French Essays Abortion Laws in France

French Essays Abortion Laws in France Abortion laws in France does the system support a pro-choice or pro-life ideology? The way in which abortion has been viewed culturally has changed dramatically over time. Since the beginning of the twentieth century, attitude change began to liberalise alongside the social and cultural changes spreading through Western Europe.   A number of factors have been presented in the literature as contributing to the ‘wave of change’ evident in contemporary feelings towards abortion. Approximately 50 million abortions are currently carried out worldwide regardless of the differences in laws between countries. More than one-third of these procedures are performed illegally (mainly in the developing world) with nearly one-half taking place outside the health care systems. Once deemed a sin punishable by death, with more relaxed and liberal attitudes towards sexuality and reproduction, the act of aborting a foetus is now seen by many as a woman’s right. Often classified under the title of a ‘pro-choice’ standpoint, the decision of whether to continue with a pregnancy is seen to rest with the individual, and Governments following this perspective should thus offer the procedure in a safe and supportive environment demonstrating their recognition that a woman should have the right of control over their own fertility. Around two-thirds of the world’s women live in such countries, where abortion can be carried out on request, or for a range of reasons. Such laws have led to the development and rise of safe and legal abortions, leading to the rates of pregnancy-related complications such as death for mother or infant, to decrease. The pace of such liberalisation is however not constant across continents and countries, and laws differ in whether reasons need to be given in regards to the request of the abortion, conditions involved in obtaining treatment, and lastly whether consent of some form, other than that of the female is required. Different levels of explanation required before the abortion is provided can vary from physical and mental health risks to the mother and foetus, to socio-medical or socio-economic reasons, to abortion upon request (predominantly within first trimester). Also, consent in some countries is required for minors (under 16 years, UK) or in more restrictive nations from the spouse of married women (Japan, Turkey). Countries that have more stringent and restrictive conditions have contributed to the slowing in abortion law reform, with restrictions actually increasing within the legal systems of some places. Often classified as a ‘pro-life’ perspective, such countries vie w the right of the foetus to life from conception, irrespective of the wishes of the mother. Countries that clearly fall into this category include the United States, where further liberalisation of abortion through changes to the law, have been blocked. Abortion laws in France currently allow women to have an abortion up to 12 weeks into pregnancy; however there are a number of processes that women must comply with in order to get the procedure authorised. Not only do French women wishing to get an abortion have to attend mandatory ‘pre-abortion counselling’ but they also need to adhere to a seven day cooling-off period after the counselling before the abortion can take place. France had in earlier time been especially restrictive in its allowance of abortion; during Nazi occupation in 1940-1941 abortion was a criminal offence, and those practicing in providing abortions could be punished by death if convicted – a lady who had performed a number of illegal abortions around this time was executed in 1942. Although the death penalty was dropped in 1944, abortions were still performed in secret up until the 1970’s when French law was relaxed in order to allow women to have an abortion up to tenth week of preg nancy (Law No. 79-1204 of 31 December 1979) and this was then increased in 2001 to be available up to week 12. After this time the agreement of two physicians stating the health of the woman is endangered is required in order to allow an abortion to be performed. The implications of these requirements can mean a number of things for women. The time limit within French laws often mean that French women wanting to terminate their pregnancy after the twelfth week are required to travel elsewhere (such as the UK) in order to get the treatment. This itself can incur financial consequences through cost of travel and possibly prolonged time off work, but also psychologically as their support systems may not be accessible when abroad, and the stress of travelling to a foreign land with a different language may also add considerably to an already distressing situation. In cases where a woman is within the timeframe to get the abortion in France, so-called counselling sessions are often biased towards getting the female to keep the baby and can thus prove emotionally and psychologically challenging and upsetting, whilst the waiting period can prolong stress and distress levels with having to wait for the procedure to take place. Such actions can theref ore severely interfere with the woman’s decision making process, which ultimately has the potential to lead to a decision being made that will later be regretted. The time limit of twelve weeks thus limits women’s choice to have an abortion, and when the limit is missed can either lead to an unwanted child or the instigation of an illegal abortion that is likely to be under less safe, with greater health risks than regulated abortions, or where the woman is required to travel outside the country with the associated stressors of doing so, to have the procedure completed. As to whether French laws are thus consistent with a pro-choice or pro-life approach, the distinction in this country is not clear cut. The fact that women (over 16) may opt for an abortion on request without specific reasoning given, without consent from another required, appears to be consistent with the liberal pro-choice perspective. However the relatively strict time limit imposed, coupled with the enforced and often biased ‘counselling’ and set waiting period before the procedure can be performed does appear to attempt to make it as difficult as possible within the framework of French law, for the woman to terminate her unwanted pregnancy. French law can therefore be seen to be more pro-life than other similar western European countries such as the UK where counselling is not mandatory, and abortion can be performed up to 24 weeks into pregnancy. French law may in light of the points discussed, be seen to fall within some median point on the continuum between pro-life and pro-choice ideology, which may seen to benefit from giving the unborn foetus a degree of right to life, and yet also be seen to be restricting women in respect to their own reproduction capacity, in comparison to similar European countries, which may anger many in our culturally liberal modern day society. ESSAY PLAN: ABORTION LAWS IN FRANCE: DOES THE SYSTEM SUPPORT A PRO-CHOICE OR PRO-LIFE IDEOLOGY? INTRODUCTIONWhat has the background to abortion laws been, and how has mood and societal reflection on the topic changed over time†¦ PRO-CHOICE PROLIFE EXPLANATIONWhat are the pro-life and pro-choice movements, and what does each of these perspectives involve†¦. THE LAWS IN FRANCE Current laws and requirements for abortion to be granted IS FRANCE PRO-LIFE OR PRO-CHOICE?Are French laws consistent with a pro-life or pro-choice ideology? CONCLUSION OF THE POINTS REFERENCES Abortion in Law, History and Religion (1995) Childbirth by choice Trust ‘Abortion Policy: France’ The Population Policy Data Bank: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat Gearty, C (2004) ‘The politics of abortion’ The Tablet Latham, C ‘Policy networks and reproductive rights in France and Britain’ BRIEFING PAPERS ‘Crafting an abortion law that respects women’s rights: Issues to consider’ (2004) Center for Reproductive Rights ‘Safe and legal abortion is a woman’s human right’ (2004) Center for Reproductive Rights INTERNET RESOURCES http://cyber.law.harvard.edu/population/abortion/France.abo.htmhttp://www.protectchoice.org/http://www.abortionfacts.com/http://www.prochoiceforum.org.uk/al11.asp

Life after high school Essay -- essays research papers fc

Life After High School I’ve just entered my senior year of high school. I know that this is a very important year. I have a lot of decisions to make and not much time to make them. These decisions will either make or break my life, and I want to make sure that I make them to the best of my ability because there is no turning back. I need to make sure I definitely want to attend college. The decision is totally up to me. There are many positives and negatives of attending college. Go over them, and then decide. I know myself better then anyone else, and I won’t let anyone else tell me what to do. I will make sure if I am going to attend college that I have something in mind that I will want to do, to succeed in. Choosing a major can be a very stressful situation so why not sit down and take some time to do it? Be creative, don’t rush, give yourself plenty of time and really think about what interests you in life. My major is something that I will want to enjoy, something that I will be doing for the rest of my life. Why would I want to be miserable at something I do in life? In two short essays: â€Å"College? What’s in It for me?† by Steven M. Richardson, and â€Å"What It Means to Be Creative†, by S.I. Hayakawa, I can relate to my major very well. Athletic Training is something that takes skill, as well as being creative in your own way. No two Athletic Trainers are the same. The more creative I am at whatever I do, the better off I will be. I hold the keys to all the doors that can ...

Aesthetic Music Educatin and the Influence of Bennett Reimer Essay

An explicit concept since the late 1950s, aesthetic education first developed to provide a strong philosophical foundation for music education and continues to evolve as a solid theoretical orientation for current effective practices. Bennett Reimer has contributed much to the discussion and development of the value of aesthetic education for the teaching and learning of music. Others in music education also support and promote these ideals and focus on developing an improved understanding for music educators. Some scholars oppose the principles of an aesthetic education, recently demonstrated by David Elliott who favors a praxial philosophy of music education centered on musical performance. The work of Reimer shows an influence of these thinkers and illustrates the essential benefits of a professional emphasis on aesthetics, the branch of philosophy especially devoted to studying the value of the arts. With guidance from aesthetics, music educators better understand the value of music and its fundamental role within the school curriculum. With its introduction, aesthetic education provided an understanding of authentic fundamental characteristics of music not previously discussed and encouraged an articulation of those ideas into relevant objectives for teaching and learning. The appearance of Basic Concepts in Music Education (ed. Nelson B. Henry, 1958) and the college text Foundations and Principles of Music Education (Charles Leonard and Robert W. House, 1959) promoted the acceptance of an aesthetic-based philosophy as a guiding theoretical foundation. These significant resources encouraged individuals to put their previous intuitions into effective practice using a shared, progressive concept of musical experience and learning. Many music educators embraced aesthetic education (and continue to do so) because it reinforced the validity of music study in the school curriculum for reasons intrinsic to the art itself. Reimer emphasizes that we (as music educators) need not establish discipleship to one particular person or point of view of aesthetic education. The ideal of â€Å"Music Education as Aesthetic Education† (MEAE) does not exist as a particular collection of fixed certainties; it supports the attitude that philosophical truths develop and transform as we advance and verify new ideas. Many sources (books, journals, articles, etc.) provide the insig... ...le, J. Scott and Marie McCarthy. â€Å"Music Education Philosophy: Changing Times,† Music Educators Journal, 89:1 (September 2002): 19-26. Reimer, Bennett. â€Å"Putting Aesthetic Education to Work,† Music Educators Journal, 59 (September 1972): 29-33. Reimer, Bennett. â€Å"Music Education as Aesthetic Education: Past and Present,† Music Educators Journal, 75 (February 1989): 22-8. Reimer, Bennett. â€Å"Music Education as Aesthetic Education: Toward the Future,† Music Educators Journal, 75 (March 1989): 26-32. Reimer, Bennett. â€Å"Essential and Nonessential Characteristics of Aesthetic Education,† Journal of Aesthetic Education, 25:3 (Fall 1991): 193-214. Reimer, Bennett. â€Å"David Elliott’s â€Å"New† Philosophy of Music Education: Music for Performers Only,† Bulletin of the Council for Research in Music Education, 128 (Spring 1996): 59-89. Reimer, Bennett. A Philosophy of Music Education, 3rd edition, (Upper Saddle River, NJ: Prentice Hall, 2003). Schwadron, Abraham. â€Å"Some Thoughts on Aesthetic Education,† Music Educators Journal, 56:2 (October 1969): 35-6, 79, 81-5. Schwadron, Abraham. â€Å"Are We Ready for Aesthetic Education,† Music Educators Journal, 60:2 (October 1973): 37-9, 87-9.

