PayPal has quickly risen the ranks of the e-commerce industry, fast becoming a global leader in online payment solutions with more than 153 million accounts worldwide. Available in 190 markets and 24 currencies around the world, PayPal enables global ecommerce by making payments possible across different locations, currencies, and languages.

Asian eMarketing got a chance to speak with Farhad Irani vice president of PayPal Asia Pacific and found out more on the company’s vision and strategy in the region.

Question1:
Tell me about PayPal in Asia. What has been your business strategy in the region, especially in 2009 and moving forward into 2010?

Asia Pacific is PayPal’s fastest growing region and represents a strategic growth opportunity.  We have over 12 million PayPal accounts in Asia Pacific and processed more than $4 billion of total payment volume across the region in 2008, an increase of 56 percent from 2007. 

Our biggest focus in Asia is enabling merchants to sell cross-border and, as a result, increase their customer reach and incremental sales.  PayPal connects to 27 financial networks and more than 15,000 local banks and our active accounts grew 23 percent year over year in 2008.  With PayPal, SMBs can sign up quickly and start accepting payments globally in about 15 minutes.  PayPal can also increase sales for SMEs by up to 14% when offered on their website (Source: Survey of PayPal shoppers conducted by Northstar Research, Q4 2007).

We also offer Asian buyers the security and convenience they require to shop online.

As part of this strategy, PayPal is focused on providing products and partnerships to suit the needs of its sellers and buyers across Asia.  In October, we launched several new services for APAC buyers and sellers, including four additional currencies, the transfer of funds to local banks and the further fostering of cross-border trade for emerging markets, such as Vietnam.  Earlier this year we also added increased buyer and seller protection for eBay purchases for our Asian members.  At a global level we also recently – on the 3rd of November 2009) - opened up our platform, meaning developers across the globe can now use PayPal’s global platform to incorporate a faster, easier and more secure payment service in a wide range of applications, including mobile and micropayments. 

PayPal has developed a number of commercial partnerships across Asia with payment service providers who have similar and complementary activities to foster ecommerce growth.  For example, in the Philippines, Japan, Thailand and Hong Kong, we work with payment service providers in those markets to help unlock e-commerce and grow the export markets there.  We also work with national agencies like Malaysia External Trade Development Co-operation (MATRADE) and Department of Industrial Promotion (DIP) and Department of Export Promotion (DEP) in Thailand to create useful partnerships and seminars for local merchants, so as help merchants fully utilize ecommerce to reach out to the global audience. 

Question 2:
What do you think makes PayPal stand out from its competition? Has Google’s Checkout made an impact on PayPal’s revenues in the region?

We know through our own experience that payments are hard to do - it’s a classic network effect business where you need both the buyers who want to send money via their preferred payment method and sellers who accept that payment method. PayPal has succeeded over the last 11 years by staying focused only on payments and carefully building its expertise.

• PayPal has unmatched competitive advantages.
  • PayPal was designed specifically for the web.
  • Our risk management and anti-fraud capabilities are best in class.  PayPal has more than 11 years of experience battling fraudsters around the globe.  This not only helps us drive down fraud in our system, but also helps us drive more sales.  We maintain on e of the lowest loss rates in the industry due to fraud – 0.25% in Q3 2009
  • We’re the universal adapter for payments on the Internet.  PayPal connects to 27 global financial networks and more than 15,000 local banks around the world.  We have regulatory licenses that cover most major markets.  It takes years and significant investment to do this.  We have direct relationships with both parties in every transaction – both the buyer AND the seller.  This closed loop system is the engine that helps us power e-commerce and Internet payments.  We know what our customers are buying.  And we can connect them to the sellers who offer what they want.

It’s the combination of these unmatched advantages that drive our powerful network effects. 

Question 3:
How are you handling this competitive threat?       

Throughout our history, PayPal has always faced competition. PayPal has been successful by staying focused on payments and focusing on its customers rather than the competition, carefully building its expertise over the last ten years. At PayPal we continue to focus on innovating and improving our service for our customers – both consumer and merchants.

