantive resources including technology giants Google, Apple, and Samsung, mobile carriers AT&T, T-Mobile, and Verizon, and traditional players Visa, MasterCard, American Express, and Discover, among others. By 2015, PayPal had mixed results competing against and partnering with many of these players. In 2012, PayPal successfully partnered with Home Depot and Discover Financial Services to accept PayPal at Home Depot’s 2,000 stores nationwide. PayPal users completed in-store transactions by typing their telephone and PIN numbers into payment terminals or by using Discover Cards linked to their PayPal accounts. However, when Apple in 2014 launched its digital wallet, Apple Pay, it excluded PayPal and instead partnered with American Express, MasterCard, and Visa. PayPal had earlier teamed up with Samsung on its competing mobile wallet, Samsung Pay, which apparently alienated Apple. Six months later in a soap-opera-like turn of events, Home Depot, which supported Apple Pay upon its launch, stopped accepting it at its stores. Despite PayPal’s exclusion, Braintree’s white- label payment solutions powered many Apple Pay mobile apps. According to Bill Ready, Braintree was processing a significant share of Apple Pay mobile app transactions by 2015. “We power more Apple Pay than anybody else. When you press that Apple Pay button, there’s a good chance that Braintree is still handling the transaction.”

54 “10 Worst Data Breaches of All Time,” Tom’s Guide, February 6, 2015, http://www.tomsguide.com/us/biggest- data-breaches,news-19083.html (September 10, 2015). 55 RBC Capital Markets, “PayPal Holdings, Inc.,” July 20, 2015, p 8. 56 Visa and MasterCard’s digital wallets.

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Another 2015 chapter in the increasingly complex digital payments saga revealed the underlying tensions between several of the industry’s many players. In July of 2015, Visa and American Express invested in Braintree’s main rival, Stripe. Responding to questions regarding the investment and its impact on Visa’s relationship with PayPal, Visa’s CEO Charlie Scharf acknowledged that Visa was used in a sizeable share of PayPal transactions, but noted its unique relationship with PayPal:

They also have a very big business that they then use our transactions to mine from, to disintermediate out clients’ relationship with us, and so that’s something which has to evolve, and is not something that we think is sustainable for the long term. PayPal’s strategy involves guiding users’ hands away from using payment cards and toward leveraging [PayPal’s] checking accounts, which increases PayPal margins significantly. Stripe, on the other hand, is seen as more of a partner because it does not subscribe to this approach.57

LOOKING AHEAD

On Schulman’s return flight home after ringing the opening bell at the NASDAQ stock exchange, mid-air between New York City, the financial capital of the world, and Silicon Valley, the technology capital of the world, he wondered what type of a company PayPal would become over the next five years. Former eBay CEO Meg Whitman described PayPal’s success a decade earlier in simple terms. “First, PayPal focused on expanding its service among eBay users in the U.S. Second, we began expanding PayPal to eBay’s international sites. And third, we started to build PayPal’s business off eBay.” Unfortunately, PayPal’s business was no longer so simple. Would PayPal’s technology reconstruction be a success and completed on time? Would PayPal be able to innovate fast enough to respond to the ever-increasing competitive threats within the rapidly evolving digital payments industry? And lastly, would PayPal lead the global effort to improve financial inclusion?

57 The Street, “PayPal Faces New Threat as Visa Partners With Payments Startup Stripe,” July 29, 2015, http://www.thestreet.com/story/13234280/1/paypal-faces-new-threat-as-visa-partners-with-payments-startup- stripe.html (September 10, 2015).

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Exhibit 1 Global Online Commerce Retail Sales

Source: BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 33.