Lisa Bright & Dark Essay -- essays research papers

John Neufeld is the author of â€Å"Lisa Bright & Dark†. He lives and works in New York City these days. He was educated at Yale. His style of writing are usually touching stories. Finding information about John Neufeld is quite difficult since the Internet nor the book has provided any help whatsoever. Lisa Shilling is the main character of this book. She is just sixteen as she slowly loses her mind. Lisa is quite an example of teenager with problems which is why she’d be classified as a very real character. Her dangerous state of mind reflects the realism that this does happen. Her moods are forever changing. Lisa’s motivation as a teenager is to live her live normally. This is hard to do since she is in need of help. Many can relate to Lisa and her illness because it is among teenagers today. Her mother and father snub her off completely overlooking her serious unstableness. Luckily, she has friends that care enough to help her. The main conflict of this book is the struggle to convince Lisa’s parents that she is ill and needs serious help. Her parents did not pay attention in the beginning when Lisa started to act a little different. This is rather understandable. Lisa was in school and pricked herself with a needle that drew blood. Many told Lisa’s stubborn parents that she needed a psychiatrist. They simply refused to accept the fact that their daughter was in need of anything. When Lisa even screamed out that she needed help, they simply wouldn’t understand. She even w...

Spirit Bound Chapter Seven

â€Å"NOT WITH YOUR TEETH,† I added hastily. â€Å"Throw yourself at me. Swing your shackles. Whatever you can do.† Victor Dashkov was not a stupid man. Others might have hesitated or asked more questions. He did not. He might not know exactly what was going on, but he sensed that this was a shot at freedom. Possibly the only one he'd ever get. He was someone who had spent a large part of his life masterminding complicated plots, so he was a pro at slipping right into them. Holding his hands up as much as he could manage, he lunged at me, making a good show of trying to choke me with the chain between his cuffs. As he did, I gave a bloodcurdling shriek. In an instant, the guardians were there to stop this crazy prisoner who was senselessly attacking a poor girl. But as they reached to subdue him, I leapt up and attacked them. Even if they'd expected me to be dangerous–and they hadn't–I had so much surprise on them that they had no time to react. I almost felt bad at how unfair it was to them. I punched the first hard enough that he lost his grip on Victor and flew backward, hitting the wall near Lissa as she frantically compelled Northwood to stay calm and not call anyone in the midst of this chaos. The other guardian had slightly more time to react, but he was still slow in letting go of Victor and turning on me. I used the opening and got a punch in, forcing the two of us into a grappling match. He was big and formidable, and once he deemed me a threat, he didn't hold back. A blow to my shoulder sent shooting pain through my arm, and I responded with a swift knee in his stomach. Meanwhile, his counterpart was on his feet heading toward us. I had to end this fast, not only for my own sake but also because they would undoubtedly call for backup if given a moment's chance. I grabbed the one closest to me and pushed him as hard as I could into a wall–headfirst. He staggered, dazed, and I did it again, just as his partner reached me. That first guardian slumped to the ground, unconscious. I hated doing that, but part of my training had been learning to differentiate between incapacitating and killing. He should only have a headache. I hoped. The other guardian was very much on the offensive, however, and he and I circled each other, getting in some shots and dodging others. â€Å"I can't knock him out!† I called to Lissa. â€Å"We need him. Compel him.† Her response came through the bond. She could compel two people at the same time, but it took a lot of strength. We weren't out of this yet, and she couldn't risk burning herself out so soon. Frustration replaced fear within her. â€Å"Northwood, go to sleep,† she barked. â€Å"Right there. On your desk. You're exhausted and will sleep for hours.† Out of the corner of my eye, I saw Northwood slump, his head hitting the desk with a thump. Everyone who worked here would have a concussion by the time we were through. I threw myself at the guardian then, using my full weight to get him within Lissa's line of sight. She pushed her way into our fight. He glanced at her in surprise, and that was all she needed. â€Å"Stop!† He didn't respond as quickly as Northwood, but he did hesitate. This guy was more resistant. â€Å"Stop fighting!† she repeated more forcefully, intensifying her will. Strong or not, he couldn't stand against that much spirit. His arms fell to his sides, and he stopped wrestling me. I stepped back to catch my breath, straightening my wig back into place. â€Å"Holding this one's going to be hard,† Lissa told me. â€Å"Hard as in five minutes or five hours?† â€Å"Somewhere in the middle.† â€Å"Then let's move. Get Victor's key from him.† She demanded the guardian give her the key for the shackles. He told us the other guardian had it. Sure enough, I frisked the unconscious body–he was breathing steadily, thank God–and retrieved the key. Now I turned my full attention on Victor. Once the fight had started, he'd stepped out of the way and simply observed quietly while all sorts of new possibilities undoubtedly formed in his twisted mind. I approached and put on my â€Å"scary face† as I held up the key. â€Å"I'm going to unlock your cuffs now,† I told him, in a voice both sweet and menacing. â€Å"You're going to do exactly what we tell you to do. You're not going to run, start a fight, or in any way interfere with our plans.† â€Å"Oh? Are you using compulsion nowadays too, Rose?† he asked dryly. â€Å"I don't need it.† I unlocked the shackles. â€Å"I can render you unconscious as easily as that guy and drag you out. Makes no difference to me.† The heavy cuffs and chains fell to the floor. That sly, smug look stayed on his face, but his hands gently touched each wrist. I noticed then that there were welts and bruises on them. Those shackles weren't meant for comfort, but I refused to feel sorry for him. He glanced back up at us. â€Å"How charming,† he mused. â€Å"Out of all the people who would attempt to rescue me, I never would have expected you two†¦ and yet, in retrospect, you're probably the most capable.† â€Å"We don't need your running commentary, Hannibal,† I snapped. â€Å"And don't use the word rescue. It makes it sound like you're some wrongfully imprisoned hero.† He arched an eyebrow, like he believed that might indeed be the case. Instead of disputing me, he nodded toward Bradley, who had actually slept through the fight. In his drugged state, Lissa's compulsion had been more than enough to knock him out. â€Å"Give him to me,† said Victor. â€Å"What?† I exclaimed. â€Å"We don't have time for this!† â€Å"And I have no strength for whatever you have in mind,† hissed Victor. That pleasant and all-knowing mask vanished, replaced by one vicious and desperate. â€Å"Imprisonment involves more than bars, Rose. They starve us of food and blood, trying to keep us weak. Walking here is the only exercise I get, and that's effort enough. Unless you really do plan on dragging me out of here, give me blood!† Lissa interrupted any response I could make. â€Å"Be fast.† I stared at her in astonishment. I'd been about to deny Victor, but through the bond I felt an odd mix of feelings from her. Compassion and†¦ understanding. Oh, she still hated him, absolutely. But she also knew what it was like to live on limited blood. Mercifully, Victor was fast. His mouth was at the human's neck practically before Lissa finished speaking. Dazed or no, feeling teeth in his neck was enough to wake Bradley up. He woke with a start, his face soon moving into the delight feeders took from vampire endorphins. A short burst of blood was all Victor would need, but when Bradley's eyes started to go wide in surprise, I realized Victor was taking more than a quick drink. I leapt forward and jerked Victor away from the scattered feeder. â€Å"What the hell are you doing?† I demanded, shaking Victor hard. It was something I'd wanted to do for a long time. â€Å"Did you think you could drain him and become Strigoi right in front of us?† â€Å"Hardly,† said Victor, wincing at the grip I had on him. â€Å"That's not what he was doing,† said Lissa. â€Å"He just lost control for a second.† His bloodlust satisfied, Victor's smooth demeanor had returned. â€Å"Ah, Vasilisa. Always so understanding.† â€Å"Don't make any assumptions,† she growled. I shot glares at both of them. â€Å"We have to go. Now.† I turned to the compelled guardian. â€Å"Take us to the room where they monitor all security footage.† He didn't respond to me, and with a sigh, I looked expectantly at Lissa. She repeated my question, and he immediately began to leave the room. My adrenaline was running high from the fight, and I was anxious to finish all of this and get us out of here. Through the bond, I sensed her nervousness. She might have defended Victor's need for blood, but as we walked, she kept as far away from him as possible. The stark realization of who he was and what we were doing was creeping up on her. I wished I could comfort her, but there was no time. We followed the guardian–Lissa asked his name; it was Giovanni–through more halls and security checkpoints. The route he led us on went around the prison's edge, not through the cells. I held my breath almost the entire time, terrified we'd run into someone. Too many other factors were working against us; we didn't need that too. Our luck held, though, and we ran into no one–again probably a result of doing this near the end of the night and not passing through a high-security zone. Lissa and Mia had gotten the Court guardian to erase the security footage there too, but I hadn't witnessed it. Now, when Giovanni led us into the prison's surveillance room, I couldn't help a small gasp. Monitors covered the walls, and consoles with complex buttons and switches sat in front of them. Computer-covered desks were everywhere. I felt like this room had the power to blast off into space. Everything in the prison was in view: each cell, several halls, and even the warden's office, where Eddie sat making small talk with Theo. Two other guardians were in here, and I wondered if they'd seen us in the halls. But no–they were too fixated on something else: a camera that had been turned to face a blank wall. It was the one I'd adjusted in the feeding room. They were leaning toward it, and one of them was saying how they should call someone to check down there. Then they both looked up and noticed us. â€Å"Help her subdue them,† Lissa ordered Giovanni. Again, there was hesitation. We would have been better off with a â€Å"helper† with a weaker will, but Lissa had had no idea when she chose him. Like before, he eventually sprang into action. Also like before, surprise went a long way in subduing these two guardians. I was a stranger–immediately raising their guard–but still appeared as human. Giovanni was their coworker; they didn't expect an attack from him. That didn't make them easy to take down, though. Having backup went a long way, and Giovanni was good at his job. We rendered one guardian unconscious pretty quickly, Giovanni using a choke hold to briefly cut off the guy's air until he collapsed. The other guard kept his distance from us, and I noticed his eyes continually shifting toward one of the walls. It had a fire extinguisher, a light switch, and a round silver button. â€Å"That's an alarm!