We have tremendous assets which are unmatched in the industry:

• A large and active global customer base of more than 78 million active buyers who transacted $60 billion in 2008
• A truly global footprint, in 190 markets and 24 currencies
• 260,000 members of the PayPal developer program
• A world class fraud prevention engine, made even stronger by PayPal's acquisition of Fraud Sciences.
• Millions of merchants – from small sellers to the largest brand names on the web like PAYSBUY, Sasa.com, Dell, Boots, AirAsiaX, FarEastFlora.com, Lufthansa, Blockbuster, iTunes Music Store.
• An incredible value proposition to merchants -- PayPal allows merchants to set up an online payment platform in minutes and start receiving funds from all over the world instantly and at a low cost of entry, driving incremental growth for their online business and enabling them to attract cross-border buyers.
• Industry-leading innovation - In November of this year we also opened up our global payments platform, PayPal X to developers. Online payment has seen less innovation than other industries, in part because of security and regulatory concerns. By opening the platform and providing the right tools to developers, we are looking forward to more game changing innovations on PayPal to make online transactions faster, safer and more cost effective for both merchants and consumers.

Question 4:
Does Amazon/Google Checkout compete with PayPal?

Amazon and Google Checkout do compete with some parts of the PayPal business – namely our merchant checkout service. However, as mentioned above we have a number of unmatched competitive advantages:

• We have been successful by staying focused on payments and have 11 years experience in the market
• Our risk management and anti-fraud capabilities are best in class.  PayPal has more than 11 years of experience battling fraudsters around the globe.  This not only helps us drive down fraud in our system, but also helps us drive more sales.
• We’re the universal adapter for payments on the Internet.  PayPal connects to 27 global financial networks and more than 15,000 local banks around the world.  We have regulatory licenses that cover most major markets.  It takes years and significant investment to do this. 
• We have direct relationships with both parties in every transaction – both the buyer AND the seller.  This closed loop system is the engine that helps us power e-commerce and Internet payments.  We know what our customers are buying.  And we can connect them to the sellers who offer what they want.

Question 5:
What is the secret of your success in the region?

Our success in the region can be attributed to the following factors:

1. Huge opportunities for success in the region:

42.2% of the world’s Internet users live in Asia (Source:  Internet World Statistics) and the appetite for ecommerce is huge. Price and security matters to buyers in the region; in a recent MasterCard Worldwide Insights survey, 65% of online shoppers across the region fear online transactions are ‘unsafe’, and using trusted epayment platforms like PayPal makes online payments much safer.

2. PayPal’s constant product innovation in the region

Country specific transaction platforms

In October we launched several new services for Asian buyers and sellers, including four additional currencies, the transfer of funds to local banks and the further fostering of cross-border trade for emerging markets, such as Vietnam.

Platform development

On 3rd November we opened up our platform to third party developers, meaning developers across the globe can now use PayPal’s global platform to incorporate a fast, easy and secure payment service in a wide range of applications, including mobile and micropayments.  Payments are becoming a game changing technology and developer innovation has been stifled until now because it’s so hard to make money. By opening up its payments platform, PayPal is essentially giving developers the tools to easily monetize their ideas.

Mobile enablement

Recently, we’ve enabled PayPal on iPhones and Android phones for our Asian users.  They can now use their phone to send money for a personal payment, check their account balance and view their transaction history.

Enhanced protection

This year we added increased buyer and seller protection for eBay purchases for our Asian members.

3. Enhancing cross-border trade across Asia

Our biggest focus in Asia is enabling merchants to sell cross-border and, as a result, increase their customer reach and incremental sales. PayPal connects to 27 financial networks and more than 15,000 local banks and our active accounts grew 23 percent year over year in 2008.  With PayPal, SMBs can sign up quickly, start accepting payments globally in about 15 minutes and increase sales by up to 14%. We also work on joint marketing promotions with our merchants to help grow their business through our online promotional website – for example, our AsiaMall (www.paypal-apac.com/apac-mall) launched in July this year.  

4. Strong partnerships in APAC :

PayPal has developed a number of commercial partnerships across Asia with payment service providers who have similar and complementary activities to foster ecommerce growth (see answer to Question 1).