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Exhibit 2 Carl Icahn—Letter to eBay Shareholders

Dear Fellow eBay Stockholders, We have recently accumulated a significant position in eBay’s common stock because we believe there is great long-term value in the business. However, after diligently researching this company we have discovered multiple lapses in corporate governance. These include certain material conflicts of interest, which we believe could put the future of our company in peril. We have found ourselves in many troubling situations over the years, but the complete disregard for accountability at eBay is the most blatant we have ever seen. Indeed, for the first time in our long history, we have encountered a situation where we believe we should not even have to run a proxy fight to change the board composition. Rather, we believe that in any sane business environment these directors would simply resign immediately from the eBay Board, either out of pure decency or sheer embarrassment at the public exposure of the extent of their self-serving activities. How is it possible for the current board to engage in any meaningful discussions about long-term stockholder value while: (1) at least two board members are directly competing with eBay, (2) one board member is demanding eBay cease hiring the most talented employees, (3) another board member is routinely funding competitors while buying companies from eBay and reaping significant personal riches, (4) at least two board members appear to have put their own financial gain in ongoing conflict with their fiduciary responsibilities to stockholders and (5) the CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction? The Board’s Transgressions and CEO Mr. John Donahoe’s Ineptitude in Addressing Them Mr. Marc Andreessen – Independent Director Since Mr. Andreessen has been an eBay insider, he has engaged in several transactions that lead us to question his loyalty to eBay. During Mr. Andreessen’s time on the eBay Board he has purchased large stakes in two former eBay subsidiaries, reaping significant personal riches. In September 2009, an investor group that included Mr. Andreessen, preempted a planned Skype IPO (in which stockholders would have ended up making multiple billions of dollars) and bought 70% of Skype for less than what eBay had paid to acquire it. Mr. Andreessen basked in the purchase, saying that “Skype is the archetypal phenomenon: a breakthrough technology”. His partner was even more excited, stating that “Skype is on its way to becoming one of the most important companies in the world”. One cannot help but wonder what happened to Mr. Andreessen’s fiduciary responsibility to share his feelings with Mr. Donahoe and the board rather than preempt the planned IPO to further his own interests. A mere 18 months later, Mr. Andreessen’s investor group flipped Skype to Microsoft for $8.5 billion, a value three times what they paid for it, netting approximately $4 billion at the expense of eBay stockholders. After the sale to Microsoft, Mr. Andreessen, a sitting eBay Board member and fiduciary to stockholders, stated: “one reason we were enthusiastic about buying Skype was that even though we thought it would be a tremendous standalone business, we also knew that for Microsoft and a number of other companies Skype would be an obvious thing to buy. We knew we’d always have the fallback of selling to strategic buyers”. Did Mr. Andreessen share this strong view with Mr. Donahoe? Was Mr. Donahoe completely asleep, or even worse, so naive and deferential to his “world-class board” that he allowed a sitting board member and several private equity firms to walk away with over $4 billion in what was essentially stockholder’s money after a sale to a strategic that he obviously should have orchestrated himself? Many others have been vocally critical of the Skype transaction, but, until now, none have taken on the task of standing up to Mr. Donahoe and this board. Mr. Andreessen’s next eBay sourced grand slam was his investment in Kynetic. In March 2011, as part of eBay’s $2.4 billion acquisition of GSI Commerce, the eBay Board decided they no longer wanted the Kynetic portion of GSI Commerce and sold it back to the company’s founder for just $31 million in cash and a $467 million sellers note at below market interest. In June 2012, Mr. Andreessen pounced, making a $150 million investment in Kynetic at a $1.5 billion valuation, leveraging the low sale price and below market financing which the eBay Board had recently approved. Just a year later, Kynetic was valued at $3.1 billion, giving Mr. Andreessen a paper gain of more than 100%.

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Exhibit 2 (continued)

