PayPal Merchant Services: Harvard Case Services Marketing Submitted by Introduction PayPal • Founded in December 1998, PayPal is a leading global online payment company. • Purchased by eBay in October 2002. • Over 100 million registered accounts globally and available in 55 markets. • PayPal has a local presence in 13 countries outside the US, including UK, Canada, Australia, Austria, Belgium,France, Germany, Italy, Spain, Ireland, Netherlands,Switzerland and China. • Supports payments in U. S. Dollars, Canadian Dollars,Australian Dollars, Euros, Pounds Sterling,Chinese Yuan • Regulated by the FSA. Passported License to 25 EU countries. • Becoming a major player in the Merchant (off-eBay) space. • Our cross border product is unique and dramatically growing in usage. • PayPal has received over 20 awards for excellence from the technology industry. PayPal Value Proposition Safe and secure • Your financial information is never shared • The best encryption technology available • Fraud rates are best in class against reputable benchmarks • Buyer and Seller Protection, free of charge Fast • PayPal payments are instant – fast checkout and payment means buyers get their items quicker Easy Convenient • Sign up and start using in a few minutes • Keep track of transactions by going to your online account • Sellers can accept it both on eBay and their own websites Issues in the Harvard Case : PayPal Merchant Services Q1 : Should they accelerate investments in merchant services’ efforts ? How would credit card companies react if PayPal pushed more aggressively for Off eBay business? Yes,PayPal should accelerate in Merchant Services(off ebay ) because the sector is growing. With more and more people coming on to cyberspace and earning money through transactions,ads,consulting. Bay is just restricted to transaction(sale) and not other money management online. PayPal has an immense opportunity in investing in off-eBay merchant services. Customer preferences have changed over the years. Bill Payment, Online banking, Google Ads, online funds transfer are the new keywords. People use PayPal for managing their money online in a secure and trusted way. Rather than just buying and selling on eBay,people are involved a lot in earning revenue over the net. So PayPal is a perfect brand in that domain so PayPal should keep investing aggressively in this new market.
Credit Card Companies Reaction Credit Cards companies would have no choice but to tie up with PayPal or similar services. Credit Card Frauds and security are big issues. Many people avoid using credit card online suspecting phishing activities. So Companies like MasterCard/VISA can tie up with paypal and offer services to its customers. Q2: How should investments be allocated to promoting growth on the two sides of PayPal’s network. i. e. Consumers vs Merchants? Any business can be classified on the basis of 1) B2B 2) B2C Paypal also has these two aspects in the online Consumer world.
Paypal is open for normal netizen and also offers services to corporates who transact online. Both of the customers are equally important for PayPal. When we see google,it has earned its major revenue through Adsense program(90%). This could be achieved through proper management of both types of customers. Paypal also need to follow a similar model. From small time bloggers earning revenue through Ads to big corporates, Services should be provided accordingly. In the business of Online Money management Service, Trust is of paramount importance.
Regarding the allocation both the customers are equally important,so nearly equal budgets should be allocated. If small customer bring less revenue, their number is large so it becomes equal to the Big Customers. The investments should be per customer, with every customer getting equal importance, as both bring value to the service. Q3 : Which Customer Segments should PayPal Target ? What product changes should be done ? For Off-eBay merchant services PayPal can target both existing users as well as New Users. 1) Existing users 2) New Customers In the new world,a lot of people are involved in internet.
Many people are transferring money over the internet. Many small companies,bloggers,web publishers earn money through their sites and advertisements. PayPal offers them a quality and secure way to manage and transfer their money. Product changes: Many off-ebay customers are not attracted towards PayPal because of the fee based revenue model. People mainly prefer free services. Even credit cards offer a interest free credit period in which money transfer/transaction can be done without paying any extra money. Paypal should also think on modifying its service on the similar lines. ) Paypal should try to give service free for a limited number of days else some fee or interest should be charged 2) Paypal should concentrate on revenue through advertisements on its PayPal portal,sponsorships,bulk deals, special promotions. 3) PayPal can use differential model for fees. e. g. First few transactions can be made free and some money can be charged over a certain limit or vice versa. Q4: On the merchant side, to what extent should paypal emphasize the recruitment of large, established online retailers versus small and midsized merchants? hat changes, if any, should be made to pricing terms, product features and other policies ? PayPal should concentrate on all the business customers. PayPal should concentrate more on midsized customers 1) Big online retailers will have their own money management systems, so will not require PayPal. 2) SME would require third party services more as compared to biggies so PayPal can come there as a service provider in managing money securely 3) Some Big Brands may try to outsource this business to some services company like IT consulting etc ) SME might not spend that money on it and rather go for a Fee based or variable priced service like PayPal for managing online revenue. So seeing the above points Pay Pal should rather go for SME rather than big customers as the number of SME in cyber space is huge. It includes small consulting firms,Bloggers,Service based websites,Ad earnings,free lancers etc. So PayPal should concenterate on them now and many of SME would become large organizations tomorrow thereby increasing the revenue of PayPal. Q5: Finally, should PayPal forge strategic partnerships to check Google Strategy? We can understand it on the basis of two scenarios
Scenario 1 : Paypal ties up with Yahoo ! ,MSN If PP ties up with google competitor it can give good head on competition to Google in the ‘Pay per purchase’ segment. It can offer its existing customers this option similar to google and earn more revenue and increase customer loyalty at the same time. As per the case,most of the sales are initiated through Web Searches. So if some partnership comes through,it can give a lot of edge to PayPal as it is a trusted brand in the domain Scenario2 : Paypal ties up with Yahoo ! ,MSN If PayPal ties up with some Google competitor,it can dilute PayPal’s brand.
PayPal’s core competency is online payment not searches. Google has been earning its major revenue through Ads so it is concentrating on increasing it through Google Payments. Yahoo ! ,Bing(MSN) are not as good as Google when it comes to search based transaction. So Paypal would not be able to bank on them. Seeing the above two scenarios,It would be better for Paypal to go for partnership with Google itself. eBay is a big partner with Google so it can tie up with Google and together they can earn revenue thorugh Paid Searches. Google is a leader in searches and PayPal is a leader in online transactions so it would be profitable for both.