† exclaimed Victor, just as the guardian lunged for it. Giovanni and I tackled him at the same time, stopping the guy just before his hand could brush the button and send a legion of guards down on us. A blow to the head knocked this guardian out too. With each person I took out in this prison break, a knot of guilt and nausea twisted tighter and tighter in my stomach. Guardians were the good guys, and I couldn't help but keep thinking I was fighting on the side of evil. Now that we were left to ourselves, Lissa knew the next step. â€Å"Giovanni, disable all the cameras and erase the last hour's worth of footage.† There was a greater hesitation on his part this time. Getting him to fight his friends had required a lot of forceful compulsion on her part. She was keeping her control but growing weary, and it was only going to get harder making him obey our commands. â€Å"Do it,† growled Victor, coming to stand beside Lissa. She flinched at his proximity, but as his gaze joined hers, Giovanni complied with the order and began flipping switches on the consoles. Victor couldn't match Lissa's power by a long shot, but his small burst of compulsion had strengthened hers. One by one, the monitors went black, and then Giovanni typed in a few commands on the computer that stored digital footage from the cameras. Red error lights were flashing on the consoles, but there was no one here now to fix them. â€Å"Even if he erases it, there are those who might be able to recover it from the hard drive,† noted Victor. â€Å"It's a chance we'll have to take,† I said irritably. â€Å"Reprogramming or whatever isn't really in my skill set.† Victor rolled his eyes. â€Å"Perhaps, but destruction certainly is.† It took me a moment to get what he meant, but then it clicked. With a sigh, I grabbed the fire extinguisher from the wall and beat the computer to a pulp until it was nothing more than a pile of plastic and metal fragments. Lissa winced at each blow and kept glancing at the door. â€Å"I hope that's soundproof,† she muttered. â€Å"It looks sturdy,† I said confidently. â€Å"And now it's time to go.† Lissa ordered Giovanni to return us to the warden's office at the front of the prison. He complied, leading us back through the maze we'd gone through earlier. His codes and security card got us through each checkpoint. â€Å"I don't suppose you can compel Theo into letting us walk out?† I asked Lissa. Her mouth was set in a grim line. She shook her head. â€Å"I don't even know how much longer I can hold Giovanni. I've never used someone as a puppet before.† â€Å"It's okay,† I said, trying to reassure both of us. â€Å"We're almost done with this.† But we were going to have another fight on our hands. After beating up half the Strigoi in Russia, I still felt good about my own strength, but that guilty feeling wouldn't leave me. And if we ran into a dozen guardians, even my strength wasn't going to hold. I'd lost my bearings from the blueprint, but it turned out that Giovanni's route back to the main office was taking us through a block of cells after all. Another sign read overhead WARNING–NOW ENTERING PRISONER AREA (PSYCHIATRIC). â€Å"Psychiatric?† I asked in surprise. â€Å"Of course,† murmured Victor. â€Å"Where else do you think they send prisoners with mental problems?† â€Å"To hospitals,† I responded, holding back a joke about all criminals having mental problems. â€Å"Well, that's not always–â€Å" â€Å"Stop!† Lissa interrupted him and came to an abrupt halt before the door. The rest of us nearly walked into her. She jerked away, taking several steps back. â€Å"What's wrong?† I asked. She turned to Giovanni. â€Å"Find another way to the office.† â€Å"This is the fastest way,† he argued. Lissa slowly shook her head. â€Å"I don't care. Find another, one where we won't run into others.† He frowned, but her compulsion held. He abruptly turned, and we scurried to keep up. â€Å"What's wrong?† I repeated. Lissa's mind was too tangled for me to pull out her reasoning. She grimaced. â€Å"I felt spirit auras behind there.† â€Å"What? How many?† â€Å"At least two. I don't know if they sensed me or not.† If not for Giovanni's clip and the urgency pressing on us, I would have come to a stop. â€Å"Spirit users†¦Ã¢â‚¬  Lissa had looked so long and hard for others like her. Who'd have thought we'd find them here? Actually†¦ maybe we should have expected this. We knew spirit users danced with insanity. Why wouldn't they end up in a place like this? And considering the trouble we'd gone through to learn about the prison, it was no wonder these spirit users had remained hidden. I doubted anyone working here even knew what they were. Lissa and I exchanged brief glances. I knew how badly she wanted to investigate this, but now wasn't the time. Victor already looked too interested in what we'd said, so Lissa's next words were in my head: I'm pretty sure any spirit users would see through my charms. We can't risk our real descriptions being discovered–even if they came from people who are allegedly crazy. I nodded my understanding, pushing aside curiosity and even regret. We'd have to check into this another time–say, like, the next time we decided to break into a maximum-security prison. We finally reached Theo's office without further incident, though my heart pounded furiously the entire way as my brain kept telling me, Go! Go! Go! Theo and Eddie were chatting Court politics when our group entered. Eddie immediately leapt up and went for Theo, recognizing it was time to go. He had Theo in a choke hold as efficiently as Giovanni had managed earlier, and I was glad someone else was doing this dirty work besides me. Unfortunately, Theo managed a good yelp before passing out and falling to the ground. Immediately, the two guardians who had escorted us in earlier charged the office. Eddie and I jumped into the fray, and Lissa and Victor got Giovanni in on it too. To make things more difficult, just after we subdued one of the guardians, Giovanni broke out of the compulsion and began fighting against us. Worse, he ran to the wall where I discovered–too late–there was another silver alarm button. He slammed his fist against it, and a piercing wail filled the air. â€Å"Shit!† I yelled. Lissa's skills weren't in physical fighting, and Victor wasn't much better. It was all on me and Eddie to finish these last two–and we had to do it fast. The second of the escort guardians went down, and then it was just us and Giovanni. He got a good hit in on me–one that knocked my head against the wall. It wasn't good enough to make me pass out, but the world spun and black and white spots danced before my eyes. It froze me up for a moment, but then Eddie was on him, and Giovanni was soon no longer a threat. Eddie took my arm to steady me, and then the four of us immediately ran out of the room. I glanced back at the unconscious bodies, again hating myself for it. There was no time for guilt, though. We had to get out. Now. Every guardian in this prison would be here in less than a minute. Our group ran to the front doors, only to discover them locked from the inside. Eddie swore and told us to wait. He ran back to Theo's office and returned with one of the security cards that Giovanni had often swiped at the doors. Sure enough, this one let us out, and we made a mad dash for the rental car. We piled in, and I was glad Victor kept up with all of us and made none of his annoying comments. Eddie stepped on the gas and headed back toward the way we'd come in. I sat beside him in the front. â€Å"I guarantee the gate guy's going to know about the alarm,† I warned. Our original hope had been to simply leave and tell him there'd been a paperwork mix-up after all. â€Å"Yup,† Eddie agreed, face hard. Sure enough, the guardian stepped out of his gatehouse, arms waving. â€Å"Is that a gun?† I exclaimed. â€Å"I'm not stopping to find out.† Eddie pushed hard on the gas, and when the guardian realized we were coming through regardless, he jumped out of the way. We crashed through the wooden arm that blocked the road, leaving it a mess of splinters. â€Å"Bud's gonna keep our deposit,† I said. Behind us, I heard the sounds of gunshots. Eddie swore again, but as we sped away, the shots grew fainter, and soon, we were out of range. He exhaled. â€Å"If those had hit our tires or windows, we'd have had a lot more to worry about than a deposit.† â€Å"They're going to send people after us,† said Victor from the backseat. Once again, Lissa had moved as far from him as she could. â€Å"Trucks are probably leaving right now.† â€Å"You don't think we guessed that?