Financial DNA, LLC releases preliminary findings on PayPal's role in Off-E Bay

(I-Newswire) May 2, 2005 - As growth in eBay's domestic marketplace volumes naturally moderates over time, investors are increasingly looking to PayPal as a key driver of the company's growth going forward.

We believe that PayPal is likely to take a lead in providing merchant services to small online merchants and niche e-commerce categories due to its lower processing discount and ease of access, two important competitive differentiators.

The opportunity for PayPal to take on the broader e-commerce merchant services marketplace is problematic, in our view. As PayPal increasingly acts as a merchant payment gateway, we believe its funding cost advantage is likely to erode.

Financial DNA finds that As PayPal's role in the merchant services marketplace expands, we believe that the company will only be able to preserve its funding cost advantage by demonstrating to consumers the value of PayPal account ownership (and funding PayPal accounts and transactions via lower-cost methods like ACH). In addition to promoting PayPal account usage in concert with merchants, PayPal could take a cue from the credit card industry here, extending buyer credit initiatives, providing more comprehensive chargeback protection, initiating rewards programs, etc.

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Complementary copies of the preliminary report are now available by contacting us at info@financialdna.com or 415-661-9443.

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Gary R Craft