Question 6:
PayPal recently launched an online Asia Mall. Can you please tell me your strategy and focus here?

PayPal is a global online payment platform that enables businesses and individuals to securely, conveniently and cost-effectively send and receive money online.  

Our aim is to work with Asian SMEs to extend their reach beyond Asia and take advantage of global markets and customers to increase their bottom line profits - especially in key import markets such as the U.S, U.K., and Australia, where PayPal is one of the most preferred ways for consumers to pay on the web. 

We offer our merchants support in the form of training on how to reach, convert and maintain global buyers, as well as joint marketing promotions.  PayPal’s Asia Mall (www.paypal-apac.com/apac-mall) is a recent example of our efforts to work with Asian merchants to further extend their cross border reach - a one stop online shopping portal to connect PayPal buyers with Asian sellers.

We also offer incentives to PayPal buyers to drive traffic for merchants – one example of this is our recently launched (16 November) CrazyHour Holiday promotions, where we’re giving away US$75,000 in cash and prizes to PayPal members who shop and pay with PayPal during one of the CrazyHours (http://www.paypal-apac.com/crazyhour/).

Question 7:
What are the key takeaways of the Asia Mall and what do you feel makes it standout?

By creating a one stop shop for PayPal buyers, we are offering Asian merchants like popular online health and beauty store, Sasa.com, and online gadget store, DealExtreme, the opportunity to connect with millions of shoppers and drive cross-border trade for their business.  PayPal has 78 million active accounts worldwide and 12 million users in Asia.  Our merchants are able to reach these buyers through PayPal’s online shopping store.

Buyers also benefit from the range of promotional offers available to PayPal customers on the site, from 20 percent discounts to free warranties and free cross-border delivery.

Question 8:
What are the key online shopping trends you see in the Asia Pacific? How have these trends been changing over the years? How different are Asian online shoppers from online shoppers in other regions?

Online shopping is obviously taking off in this region in a big way.  44 percent of online Asians have shopped online for the past three years and more than three-quarters (76%) intend to shop online again in the next six months according to MasterCard’s latest Worldwide Insights.

In a recent PayPal survey  on festive shopping expenditure this year done in Singapore, Thailand, Malaysia and India, close to half of all respondents said that they will shop online for holiday gifts and items, with the main reasons cited as greater time flexibility and the wider range of items available online. Shoppers expect to spend an average of US$94 online this Christmas, and Singaporeans are the most generous online with an expected spend of US$114.

Respondents polled cited better deals and free shipping as strong incentives to increase or start shopping online for holiday gift and items.  Lower prices as compared to regular brick and mortar shops was also mentioned as the top lever in encouraging offline shoppers to start shopping online, with 37 percent of non-online shopping respondents voting that as their top motivator to start shopping online.

Where security has become somewhat of a hygiene factor in the US, it is still a huge concern for Asian shoppers.  In our recent survey on online shopping, evidence of good website payment security ranked second in the top importance factors when it came to choosing a website to shop on.  Non-disclosure of a buyer’s financial information with merchants or third parties means PayPal can provide the security assurances Asian shoppers require.

Question 9:
PayPal continues to be popular targets for phishers. What is PayPal’s strategy and approach here to better protect its customers? What security measures do you have in place here and how does it compare to what others have to offer here (in terms of security)?

Back in 2007, PayPal partnered with large internet service providers and Web mail systems, including AOL, Gmail, Hotmail, and Yahoo to eliminate phishing attempts before they reach users’ inboxes.  By using electronic signatures that the companies can scan to differentiate legitimate communications sent out by PayPal and eBay from all the counterfeit messages bearing the companies' names, the partners are eliminating millions of phishing attempts before they ever reach end-users' in-boxes.   

Additionally, we provide comprehensive consumer educations programs to help users spot phishing attacks and provide top tips on how to protect against such scams: https://www.paypal.com/fightphishing

In addition to its protection against phishing, PayPal also has industry leading fraud technology and securely stored personal information, which doesn’t get disclosed to the merchant, thus ensuring that buyer’s payments are secure.