† I snapped. I knew he was trying to be helpful, but he was the last person I wanted to hear from at the moment. Even as I spoke, I peered back and saw the dark shapes of two vehicles speeding down the road after us. They were gaining quickly, leaving no question that the SUVs would soon catch up to our little compact car. I looked at our GPS. â€Å"We need to turn soon,† I warned Eddie, not that he needed my advice. We'd mapped out an escape route beforehand, one that took lots and lots of twisty turns on these remote back roads. Fortunately, there were a lot of them. Eddie made a hard left and then almost an immediate right. Still, the pursuing vehicles stayed with us in the rearview mirror. It wasn't until a few turns later that the road behind us stayed clear. Tense silence filled the car as we waited for the guardians to catch up. They didn't. We'd made too many confusing turns, but it took nearly ten minutes for me to accept that we might have actually pulled this off. â€Å"I think we lost them,† said Eddie, the wonder in his voice matching my feelings. His face was still lined with worry, his hands gripping the wheel hard. â€Å"We won't lose them until we clear Fairbanks,† I said. â€Å"I'm sure they'll search it, and it's not that big.† â€Å"Where are we going?† asked Victor. â€Å"If I'm allowed to ask.† I squirmed around in my seat so that I could look him in the eye. â€Å"That's what you're going to tell us. As hard as it is to believe, we didn't do all that just because we missed your pleasant company.† â€Å"That is hard to believe.† I narrowed my eyes. â€Å"We want to find your brother. Robert Doru.† I had the satisfaction of momentarily catching Victor off guard. Then his sly look returned. â€Å"Of course. This is a follow-up to Abe Mazur's request, isn't it? I should have known he wouldn't take no for an answer. Of course, I never would have guessed you were in league with him.† Victor apparently didn't know I was actually in the familial league with Abe, and I wasn't about to enlighten him. â€Å"Irrelevant,† I said coldly. â€Å"Now, you're going to take us to Robert. Where is he?† â€Å"You forget, Rose,† mused Victor. â€Å"You aren't the one with compulsion here.† â€Å"No, but I am the one who can tie you up by the side of the road and make an anonymous call back to the prison with your whereabouts.† â€Å"How do I know you won't get what you want from me and then turn me back in anyway?† he asked. â€Å"I have no reason to trust you.† â€Å"You're right. I sure as hell wouldn't trust me. But if things work out, there's a chance we might let you go afterward.† No, there really wasn't. â€Å"Is this something you want to gamble on? You'll never get another opportunity like this, and you know it.† Victor had no witty quip for that. Score another one for me. â€Å"So,† I continued, â€Å"are you going to take us to him or not?† Thoughts I couldn't read churned behind his eyes. No doubt he was scheming about how he could work this to his advantage, probably figuring out how to escape us before we even reached Robert. It was what I would have done. â€Å"Las Vegas,† Victor said at last. â€Å"We need to go to Las Vegas.†

Information About the Great Depression, New Deal, the Great Society, and the War on Poverty Essay

The Great Depression was a time of great suffering in American history. Remarkably it was a time that marked the American people and the country was able to emerge shining and stronger than ever. The Great Depression began in 1929 when in the month of October the stock market crashed and fourteen billion dollars were lost. In just one week, thirty billion dollars were gone. This loss was so monumental because it was ten times the average annual budget of the United States. The depression struck hard at all the industries in the United States. This left thousands and thousands of people jobless and even homeless. The first industries to be affected were construction and production. Soon after, the agricultural industry was hit hard. Over 750,000 farms were lost due to how the price of crops dropped drastically which ended up bankrupting the farmers. The unemployment rate was at 25%, the highest ever in American history. The population took yet another devastating blow with lack of food and illness due to inability to pay for medical care. President Hoover lost the election to Franklin D. Roosevelt because the American public considered Hoover to be incapable of handling the crisis. The Great Depression ended up carrying on until the second world war. Recently the United States faced something very close to the Great Depression. The stock market crashed again and millions of jobs were lost. Prices rose and Americans were headed for a slump that would take a long time to recover from. Ever so slowly the economy began to move forward again. But to this day the economy is still crippled and the American people are still paying for it. The New Deal was a series of economic programs that were implemented in the United States between 1933 and 1936. The man responsible for the New Deal was none other than Franklin D. Roosevelt. The New Deal was a response to the Great Depression and mainly focused on Relief for the unemployment and the poor, Recovery of the economy, and Reform of the financial system to prevent another depression. These three R’s were what drove it to be approved by Congress. The New Deal managed to decrease unemployment greatly by the 1940’s and put out many different programs and organizations that are still present today that help move the United States forward. The main focus of President Kennedy’s administration was to confront poverty. Kennedy began by putting 2 billion dollars to urban renewal and gave federal rewards to companies who moved to the newly renewed areas. The War on Poverty was a governmental effort to stop the problem of persistent poverty in the U.S. the poverty rate in the U.S. was at 24%. In 1964 Lyndon B. Johnson declared a metaphorical war on poverty and new plans and programs were put out to help the poverty rate. The Great Society began when Johnson defeated the Republicans in 1964. His agenda consisted of taking care of the matters of discrimination, poverty, education, healthcare, housing, and consumer and environmental protections. The â€Å"Great Society† was a set of domestic programs promoted by Johnson and the Democrats. The Elementary & Secondary Schools Act passed in 1965 was the first time the federal government was involved in public education. It gave government funds to high risk schools. The Higher Education Act put forth new buildings, programs, scholarships, and grants. The National Housing Act if 1968 increased low income housing by 1.7 million. The Civil Rights movement was an important time during American history. It was a time where American minorities conducted protested that won them rights and put a stop to racism in the United States. monumental individuals like Martin Luther King and Malcolm X helped a lot in spreading the word about racial equality. The African American communities all around the country protested for equality. Some whites went to extremes and resorted to violence that led to many murders of the African American people and even the assassination of Martin Luther King. The Native Americans also had an influential movement where they seized Alcatraz and occupied it. Their motive was to protest the first discovery of America and to establish a native American identity. Meanwhile the fastest growing minority in the United States, the Latinos, were also trying to establish equality.

Credit Card and Paypal

In this report, we focus on all aspects of the PayPal business. PayPal Basics PayPal is quickly establishing itself as a global payment processor with scale, facilitating nearly $60B in Total Payment Volume in 2008. It remains the largest player focused solely on online payments; however when compared to the total volume of large global players, such as Visa and MasterCard, PayPal’s volume remains fairly small: its $60B TPV was just over 1% of the total volume of payments processed last year by Visa and MasterCard combined. Figure 1: PayPal’s Volume Dwarfed by Incumbents in billions 2,000 1,500 1,757 1,548 969 1,000 500 0 Visa (Credit) Visa (Debit) MasterCard (Credit) Source: Company reports, J. P. Morgan estimates. Note: Parts of PayPal volume may be processed using Visa or MasterCard’s network; Visa volume excludes Visa Europe 406 60 MasterCard (Debit) Pay Pal PayPal is an Established Payment Network and Brand – A Rare Commodity PayPal is in rare company , successfully creating itself into a formidable payment network and brand alongside dominant payment brands in Visa, MasterCard, American Express and Discover.Payment networks sit at the top of the value chain in payments, collecting high-margin fees for facilitating payments from participants seeking access to a network of trusted merchants and consumers. PayPal overcame the classic chicken-and-egg dilemma and now has a critical mass of users in its network, differentiated as a trusted brand for facilitating online payments with the potential to extend its presence into offline opportunities longer-term.One driver of PayPal’s growth is that, unlike traditional payment methods which developed in an offline world and have been overlaid onto eCommerce, PayPal’s platform was built with eCommerce in mind. As such, PayPal has developed tools and risk management measures to address the unique complexities of handling card not present payments over the web – one of th e fastest growth categories in payments. Moreover, PayPal is elegantly structured to simplify the web of connections required in a traditional payment system, making it well positioned to penetrate the small business payments market. Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Figure 2: PayPal Simplifies the Payment Process Traditional payment structure Merchant Payment gateway provider Merchant bank Source: J. P. Morgan. PayPal payment structure Merchant Consumer Consumer Card issuer processor Card-issuing bank Merchant bank Consumer bank We think the online marketplace, and sellers in particular, benefit from this simplification in several ways: †¢ Ease of Use.PayPal gives virtually anyone the capacity to accept payments, enabling a merchant to operate even at an initial scale that would otherwise be uneconomical (i. e. , there are no minimum requirements for payment volume in order to use PayPal. ) Higher level of trust. The payments system is not very transparent, and not all aspects were intended for mass use. A trusted central clearinghouse like PayPal can encourage use of online payments by lowering users’ safety concerns and raising their willingness to send money online. †¢PayPal Is Differentiated beyond Just Online Commerce PayPal is different from other payment brands (e. g. MasterCard, Visa) in that it is a vertically integrated payment provider. In other words, PayPal is a single source provider of payment services. By contracting directly with PayPal Merchant Services, small merchants can get all of their payment needs, and do not necessarily need a separate merchant bank account or payment gateway services provider. PayPal is gradually expanding its presence off eBay by promoting itself as an integrated payment offering along side other payment brands (e. . MasterCard, Visa), supported by PayPal ’s own merchant services offering and alliances with payment vendors like CyberSource (payment gateway) and Chase Paymentech (largest merchant acquirer in the U. S. ). PayPal’s Product Offerings for Online Sellers PayPal offers several different products for payment acceptance, based on the size and needs of the merchant: †¢ Email product. This is the offering used largely by smaller eBay merchants, who receive payments entirely via e-mail, with no site of their own on which they need to integrate PayPal. Website Payments Standard.This product allows merchants to place a PayPal button on their site, and when a user is ready to check out, the user hits the button and is taken to the PayPal site where the actual checkout occurs. †¢ 4 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 †¢ Website Payments Pro. With an incremental $ 30 monthly fee, the Pro product is better integrated into a seller’s site. The product is intended for small- to medium-size sellers, and requires the seller to be using a compatible hopping cart vendor (most are compatible). Express Checkout. Intended for larger merchants (those already accepting include Dell and Barnes & Noble). Express Checkout is incremental to the payment acceptance service used by a vendor – it gives users an additional checkout option. When a shopper uses Express Checkout, s/he logs into PayPal, and PayPal then forwards address and other info to the merchant. This allows an existing PayPal user to bypass entering personal and shipping information again, even if it is the user’s first time using the specific merchant. †¢ Strong Growth in Active UsersBy continuing to add users across multiple platforms, PayPal has been able to post strong user growth in recent quarters, even despite the slowdown in on-eBay growth and low-single-digit u ser growth on the eBay site itself: Figure 3: PayPal Active User Growth Strong in Recent Quarters Users in Millions 150 100 50 26. 7% 23. 7% 20. 7% 19. 6% 18. 6% 19. 2% 17. 7% 16. 3% 16. 1% 16. 0% 17. 3% 22. 9% 21. 4% 30% 20% 10% 73 70 65 63 60 57 53 55 51 47 49 45 44 0 0% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 Pay Pal Activ e Accounts Y/Y Grow th Source: Company reports, J.P. Morgan Payment Business Basics For a primer on the payments industry, please see Payment Processing: Payments Market Share Handbook published on June 5, 2009 by J. P. Morgan's Computer Services & IT Consulting analyst, Tien-tsin Huang When a buyer hands cash to a seller, the transaction is self-contained. If a credit (or debit) card is involved, however, several other parties become involved in the transaction, which we describe below: †¢ Issuer (Cardholder’s Bank). Card transactions start with a card issued by an issuing bank (e. g. Bank of America, Chase, et c. ) to a consumer.In terms of economics, the bank that issued the consumer’s credit card takes the purchase price, collects its interchange fee (in the US, ~170 -225 bps depending on the type of card), and passes the remainder to the†¦ Acquirer (Commonly the Merchant’s Bank). The acquirer provides merchant services to the merchant, handling all the card and/or electronic payment acceptance needs of the merchant. The merchant’s acquiring bank 5 †¢ Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 ccepts the payment, collects a merchant discount (generally in the 30-50 bps range in the US), and forwards the balance to the seller/merchant. Both the Issuer and the Acquirer pay a small (~7-9 bps each) fee to the Payment Network (see next entry). Merchant acquirer functions include: †¢ †¢ †¢ †¢ †¢ †¢ Sign up merchants to enable them to accept card payments. Enable merchants to authorize card payments via the network. Pay all network and associated fees for a merchant’s transactions Facilitate clearing and settlement of card payments Provide incremental services, e. g. , sending out statements, etc. Payment network (e. g.Visa, MasterCard). As the backbone to the payments industry, networks connect various banks that need to process credit card payments with merchants and provide authorization, clearing and settlement services. Networks also set rules and interchange rates (earned by the issuing bank). Payment gateway. In the offline world, the payment gateway is the equivalent of a point-of-sale terminal that accepts the payment type (e. g. credit, debit card) and translates it into a format that can be accepted by the merchant acquirer. In the online world, the gateway generally connects an eCommerce site with the merchant acquirer.PayPal already functions as a Payment G ateway, largely as a result of its acquisition of VeriSign’s payment business, which had 144,000 customers when acquired in 4Q’05. †¢ 6 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Figure 4: Example of a Credit Card Payment Processing Cycle Source: J. P. Morgan. How Does PayPal fit in? In most cases, when a PayPal user pays with a credit or debit card, PayPal functions as the Merchant (in Fig. 4).PayPal relies upon its merchant acquirer (usually Wells Fargo) to facilitate the transaction. PayPal the charges the merchant its fees, which on average represent a spread over what the acquirer charges PayPal. In addition, if merchants want, PayPal offers certain merchant acquiring services such as the means to authorize valid card transactions and facilitating the clearing and settlement of the transaction through the payment network. At this point, we estimate that PayPal’s merchant acquiring business comprises less than 5% of PayPal’s TPV. 7 Imran Khan (1-212) 622-6693 imran. t. [email  protected] om Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 PayPal Revenue Model Transactional Revenue PayPal’s business model involves collecting a percentage of revenue from each payment made on the system; this percentage has remained in the 3. 75%-4. 0% range since F’05. In F’08, PayPal collected 3. 86% of TPV as revenue. The following table summarizes the contributors to take rate: Table 1: Contributors to PayPal’s Transactional Revenue Take Rate Type Cross-border transactions (â€Å"CBT†) US sellers, non-CBT Int'l sellers, non-CBT Payment Gateway Website Payments Pro Source: J.P. Morgan estimates % of revenue ~35% ~33% ~25% ~3-5% ~2-5% Comment PayPal charges up to 100 bps higher rates for CB transactions; charges an additional 250 bps for currency conversion Sliding scale from 1. 9% based on volume Country-specific pricing; generally higher rates than US Acquired from Verisign in 4Q'05; limited growth since Monthly $30 fee for WPP product Figure 5: Our Estimates of Contributors to PayPal’s Transactional Revenue Int'l rev enue Pay ment Gatew ay Website Pay ments Pro Monthly Fees Cross-border rev enue US rev enue Source: J. P. Morgan estimatesMarketing Services and Other Revenue Several items are counted as a part of Marketing Services and Other revenue. These include: †¢ Interest earned on some customer balances. PayPal earns revenue as it receives interest on the balances of some non-US account holders. Note that US customer balances are held in FDIC-insured accounts or in a money market account; PayPal does not receive interest on these accounts. BillMeLater interest and fees. Interest and fees earned on existing BML client balances are classified as Marketing Services and Other revenue. †¢ Comparing PayPal Fees to Online CompetitorsPayPal’s fee structure is similar to those of its online-only competitors; both Google Checkout and Checkout by Amazon offer a similar package of fees depending on a merchant’s monthly sales volume; Amazon differs in charging a slightly different fee level for transactions under $10 as well as minimal cross-border support: both buyer and seller must have a US-based financial instrument to use the service. Both Google 8 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 nd PayPal charge roughly (in Google’s case, exactly) 1% more for cross-border transactions. See Table 2 for a summary. As a point of reference, we believe offline fees for accepting cards (aka merchant discount rate) average around 1. 9-2. 0% in the U. S. In March of 2009, Google announced that it woul d no longer offer a discount on payment processing on Google Checkout for Google AdWords advertisers. Table 2: Fees for PayPal, Google, Amazon Remain Similar Transaction Type/Volume Transactions under $10 Up to $3,000 / month Between $3K-$10K Between $10K-$100K $100K and above Cross-border PayPal Same as below 2. % of transaction + 30 cents 2. 5% of transaction + 30 cents 2. 2% of transaction + 30 cents 1. 9% of transaction + 30 cents Varies by currency but ~1% extra; payments with currency conversion add 2. 5% charge Google Checkout Same as below 2. 9% of transaction + 30 cents 2. 5% of transaction + 30 cents 2. 2% of transaction + 30 cents 1. 9% of transaction + 30 cents 1% of transaction Checkout by Amazon 5. 0% of transaction + 5 cents 2. 9% of transaction + 30 cents 2. 5% of transaction + 30 cents 2. 2% of transaction + 30 cents 1. 9% of transaction + 30 cents US only (seller and buyer must have US-based account)Source: Company websites PayPal’s Transaction Costs Set aga inst the ~3. 9% revenue take rate, the business faces two key expense lines that drive its transactional margins: transaction processing cost and fraud losses: Figure 6: F’08 Revenue and Expense Drivers for Aggregate PayPal Payment Volume % of Total Payment Volume, Aggregated across all TPV and Funding Methods 4% 3% 2% 1% 0% 100% of PP rev enue 30. 9% of rev enue 1. 19% 7. 4% of rev enue 0. 28% 61. 8% of rev enue 3. 86% 2. 67% 2. 38% 2. 38% Rev enue Take Rate – Processing Ex pense – Transaction Losses = Transaction ProfitSource: Company reports, J. P. Morgan estimates Processing expense is driven by funding mix PayPal’s profitability is driven in large part by the mix of sources from which customers draw funds in order to pay on PayPal. In particular, when customers pay using a credit card, PayPal incurs a significantly higher cost of funds than when customers fund a purchase using their PayPal balance or an ACH transfer. 9 Imran Khan (1-212) 622-6693 imr an. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009Specifically, PayPal, similar to any merchant that accepts credit cards, is charged a variety of fees (the largest of these is interchange, which is the fee charged by the cardholder’s bank). For PayPal, we believe these fees amount to ~220-250 bps of payments funded with a credit card, with the range representing different types of cards and different geographies (interchange fees are generally higher in the US than across parts of the world, including Europe and Australia). Fees are slightly lower, but still in the 150200 bps range, if users choose a debit card rather than a credit card.By comparison, a payment funded from money already in a user’s PayPal account carries virtually no cost to PayPal. A payment funded though ACH carries a flat processing fee, usually less than 25c; this represents less than 40 bps on an ave rage PayPal transaction of $62. Figure 7: PayPal’s Funding Mix Merchant PayPal collects take rate (~1. 9% to as much as 5%), based on merchant volume and location (significantly higher if currencies converted) PayPal If funded via If funded from user’s PayPal balance, cost to PayPal is negligible Credit card, cost to PayPal is ~220-250 bps; PayPal then functions as Merchant in Fig. above. If funded via If funded via ACH, cost to PayPal is ~$0. 10-$0. 25 Debit card, cost to PayPal is ~150-200 bps PayPal’s cost of funds becomes more favorable Source: J. P. Morgan 10 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Drivers of Funding Mix PayPal allows users to pay with both a credit/debit card and ACH; however, PayPal defaults to using an existing balance or ACH, and users must actively select to pay via a credit/debit card every time t hey use the service.The company has noted that customers generally shift toward a more favorable funding mix over time. Additionally, as PayPal adds new merchant sites, users of those sites begin with a heavier mix of credit card use. The mix for a merchant site begins to resemble that for PayPal overall as users’ familiarity with PayPal grows – generally, 12-18 months. Additionally, we believe BillMeLater, which is funded entirely through checks and ACH, can help improve funding mix for PayPal down the road. Other Margin Drivers PayPal margins have historically been in the 20% range, excluding corporate expenses.We believe several factors drive the variance between the 60%+ transaction margins and the high-teens overall profitability. Primary among these are: †¢ Customer service costs. Call centers as well as a variety of employees needed to manage any problems that arise in the payments process. We do not expect these expenses to show meaningful economies of sca le as the business continues to grow. Sales and Marketing. As PayPal has invested in growing its Merchant Services business, we believe that segment’s growth has been fueled by higher Sales spend. When the business matures, we believe there should be some scale economies in Sales. BillMeLater Basics PayPal acquired BillMeLater in 4Q’08. The service allows users to request transactional credit, rather than a revolving credit line as is the case with a credit card. BML offers consumers rapid credit decisioning on the basis of less detailed information (date of birth and last four digits of a Social Security Number) than necessary for more traditional financing. The majority of BML’s revenue is derived from consumer interest payments and fees, as shown below: 11 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Figure 8: BillMeLater Econ omics as of Time of Acquisition % of TPV 12% 10% 8% 6% 4% 2% 0% 2. 4% Merchant Fees + 6. 5% 3. 6% 2. 9% 3. 4% 2. 1% 4. 1% Cust. Interest Cust. Fees – Acquisition ; Income + Credit ; Cost of Funds = Transaction Profit Serv icing – Fraud Loss – Source: Company presentation, J. P. Morgan estimates Note: Cost of funds includes an implied cost of financing consumer receivables; transaction expense for processing funds is minimal due to funds being sourced primarily via ACHAt this point, BillMeLater’s presence on the eBay site itself remains minimal; the company has placed a 3Q’09 target for better integration of the business with PayPal, and we believe that, after fuller integration, eBay may choose to drive higher BML penetration on the Marketplaces business through, e. g. , promotional or interest-free financing. Complete integration of BML into all aspects of the PayPal solution is expected in 1Q’10. Charge-offs BillMeLater reports its net cha rge-offs as a percentage of the average receivables balance over the course of the quarter; in Q1’09 net charge-offs rose to 8. 95%, compared to 8. 5% during the part of the fourth quarter after the acquisition. Due to the transactional nature of the business, we believe BML has the capacity to continue keeping loan losses at a reasonable level; additionally, the company has expressed that it plans to focus on being more conservative with offers of credit in the near term, even at the expense of TPV growth. Nevertheless, we expect charge-offs to continue rising somewhat. Historically, credit card charge-offs have been correlated with the unemployment rate, as seen below. 12 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Figure 9: Historically, Credit Card Charge-offs Rise when Unemployment Rises 10% 8% 6% 4% 2% 0% Q1'95 Q1'96 Q1'97 Q1'98 Q1'99 Q 1'00 Q1'01 Q1'02 Q1'03 Q1'04 Q1'05 Q1'06 Q1'07 Q1'08 Q1'09 Unemploy ment Rate Source: Federal Reserve, J. P. Morgan Credit Card Net Charge-off Ratio While we believe charge-offs at BML can be managed better, due to the transactional nature of BML’s exposure, we think rising unemployment is unlikely to leave the business untouched. Thus, if unemployment keeps going up, we would expect continued upward drift in charge-offs.PayPal’s Growth Strategy PayPal’s original growth engine was the marriage between PayPal and eBay, and the ability to drive higher penetration on the eBay site. We believe the low-hanging fruit in this regard has largely been gathered, but room for growth still exists along several areas of opportunity. 1. Growth Opportunities for PayPal on eBay Continued Geographic Expansion Can Drive Growth One of the biggest factors driving higher PayPal penetration on eBay has been geographic expansion in territories where the business is less mature than in the US.PayPal has had approximately five years of operating history in much of continental Europe, compared to nearly a decade in the United States. Table 3: PayPal Penetration as % of Addressable TPV continues to Grow % of addressable TPV Country US Canada United Kingdom Australia France Spain Italy Germany 2004 64% 60% 49% 7% 8% 5% 7% 2% 2008 80% 79% 74% 47% 43% 37% 36% 15% 2011(E) 84% 82% 81% 72% 61% 57% 56% 39% Comment Could see add’l boost from BML Penetration already nearly 60%; see below In terms of online activity, much of continental Europe is following in the footsteps of the UK, but several years behind.Penetration nearly doubled in F’08 alone Source: eBay Presentation, J. P. Morgan estimates We believe the 2008 experience in Australia, where PayPal penetration went from under 40% to nearly 60% over the course of a year, is reflective of eBay’s capacity to grow penetration via rule changes: the company rolled out rules mandating most sellers to offer PayPal as an option in 2008, and penetration grew by more than half over the course of the year. 13 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009Figure 10: Australia Demonstrates PayPal’s Capacity to Quickly Boost Penetration 60% 50% 40% 30% Q1'08 Q2'08 Q3'08 Q4'08 Source: Company presentation, J. P. Morgan estimates Additionally, several continental European countries have seen growth roughly in parallel since the rollout of PayPal in much of continental Europe in summer 2004. We See Limited Opportunity for Domestic on-eBay Growth Having already achieved notable levels of penetration on established sites, we don’t think PayPal will see significant additional increases in on-eBay penetration from current levels, especially in the US.However, as eBay increases the amount of buyer protections and begins to offer credit through BML, we thi nk the percentage of GMV that is addressable by PayPal can rise. Figure 11: PayPal volume as a % of Addressable GMV, 2008 GMV in $B 30 20 $29B $24B 10 0 79% 41% US Source: Company reports, J. P. Morgan Pay Pal Non-Pay Pal International One additional way to increase penetration on the site is for the company to offer increased incentives for sellers and buyers to choose PayPal as the payment method.These incentives can take the form of carrots (coupons, higher levels of protection) or sticks (e. g. , rules making other forms of payment more difficult to accept). PayPal has continually increased buyer protections on eBay for uses who pay with PayPal, with the levels rising from $1,000 to $2,000 in January 2007 and going up again to offer unlimited coverage in June 2008. We think offering higher levels of buyer protection – but only when paying with PayPal – remains a useful lever for increasing the penetration of PayPal on the eBay site. 14Imran Khan (1-212) 622-6693 im ran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 PayPal on eBay: Challenges Weak Marketplaces Growth Will Negatively Impact TPV Growth In line with recent declines in GMV, the percentage of PayPal’s TPV that is driven by on-eBay activity has been steadily declining in recent quarters, with 3Q’08 having represented the first quarter in PayPal’s history that saw a majority of TPV come from the Merchant Services part of the Payments business.Figure 12: On-eBay TPV Continues to Decline as a Percentage of Total 70% 60% 50% 40% 30% 20% 10% 0% 62% 58% 56% 56% 54% 51% 49% 49% 46% Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Percentage of TPV deriv ed on eBay Source: Company reports, J. P. Morgan estimates As eBay has struggled to improve GMV growth and faced headwinds from FX, the on-eBay portion of TPV has seen nominal growth turn negative in recent quarters, a s shown in the chart below; adjusted for FX the last two quarters have seen on-eBay TPV grow 5% and 3%, respectively.Figure 13: On-eBay TPV Growth Continues to Lag Off-eBay TPV Y/Y change 80% 60% 40% 20% 0% -20% 1Q'07 50% 19% 57% 62% 66% 61% 57% 49% 35% 26% -7% 18% 18% 17% 17% 19% 12% -3% 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 On-eBay TPV, Y/Y Source: Company reports, J. P. Morgan estimates Off-eBay TPV, Y/Y We are currently modeling GMV to shrink by 14% in F’09, returning to slight growth in F’10 with a 1% rise. Even when