Carl Icahn—Letter to eBay Shareholders Additionally, during Mr. Andreessen’s time on the eBay Board – a time when he has been privy to nonpublic eBay Board information – he has made investments in and actively advised, no less than five direct competitors of eBay (four of which are competitors of PayPal), including Boku (mobile payments platform), Coinbase (Bitcoin wallet), Dwolla (secure online money management), Jumio (online and mobile credit card payments) and Fab (design e- commerce). How can Mr. Donahoe and the eBay Board allow Mr. Andreessen to advise these competitors while he simultaneously possesses not only nonpublic eBay Board information but also intimate proprietary information about PayPal’s operations? But perhaps more importantly, how can Mr. Andreessen be trusted to objectively advise Mr. Donahoe and the eBay Board about the strategic direction of PayPal when he has vested interest in so many of its competitors? Regarding Square, another powerful PayPal competitor, Mr. Andreessen publicly lamented his regret in passing on the opportunity to invest in that company as well. Mr. Scott Cook – Independent Director and Member of the Corporate Governance & Nominating Committee Mr. Cook is the founder, former CEO and a current board member of Intuit Inc. Mr. Cook has retained almost $1 billion of Intuit stock (~100x the $9 million of eBay stock he owns). Intuit and PayPal are direct competitors in payment processing as Intuit Go-Payment provides virtually the same capabilities to merchants as PayPal Here. How can the board have a conversation about the strategy or performance of PayPal when a representative of a direct competitor who has so much at stake is in the room? Even worse, Mr. Cook also apparently believes he can tell eBay whom the company cannot hire. Unbelievably, according to a pending DOJ complaint, “eBay ultimately agreed to an expansive no-solicitation and no-hire agreement in large part to placate Intuit’s Mr. Cook, who was serving as a member of eBay’s Board of Directors and who, at the same time, was making several complaints on behalf of Intuit about eBay’s hiring practices.” Furthermore, according to the complaint, in an effort to placate Mr. Cook, eBay instructed its employees not to pursue potential hires from Intuit and to discard their resumes. Is Mr. Cook wary of how a standalone PayPal could impact the company he founded? Is he worried that it would diminish the value of his $1 billion in Intuit stock? The best question, however, is where has Mr. Donahoe been when all of this has been going on? Mr. John Donahoe – Chief Executive Officer, President and Director While Mr. Donahoe is feeding information to competitors on the eBay Board and selling the company’s assets to board members, notable PayPal architects including Elon Musk and David Yammer are publicly questioning his strategy. David Yammer recently stated that “if you allowed PayPal to pursue its destiny there are moves it could make to become the largest financial company in the world.” Elon Musk has said “it doesn’t make sense that a global payment system is a subsidiary of an auction website…it’s as if Target owned Visa or something” and that “(PayPal) will either wither or be spun out.” Mr. Donahoe has resoundingly highlighted the strength of his “world-class board of directors,” including Mr. Andreessen and Mr. Cook. In our opinion, world-class directors focus on creating long-term stockholder value, not furthering their own financial and professional interests at the expense of stockholders. Amazingly, Mr. Donahoe has also publicly boasted about eBay’s sale of Skype, claiming that it was an opportunity for eBay to “have its cake and eat it, too.” The facts, however, show that the transaction was disastrous for stockholders to the tune of more than $4 billion. Additionally, Mr. Donahoe has touted his record of creating stockholder value over handpicked time periods. The more applicable facts show that not only from the time Mr. Donahoe took over as CEO, but also since the beginning of 2013, the stock has dramatically underperformed its applicable peers. From March 31, 2008 through our initial involvement on January 10, 2014, eBay stock returned 75% while Amazon, Visa and MasterCard returned 462%, 271% and 285%, respectively. For all of 2013 through our initial involvement on January 10, 2014, Amazon, Visa and MasterCard returned 60%, 48%, and 73%, respectively, while eBay stock returned only 2%. It is very sad to us that Mr. Donahoe appears to lack awareness about what is going on around him on his board and in the marketplace. It makes us seriously question his judgment and ability to make the crucial decisions that must

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Exhibit 2 (continued) Carl Icahn – Letter to eBay Shareholders