Traditional payments are not designed for the web and are limited - online threats are rife and attackers have become sophisticated in targeting online ecommerce.   PayPal was designed and developed purely for online transactions and, as a result, deploys industry-leading online fraud protection to safeguard users against today’s online threat landscape.

PayPal’s top priority is customer security and it deploys three industry-leading safeguards to ensure money and information stays secure when transacting with PayPal.  As a result, PayPal maintains a very low loss rate due to fraud – less than 0.5% and one of the lowest in the industry.
When it comes to security, we keep to the three P’s:

Prevention:

• 24/7 transaction monitoring
• Sophisticated anti-fraud risk models
• Over 2,000 anti-fraud specialist worldwide
• Cutting-edge fraud models
• PayPal verification system

Privacy:

• Financial information is never shared between buyers and sellers

Protection:

• Industry leading use of industry data encryption
• Buyer and seller protection
• 100% protection against unauthorized transactions sent from your PayPal account
• Dispute resolution

Question 10:
How aware are Asian online shoppers when it comes to Internet security risks? What do you think are the key things online shoppers have to bear in mind here?

Online security has always been a major concern for Asian online shoppers. In our recent survey on online shopping, evidence of good website payment security ranked second in the top importance factors when it came to choosing a website to shop on.

The three key things that Asian online shoppers need to remember when it comes to online security are the three P’s : Privacy, Prevention and Protection.

• Privacy: 
  • Pay safely:  One of the most effective ways is to keep your financial information private.  PayPal enables its users to pay without disclosing their financial information with sellers or other third parties they don’t know. 
• Prevention:
  • Guard your information, online and offline - Change your user name and passwords frequently and don’t share them with other parties.
  • Don’t respond to email or phone calls asking for your account information
• Protection: 
  • PayPal has both buyer and seller protection to help when a problem arises. 

Online shoppers can also learn more at:  www.paypal.com/sg/securitycenter

Question 11:
Do you feel that security is PayPal’s biggest challenge? If not, what is?

PayPal is THE safest way to pay and get paid online, so it is definitely not a challenge for us, instead it is an opportunity.

Our biggest challenge in this region is ensuring that merchants are aware of PayPal’s value proposition.   Outside of North America, ecommerce is expected to grow to between $460-480 billion by 2011. PayPal merchant services are expected to account for up to 5-6 percent of this volume. When merchants add PayPal to their online businesses, they get an average sales increase of 14%, and 80% conversion rate.
 
Other payment solutions compared to PayPal are often more expensive and include other miscellaneous costs including transaction fees, foreign exchange fees, and protection charges. What’s more, they are time intensive to set up, with no local options and a 15-30 day settlement period. With PayPal, merchants can set up an online payment platform in about 15 minutes and start receiving funds from all over the world instantly, at a low cost of entry – no set up fees. 

Question 12:
How do you feel online shopping is evolving and what is PayPal doing to ensure it keeps up with this evolution?

Online shopping is constantly evolving and growing, but some fundamentals will always remain the same. Online shoppers want a secure, fast and cost effective payment method for their online purchases, and at PayPal we are constantly innovating to make the experience faster, safer and more cost effective for our users. We want payments to fit into our consumers’ lives seamlessly and with transparency.

One of the most recent developments at PayPal is the opening of PayPal’s global payments platform, PayPal X, which will put the future of payments in the hands of developers. PayPal X will give developers the opportunity to tap into the $30 trillion global payments market while changing the way we pay. For developers and the industry at large, the timing is right, the developer opportunity is huge, and PayPal is the company to do it. Traditionally, online payment has seen less innovation than other industries, in part because of security and regulatory concerns. We want to come in and provide the right technology tools for developers, so that our users can benefit from the innovations that come from an open platform.

One example of the benefits of open platform:

B2B:  B2B is one of the biggest untapped opportunities for online payments. Until now, there hasn’t been a cost-effective way for businesses to pay their vendors quickly and easily. All the existing B2B payments models take at least five days and involve multiple clearing systems, with no remittance details and therefore no visibility into the status of the transaction for both the sender and recipient. As a proof of concept, SAP has used PayPal X to create a faster, more cost-effective way for eBay Inc. to pay our vendors.

By Shanti Anne Morais