looking only at non-Vehicles GMV, our model calls for an 11% decline this year, followed by a 1% growth in the next year.While we think eBay has taken many correct steps in improving the competitiveness of its Marketplaces segment, we remain concerned that the competitive environment 15 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 will make it difficult for eBay to reaccelerate growth and reclaim market share in future years. Additionally, we believe the shift to a frictionless eCommerce model is driving buyers to choose fixed-price formats over an auction approach.As this has the effect of moving from a space eBay controls into a much more competitive, multi-channel environment, we think it creates an additional headwind to growth. Cultural Headwinds in Some Geographies In addition to the above, two specific geographic regions have presented challenges for growing PayPal penetration: †¢ In Germany (and Austria, combined, estimated at ~15% of GMV), the majority of online payments are made using bank transfers, and PayPal has had limited success displacing this system. However, as Table 3 (above) indicates, PayPal’s penetration in Germany has been rising.In Korea (we estimate ~5% of GMV), where eBay recently announced plans to acquire GMarket and combine it with its current a uction. co. kr site, the predominant mode of payments is using escrow accounts. As in Germany, we believe penetration can rise over time as users become more comfortable with PayPal. †¢ Given the challenges in these two areas, which comprise approximately one fifth of eBay’s GMV, we believe it could be difficult for eBay to go significantly past the ~70% penetration threshold in the next five years. Bottom Line: We see ~$36B in F’11 on-eBay TPVBased on our current model of F’10 GMV (excluding Vehicles) of $43B, and an assumption of accelerating GMV growth to 10% Y/Y in F’11, we think PayPal’s oneBay TPV could hit $36B in F’11 (implying a 6% 3-year CAGR), with a range of $33B-$40B depending on more or less favorable assumptions. Figure 14: On current trends, on-eBay portion of PayPal would contribute ~$36B in F’11 TPV On-eBay TPV, $ in billions 40 35 30 25 2008 2009E Optimistic Current Model 2010E Pessimistic 2011E Source: Company reports, J. P. Morgan estimates 16 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 2. Growth Opportunities for PayPal off eBay PayPal’s growth through increasing penetration of off-eBay online commerce has been a key component of the business’s growth in recent years. We think the company retains significant runway to add customers. Historically, Focus on Smaller Sellers Due to its roots as a solution for payments on the eBay platform, PayPal has generally seen a higher penetration among smaller and mid-size sellers.This is partly due to the fact that PayPal has no fixed costs to a merchant, whereas accepting credit cards carries fixed costs. For a seller generating $100K in annual revenue, a $60$70/month cost for accepting credit cards amounts to nearly 1% of sales. Table 4: Economics of PayPal compelling for SMB market PayPal Setup fees Monthly Service Fee Monthly Gateway Fee Transaction fee Monthly Minimums $0 $0 $0 1. 9%-2. 9% + $0. 30 None Merchant Processor $0-$300 $20-$50 $10-$30 2. 0%-3. 0% + $0. 10-$0. 50/transaction $0-$30Source: Company reports, processor websites and J. P. Morgan estimates Figure 15: Payment Solutions P a y m e nt s o lu tion s †¢ †¢ †¢ D is a d va n ta ge s re la tiv e to P ay P al Buyer S eller C an n ot b e tra cked L im ite d p rote ction ag a in st lo ss/th eft R estricte d to virtu a l w orld †¢ †¢ L im ite d p ro te ction a g a in st lo ss/th eft R e stricte d to virtu a l w orld †¢ †¢ S lo w se ttle m en t/fu lfillm e n t tim e C ost/tim e of w ritin g che cks †¢ †¢ S lo w se ttle m en t tim e F ra ud riskC red it C ard Joh n Q Pu b lic 5012 345 6 7890 1234 †¢ †¢ †¢ †¢ †¢ †¢ S ecu rity unce rta in ty of sm a ll b usin e ss site C re d it lim its In te re st co sts †¢ †¢ †¢ †¢ †¢ H ig h tra n sa ctio n fee s – p ro hib itive fo r sm a ll m erch a n ts R e qu ire s m e rcha n t b ank a ccoun t F ra ud risk (card no t p rese n t) P ro ce ssin g tim e /co st S e tup co sts W ire (e . g. , W e ste rn U n io n ) F ee s U su a lly re qu ire s p h ysica l visit to ve n do r L im ite d a cce p ta n ce Source: J. P. MorganPenetration among Large Businesses Small, but Growing Whereas smaller sellers were PayPal’s bread-and-butter in the early days, the greater part of online commerce now occurs at larger sellers. This is especially true when one includes online travel, a category PayPal has pursued aggressively: whereas eCommerce has a fairly long tail of sites, the great majority of online travel is transacted at the large providers and OTAs. 17 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009Table 5: Penetration at top 50 onl ine merchants, by geography As of March 2009 Country USA UK Germany France Australia Penetration 42% 28% 16% 36% 60% Source: Company presentation and J. P. Morgan estimates Internet Retailer Data: PayPal’s Penetration Higher with Smaller Merchants Based on data from Internet Retailer, we estimate that 26% of the total sales volume on the top 50 online retailers in F’08 came on sites that accept PayPal. Consistent with PayPal’s past focus on smaller sellers, PayPal penetration among sites outside the top 50 is 39%, nearly 1. x the penetration among the top 50. Figure 16: Smaller Merchants More Likely to Accept PayPal % of internet retailers accepting PayPal, weighted by 2008 online sales Internet Retailer Top 50 I. R. Top 50, ex cluding Amazon Rest of I. R. Top 500 (##51-500) 0% Source: Internet Retailer, J. P. Morgan estimates 26% 33% 39% 10% 20% 30% 40% Note: Internet Retailer does not include travel sites in its rankings The following table summarizes PayPalâ €™s presence (including previously existing BillMeLater relationships) on the top 50 retail sites as ranked by Internet Retailer. 8 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Table 6: 26% of Revenue at top 50 US eCommerce Sites is Addressable by PayPal 2008 Sales in $ millions Site Amazon. com Inc. Staples Inc. Dell Inc. Office Depot Inc. Apple Inc. OfficeMax Inc. Sears Holdings Corp. CDW Corp. Newegg Inc. Best Buy Co. QVC Inc. SonyStyle. com Walmart. com Costco Wholesale Corp. J. C. Penney Co. Inc. HP Home & Home Office Store Circuit City Stores Inc.Netflix Inc. Victoria's Secret Target Corp. Systemax Inc. L. L. Bean Inc. Macy’s Inc. Williams-Sonoma Inc. Gap Inc. Direct HSN Inc. Zappos. com Inc. Amway Global Overstock. com Inc. Avon Products Inc. 1-800-Flowers. com Inc. Nordstrom Inc. Buy. com Inc. Redcats USA The Neiman Marcus Group In c. Musician's Friend Inc. Blockbuster Inc. PC Connection Inc. Toys ‘R' Us Inc. Cabela's Inc. BarnesandNoble. com Inc. Scholastic Inc. The Home Depot Inc. VistaPrint Ltd. Saks Direct Nutrisystem Inc. Peapod LLC drugstore. com Inc. Nike Inc. Kohl's Corp.Verticals Multiple Office Supplies Computers Office Supplies Computers, Digital Sales Office Supplies Department Store Computers Computers Electronics Multiple Electronics Multiple Multiple Department Store Electronics Electronics Video Rental Apparel Multiple Electronics Apparel Department Store Home Apparel Multiple Apparel Multiple Multiple Health & Beauty Flowers Apparel Multiple Multiple Department Store Musical Equipment Video Rental Computers Toys Sporting Goods Media Media Home Office Supplies Department Store Food Groceries Health & Beauty Apparel Department Store 2008 Online Sales $19,170 $7,700 $4,830 $4,800 $3,642 $3,084 $2,693 $2,600 $2,100 $2,015 $1,993 $1,828 $1,740 $1,700 $1,500 $1,497 $1,414 $1,365 $1,333 $1,209 $1,072 $1,044 $1,040 $1,033 $1,030 $1,016 $1,014 $904 $834 $754 $750 $686 $657 $617 $565 $531 $526 $516 $500 $497 $466 $455 $437 $401 $381 $376 $373 $367 $366 $356 PayPal? No No Yes No No Yes No No Yes No No Yes Yes No No Yes No No No No Yes No No No No No Yes Yes Yes Yes Yes No Yes No No Yes No No Yes No Yes No No No No No No Yes No No BML?No No No No Yes Yes No Yes Yes No Yes No Yes No No No No No No No Yes No No No No No Yes Yes Yes No Yes No Yes Yes No Yes No No Yes Yes No Yes No No No Yes No Yes No No Comment Ended BML relationship after PayPal Acquisition Could leverage BML relationship Could leverage BML relationship Site now owned by Systemax, a PayPal customer Could leverage BML relationship Could leverage BML relationship Could leverage BML relationship Could leverage BML relationship Source: Internet Retailer, J. P. Morgan estimates 19 Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com N orth America Equity Research 26 June 2009 Off-eBay market share of 4. % in F’08 We estimate that PayPal’s $29. 5B Merchant Services TPV in F’08 (excluding BML) represented 4. 2% of the combined volume of eCommerce and Travel spend in that year. Our current estimates call for that number to rise to nearly 4. 9% of the total in F’09. Table 7: J. P. Morgan eCommerce and Travel Market estimates $ in billions Category Off-eBay eCommerce Travel Total off-eBay volume PayPal off-eBay TPV PayPal penetration F’07 311. 4 271. 9 583. 3 19. 9 3. 4% F’08 379. 0 329. 2 708. 2 29. 5 4. 2% F’09E 412. 0 342. 2 754. 2 37. 0 4. 9% F’10E 490. 8 405. 1 895. 9 50. 2 5. 6% F’11E 561. 4 458. 0 1019. 3 64. 2 6. 3% Source: Company reports and J. P.Morgan estimates We estimate that combined global online spend on eCommerce and Travel will exceed $1 trillion in F’11. By our estimate, PayPal’s Merchant services would need to access over 6. 0% of this volume in order to hit the low end of the target $4B-$5B PayPal revenue range indicated by the company. 3. Growth through BillMeLater We see several key effects on PayPal of the 4Q’08 acquisition of BillMeLater. In the near term, we think the addition could hurt profitability, while longer-term, we believe it can become a contributor to PayPal growth both on- and off-eBay. †¢ Minimal near-term TPV impact. BML accounted for 1. 