be made concerning the future of PayPal. How can Mr. Donahoe be the right person to make the strategic decisions necessary to achieve long-term value creation when he relies on his “world-class board of directors” with competing interests that challenge their fiduciary responsibility to eBay stockholders? We are convinced that not only has Mr. Donahoe failed to address eBay’s corporate governance crisis but also that his general stewardship of the company has been myopic. Elon Musk, one of the most preeminent technological visionaries of our generation, predicts that “(PayPal) will get cut to pieces by Amazon Payments, or by others such as Apple and by startups if it continues to be part of eBay.” It is time for us to address this critical problem that now faces the company. Our Proposal We believe creating two dedicated and highly focused independent businesses would provide employees and stockholders the best opportunity to remain competitive over the long term. We believe that the separation of the traditional eBay and PayPal businesses will: (1) highlight the significant value of the disparate businesses currently shrouded by a conglomerate discount the market has afforded eBay; (2) focus and empower independent management teams to most effectively build two very different business platforms, make economic decisions independent of each other and, most importantly, foster innovation; and (3) provide an even more valuable currency for future bolt-on acquisition opportunities and for recruiting the top talent necessary for PayPal to remain the market leader in payment technology. In an environment where an accomplished leader such as Scott Thompson, the former CEO of Yahoo, is dismissed for adding two words, Computer Science, to a degree from Stonehill College, it is incredible that so many blatant indiscretions at eBay have been tolerated by Mr. Donahoe and the other board members. We believe eBay needs fresh stockholder representation on the board to steer it towards long-term success and away from becoming yet another example of a technology company with a management team and board that refused to adapt (such as Nokia, Blackberry, Dell, Eastman Kodak, Polaroid, Nintendo, Xerox, Sony, Palm, and AOL, among many others). Our experience creating long-term stockholder value at companies such as Chesapeake Energy, Forest Labs, Motorola and R.J. Reynolds Tobacco, among many others, has showcased our ability to influence boards to meaningfully enhance long-term stockholder value by, among other things, holding management, and in certain cases other directors, accountable. We hope you will VOTE FOR OUR SLATE OF DIRECTORS and afford us the opportunity to represent and serve all eBay stockholders as members of the eBay Board, just as we have successfully done at many other companies in the past. Even more importantly, however, we urge you to vote in favor of our precatory proposal in order to send a clear message to the eBay Board that eBay and PayPal must be separated – NOW. We hope that all eBay stockholders recognize that PayPal is at a critical point in its development and that the payments market is rapidly evolving around it. Particularly with respect to technology, business opportunities are either seized by those who truly appreciate their potential, or they vanish and are relegated to the dustbin of history. Do not allow PayPal to be, in the words of Elon Musk, “cut to pieces” because it remains part of eBay. VOTE FOR OUR PRECATORY TO SEPARATE PAYPAL FROM EBAY NOW. Sincerely, Carl C. Icahn Source: http://www.businessinsider.com/carl-icahn-ebay-letter-2014-2

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Exhibit 3 eBay and PayPal Revenue Growth ($billions)

Source: http://walkthechat.com/wechat-payment-5-reasons-tencent-might-kill-alipay/.

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Exhibit 4 eBay’s Response to Carl Icahn’s Letter

New eBay shareholder Carl Icahn has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley. Marc Andreessen and Scott Cook bring extraordinary insight, expertise and leadership to eBay’s board, which is scrupulous in its governance practices and fully transparent with regard to its directors’ other affiliations and businesses. And eBay Inc. President and CEO John Donahoe is widely respected for his turnaround of eBay and leadership of the company over the past six years. As we are sure our other shareholders would agree, we prefer to engage in more constructive and substantive discussions of why, in our view, PayPal and eBay are better together. Instead, Mr. Icahn unfortunately has resorted to mudslinging attacks against two impeccably qualified directors. Mr. Icahn has nominated two of his employees to eBay’s board. As we have said, the board’s nominating committee will review the nominations of his employees in due course. Even if our board does not support the nominations, ultimately shareholders will decide whether they believe Mr. Icahn's employees are better qualified than directors such as Mr. Cook (Mr. Andreessen is not up for re-election this year) to sit on the board of a leading technology company. The board has been clear in its view that shareholders are best served by keeping PayPal part of eBay. The board regularly assesses all strategic options for the company; should circumstances change the board is entirely capable of evaluating alternatives for optimizing shareholder value. In response to Mr. Icahn’s specific claims, the facts are: 1) Skype: Skype was a great stand-alone business but had limited synergies with eBay’s global commerce and payments businesses. Consistent with its practice of regularly reviewing all of eBay’s operations, the Board determined that because of these limited synergies, it would be in the best longer term interest of stockholders to explore a divestiture of Skype. The company explored all options for divesting Skype, including an IPO and sale to a strategic buyer, and pursued the option that offered the highest return at the time, which was the sale of a controlling stake. We retained a 30% stake upon the sale to a private equity group led by Silver Lake Partners. That stake meant that the company earned a total of $1.4 billion when Microsoft acquired Skype. Because Mr. Andreessen’s fund had a small stake in the acquiring group, Mr. Andreessen was recused from all decision making. This recusal was dictated by eBay’s published Board Governance Guidelines and Code of Business Conduct, and Mr. Andreessen fully supported his recusal. Separating Skype enabled eBay to invest in its core growth engines of e-commerce and online payments, while allowing for potential upside if Skype’s potential was fully realized. 2) Marc Andreessen: Andreessen Horowitz is one of the most successful venture capital firms in the world, and Mr. Andreessen’s track record of creating value and driving innovation makes him an extraordinary asset on eBay’s board. Regarding other investments Mr. Andreessen and his firm have made, this sort of potential conflict exists whenever venture capitalists serve on a Board of Directors. This is true for many public companies which have found experienced venture capital investors to be extraordinarily valuable directors, especially in high tech. The eBay Board has guidelines to minimize the impact of any such conflicts. Also, in regards to Kynetic, any benefits from the terms of eBay’s purchase of GSI Commerce accruing to Kynetic would have been built into the price at which Andreessen Horowitz purchased their shares; as such, any relationship with eBay was irrelevant. eBay subsequently disposed of its note and equity interests in Kynetic and related Rubin enterprises at a profit. 3) Scott Cook: As founder of Intuit and chairman of the company’s executive committee, Mr. Cook also has an exceptional track record of creating value and driving innovation. He has been an enormous asset to eBay’s board for many years. The overlap between Intuit and eBay is small, fully disclosed and within the safe harbor for interlocking directorates. Regarding hiring, this is old news, any restrictions ended years ago, and Intuit historically had not been a source of talent for eBay Inc. Source: https://www.ebayinc.com/stories/news/ebay-inc-responds-carl-icahns-feb-24-open-letter- stockholders/?utm_source=301Redirect&utm_medium=301Redirect&utm_campaign=301Redirect

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Exhibit 5 PayPal Payment Volume through Mobile Devices

Source: BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 31.

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Exhibit 6 PayPal Share of Online and Mobile

Source: BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 32.

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Exhibit 7 Payments Ecosystem

Source: BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 13. Note: In some instances both Braintree and Stripe can also act as gateways and payment processors.

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Exhibit 8 Competitive Landscape

Mobile In-App Stripe Founded in 2010, Stripe was one of the newer class of payment gateway start-ups to emerge and provided the technical, fraud, prevention, and banking infrastructure required to operate online payment systems. Stripe’s white-labeled technology enabled websites and mobile applications to accept payments from anybody, whether they were using a credit card, Bitcoin, or even new services such as Apple Pay or Android Pay. Like Braintree, Stripe’s open APIs and development software became popular among mobile application developers for their ease of integration into both online and mobile applications. This open infrastructure made Stripe popular among mobile application developers, which led to its early adoption by several sizeable companies including Twitter and Salesforce. By mid-2015, the company had raised $280 million in venture capital funding at a $5 billion valuation from leading firms including Sequoia Capital, Andreessen Horowitz, Khosla Ventures, and several of PayPal’s founders: Elon Musk, Peter Thiel, and Max Levchin. Mobile Point-of-Sale Square In 2009, Twitter co-founder Jack Dorsey launched Square, which offered a small, square-shaped piece of hardware that plugged into a smartphone’s audio jack and translated the information from a credit card’s magnetic strip into an audio signal that was then processed by a downloadable smartphone app. Over time, Square released additional products and services including Square Register, which included an entire suite of customizable checkout features and solutions, management tools, and data analytics capabilities. Square’s cloud-based POS system also provided access to business applications including inventory management, time and attendance, among others. Value-added services such as loyalty programs, coupon redemption and gift cards were also easily integrated. By 2012, Square’s products were being used by large retailers as well, announcing a partnership with Starbucks to power their credit and debit transactions in the U.S. By 2015, Square was a top ten merchant on Visa’s credit card processing system and had raised a total of $500 million in venture capital funding.58 Later that year, Square confidentially filed for an IPO.

58 “The extraordinary reinvention of Square,” Fortune, August 2, 2015, http://fortune.com/2015/08/02/square- reinvention-ipo-dorsey/ (September 10, 2015).