2% of total 1Q’09 TPV.As such, we think it is important to note that the current impact of BML on PayPal results is likely to be somewhat small. Near-term growth likely slow. The company has stated that it intends to be very conservative in its approach to the tradeoff between growing BML volume and maintaining healthy credit metrics. Given the current environment, we believe this will significantly dampen growth in BML TPV through at least the end of F’09. Integration, portfolio losses to impact profits. PayPal’s segment margin in the last two quarters was 500 bps lower than in the same two quarters a year ago. The company has attributed this decline to the impact of integrating BML as well as charge-offs related to the unit’s loan portfolio.Medium-term, synergies become possible. Once consumer credit regains a measure of health, we think the company will begin to use BML as an additional tool to grow business, e. g. , by offering financing to incentivize users to pay with PayPal both on and off eBay. Target is convenience shoppers, not the underbanked. We believe eBay sees BML as an additional feature (or convenience) to attract higher-quality customers, rather than as a tool to expand its reach among customers who do not otherwise have access to credit. This approach appears consistent with the tradeoff noted above of slower growth in exchange for better credit metrics. †¢ †¢ †¢ †¢ 20Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 †¢ Auto financing unlikely to be priority. As noted above, Vehicles sold on eBay have been largely beyond PayPal’s reach up to now. We think eBay sees BML’s core expertise in transactional credit for smaller amounts than involved in a car purchase. A significant expansion of the business to include auto financing seems unlikely in the near to medium term. Impact on margins temporary. eBay expects segment margins to revert to historical trends as BML is incorporated into PayPal more completely (e. g. the company expects BML to be integrated into the PayPal wallet by 3Q; additionally sales teams for BML and for Merchant Services are being merged to give clients a single touch point). †¢ BillMeLater Can Improve Funding Mix We think the impact of BillMeLater in the longer term will be felt most strongly on PayPal’s funding mix: BML does not accept credit ca rds, and as such faces a lower transaction funding cost than the PayPal business as a whole. As such, any portion of TPV that shifts from the historical mix of funding sources to BML will help lower PayPal’s cost of funds. Assuming, conservatively, that PayPal manages the business to have a similar take to the rest of PayPal, we estimate that each 1% shift of TPV onto BillMeLater would drive ~2 bps improvement in funding cost.Thus, if BML were to grow to 4% penetration of our mid-point F’11 scenario of $100B in TPV, it would drive ~8 bps improvement in funding cost: an incremental $80M contribution to the bottom line, or 5c of EPS. Table 8: Sensitivity Analysis: EPS Boost from Lower Transaction Cost as BML Penetration Rises TPV in $B, BML as a % of TPV, EPS impact in $ TPV BML % 87. 1 100. 5 113. 8 Source: J. P. Morgan estimates 1% $0. 01 $0. 01 $0. 01 2% $0. 02 $0. 02 $0. 03 3% $0. 03 $0. 04 $0. 04 4% $0. 04 $0. 05 $0. 05 5% $0. 05 $0. 06 $0. 07 Credit Cards’ P ain Could Be PayPal’s Gain Recently, the House and Senate passed bills restricting certain practices in the credit card industry. We believe that such steps could have several points of impact on PayPal.Crucially, if these rule changes make credit card issuers less generous toward consumers (e. g. , lower profitability drives issuers to lower the levels of rewards for credit card use), PayPal could benefit from funding mix improvement, as the incentives for customers to fund their accounts with credit cards, vs. debit or ACH, would be reduced. Further, we believe that, should credit card issuers try to recapture profitability with less consumer-friendly rules as well as more frequent fees, the quality of the user experience for credit cards will erode, making consumers incrementally more likely to use PayPal. 21 Imran Khan (1-212) 622-6693 imran. t. [email  protected] om Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 4. Growth Opportunity: Expanding Merchant Acquiring Business We believe PayPal currently has two strategic growth opportunities going forward. The company can drive greater adoption of the PayPal solution by continuing to establish PayPal as a brand for online payment, alongside incumbent players such as Visa and MasterCard. Alternatively, PayPal can attempt to improve its payment economics by becoming a scale merchant acquirer. This would allow PayPal to capture the ~30 bps on card transactions that we estimate it currently gives up to its acquirer.Finally, PayPal may attempt to skate along the knife-edge between the two above strategies, maintaining relationships with large acquirers such as Chase Paymentech while at the same time functioning as an acquirer for its smaller client base. PayPal as a Brand Chase Paymentech, the largest merchant acquirer in the U. S. and the largest processor of e-Commerce transactions, offers PayPal as an integrated payment option alongs ide well known names like Visa and MasterCard. As such, Chase Paymentech clients have the option to advertise acceptance of PayPal as a payment type. According to Chase Paymentech, clients that accept PayPal (in addition to credit cards) commonly see an increase in sales. We view this as an important indication that PayPal has potential to be a powerful brand off eBay.We believe PayPal’s recent stated focus on larger merchants suggests this is the more likely strategic direction for the company, as PayPal may not want to jeopardize its status as a partner to the large acquirers, which make it easier for enterprise-scale businesses to include PayPal as one of several payment choices. Can PayPal Become a Scale Merchant Acquirer? In our view, PayPal also has the potential to become a scale merchant acquirer, which could enhance its off-eBay presence, especially among smaller and mid-size merchants. As a merchant acquirer, PayPal would handle all of the card processing needs of a merchant, including directly processing other brands like Visa and MasterCard.We believe PayPal can offer very competitive rates to small merchants (who often pay heavy miscellaneous fees to acquirers), given its scale, allowing it to deepen relationships with merchants and potentially handle offline transactions as well. Smaller merchants (especially the ~87% of US merchants with annual card acceptances under $100K) tend to pay a much higher spread to their acquirer. Whereas such merchants account for ~10% of credit card volume, we believe they represent as much as $2. 5B in merchant acquirer revenue: more than 1/3 of the total revenue in the US merchant acquirer business. We think PayPal’s historical strength among smaller sellers can be an advantage in accessing this market. Chase Paymentech offers PayPal as an integrated payment option for its clients.Chase Paymentech was the largest merchant acquirer in the U. S. in 2008 with 22. 5% market share 22 Imran Khan (1-212) 62 2-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Table 9: Top Ten US Merchant Acquirers, 2008 $ in billions Merchant Acquirer Chase Paymentech First Data BofA Merchant Svcs Elavon Fifth Third Processing Solutions Global Payments Wells Fargo Merchant Services Heartland Payment Systems First National Merchant Solutions RBS WorldPay Source: The Nilson Report. V/MA volume $567 $293 $283 $181 $165 $93 $91 $75 $51 $48 Market share 22. % 16. 9% 11. 2% 7. 2% 6. 5% 3. 7% 3. 6% 3. 0% 2. 0% 1. 9% As noted above, PayPal currently partners with Wells Fargo when it comes to handling non-PayPal branded transactions. One concern about a PayPal entry into the acquirer market would be whether it could successfully maintain its relationships with the other acquirers who currently offer PayPal as an option, and who would come to view PayPal as a more direct competitor. How Much is PayPal Worth? Combining the outlook outlined above, we believe PayPal TPV will reach $100. 5B in F’11; though somewhat more pessimistic or optimistic projections for the unit’s growth yield a range of $87B-$114B.At the midpoint, our estimate is for a 19% 3-year CAGR in Total Payment Volume. Figure 17: On current trends, TPV on pace for just over $100B in F’11 Total PayPal TPV, $ in billions 125 100 75 50 2008 2009E Optimistic New Model 2010E Pessimistic 2011E Source: Company reports, J. P. Morgan estimates Assuming the PayPal take rate remains just below 3. 9% (and assuming healthy growth in PayPal Marketing Services and Other revenue in F’11), our TPV estimate would result in $4. 1B in PayPal revenue. On the profitability side, we believe PayPal is likely to see segment margins shrink to 17. 2% for F’09 due to the continuing integration of BML; by comparison, segment 23 Imran Khan (1-212) 622-6693 imran. t. [email  protected] omTien-tsin Huang, CFA (1-212) 6 22-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 operating margin as reported by the company was 20. 0% in F’08. We think PayPal segment margins can expand back to above 18% by F’11. Figure 18: Segment income could reach $785M in F’11 PayPal segment operating income, $ in millions 1000 800 600 400 2008 2009E Optimistic New Model 2010E Pessimistic 2011E Source: Company reports, J. P. Morgan estimates Based on our scenarios for PayPal F’11 results, we believe the unit is likely to achieve approximately $450M in Net income. At a 20x multiple, this would yield a $9B valuation. Table 10: Scenario Analysis to Get to a PayPal Value in billions except where indicated On-eBay TPV Off-eBay TPV Total TPV Revenue Segment Margin [Unallocated Corporate Costs] Pro Forma Operating Income ($M) Tax Rate Net Income F'11 Earnings Multiple PayPal Value Source: Company reports, J. P. Morgan estimates Worse Case 33. 0 54. 2 87. 1 3. 57 17. 5% 4% 482 25% 361 16 5. 8 Average Case 36. 3 64. 2 100. 5 4. 09 18. 8% 4% 603 25% 452 20 9. 0 Better Case 39. 6 74. 3 113. 8 4. 61 20. 0% 4% 737 25% 553 24 13. 3 Comparative Valuation of PayPal Unit We believe it is instructive to look at several comparables when it comes to valuing PayPal. Specifically, Visa and MasterCard provide payment networks, while Global 24Imran Khan (1-212) 622-6693 imran. t. [email  protected] com Tien-tsin Huang, CFA (1-212) 622-6632 tien-tsin. [email  protected] com North America Equity Research 26 June 2009 Payments is a pure-play merchant acquirer, functioning in much the same way as PayPal does by providing an on-ramp for merchants into the payment system. Table 11: Comparative Valuation for PayPal $ in billions PayPal $67B 11% 1% $2. 70B 13% 17. 2% Some credit risk due to BML Visa $2,702B -1% 60% $6. 94B 6% 52. 9% None 20. 8 17. 1 15. 4 MasterCard $1,759B -9% 34% $4. 97B 0% 43. 2% None 15. 7 13. 4 11. 7 Global Payments N/A ($93B in F’08) N /A 4% $1. 59B 10% 19. 2% None 18. 4 15. 8 12. 5 CyberSource N/A N/A