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Exhibit 8 (continued) Competitive Landscape

Digital Wallets Android Pay Google launched a digital wallet thrice: Google Checkout in 2011, Google Wallet in 2013, and Android Pay in 2015. The latest, Android Pay, was embedded in the latest Android operating system and relied on NFC technology and MasterCard’s PayPass technology to securely store users’ payment credentials. Google had the advantage of pre-installing its second digital wallet iteration, Google Wallet, on all Android-operated phones, but failed to partner with mobile carriers, and was completely blocked by Verizon. The interests of AT&T, T-Mobile, and Verizon were with their own digital wallet joint venture, Softcard (formerly Isis). Google solved this problem by acquiring Softcard in 2015 prior to its launch of Android Pay, which was subsequently supported by all major mobile carriers. Unfortunately, Google faced another hurdle at the time of Android Pay’s launch: Most Android-operated phones were built by Samsung and Samsung had its own digital wallet in development. Samsung Pay Samsung planned to launch Samsung Pay late in 2015 on all of its new Samsung Galaxy devices. Samsung acquired LoopPay in 2015 for its proprietary contactless payments technology called Magnetic Secure Transmission (MST), which was compatible with 90 percent of the existing payment terminals in the United States. Samsung’s devices supported NFC as well, making them operable with both NFC-enabled and older magnetic-strip-only POS terminals. Apple Pay Apple’s attempt in 2014 at producing a widely adopted digital wallet seemed to many the most hopeful. Apple Pay came pre-installed on all Apple devices and Apple succeeded in partnering with both the credit card networks and mobile carriers. Surprisingly, Apple Pay relied on NFC technology despite NFC’s limited market penetration at the time. Before Apple Pay launched, the major credit card networks announced that they would transfer any counterfeit liabilities onto merchants that did not update their POS terminals to more secure and EMV-compliant terminals by October 1, 2015. By 2015, Apple Pay was being accepted at 700,000 merchant locations across the United States.59

59 Deutsche Bank Markets Research, “The Way to Play Digital Payments,” July 12, 2015, p. 50.

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Exhibit 9 Venmo Payment Volume

Source: BMO Capital Markets, “PayPal Holdings,” July 20, 2015, p. 18.

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Exhibit 10 Biographies

Dan Schulman

Chief Executive Officer, PayPal Mr. Schulman joined PayPal in 2014 following the announcement of the eBay/PayPal separation. Dan will serve as President and CEO of PayPal. He previously served as Group President of Enterprise Growth at American Express from August 2010 to August 2014 where he led global strategy to expand the alternative mobile and online payment services. At American Express, Dan helped the company launch its next gen digital payment products platform, developed non- traditional sources of revenue and introduced a suite of payment products helping to expand the company’s demographic and geographic reach. Prior to American Express, Dan was President of the Prepaid Group at Sprint Nextel, from November 2009 until August 2010, post its acquisition of Virgin Mobile, USA.

James Barrese CTO and Senior Vice President, Payment Services, PayPal

Mr. Barrese will serve as CTO and Senior VP of Payment Services for PayPal; prior to the separation he served as Senior VP and CTO at PayPal from October 2013. He was CTO from February 2012 to October 2013 and was VP of Global Product Development prior to that for PayPal from August 2011 to February 2012. James served previously in a variety of leadership roles in the technology organization at eBay after joining in 2001.

William Ready Senior Vice President, Product and Engineering, PayPal

Mr. Ready joined PayPal in 2013 when the company acquired Braintree where he was CEO from October 2011 until December 2013 helping to fuel the mobile commerce revolution by building one of the most innovative and influential startups in the payments industry. Prior to Braintree, he was executive in residence at Accel Partners, a leading Silicon Valley venture capital and growth equity firm, from July 2011 to October 2011. Bill has also served as president of iPay Technologies starting in 2008 until 2011 where he helped guide the company through a period of strong growth and its sale to Jack Henry & Associates for $300m in 2010. He was a strategy consultant at McKinsey & Company advising leading financial technology companies and was an early engineer at two other successful start-ups including emphesys and Netzee.

Source: PayPal.