Paypal Insights 2016 Global Report Final

PayPal Cross-Border Consumer Research 2016

Global Summary Report

Advancement of technology is Understanding that we are going This survey is designed to gain helping to open up commerce through a commerce revolution, insight into 3 main areas: opportunities for everyone - PayPal in partnership with Ipsos, across borders, anywhere, • How online commerce, and conducted a global 32 market anytime and via any device specifically cross-border survey with approximately commerce is evolving 28,000 consumers to examine • How and why consumers shop how people shop online and online domestically & across across borders. borders • How consumers pay for domestic and cross-border transactions

Fieldwork Sample, per market

This research was 32 markets Global Fieldwork: carried out to Sample of c.2000 in Russia and Poland, Use an Internet- Aug-Oct 2016 the international 1 c.800 in other markets enabled device quality standard for market Nationally representative of online population research, ISO Data weighted to adjust Online Aged 18+2 20 minute 20252:2012 for panel bias based on survey Respondents recruited questionnaire external trend data from online panels

Questionnaire

Screening Transaction & Spend: Cross-Border Drivers, barriers and Cross-Border Past 12 Months & transactions & spend attitudes to cross- Payment Next 12 Months border shopping

1.Desktop computer/Laptop/ notebook computer/Tablet /Smartphone/Some other type of mobile phone/Electronic organizer / PDA with wireless voice and data features/Games console with Internet connectivity (e.g. Wii) /Smart TV ©2016 PayPal Inc. Confidential and proprietary. 2. In Egypt, Nigeria & UAE no quotas were set, sample achieved through mail-out to sample nationally representative of 3 general population, screened for internet use. In European countries sample representative of online population aged 18-74. The Cross-Border Opportunity

© 2014 PayPal Inc. All rights reserved. Confidential and proprietary. Online and cross-border commerce size and growth estimates US and China are biggest markets in terms of online spend, but India is growing fast

Total x-border online spend 2016($US bn) Compound annual growth rate: total e-commerce (CAGR) Total domestic spend 2016 ($US bn) Compound annual growth rate: mobile commerce (CAGR) US$BN CAGR (%)

600 100 550 90 500 80 450 70 400 350 60 300 50 250 40 200 30 150 20 100 50 10 0 0 US CA UK IRE DE FR IT ES NL SE BE PT PL RU HU CZ GR IL AE BR MX AR PE CL NI SA EY IN CN JP TH SN

North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

For details on forecasting please see appendix NB: Due to low incidences, no cross-border estimate has been made for Japan Source: Ipsos PayPal Insights 2016 www.xxxx. Portugal, Peru and Ireland are the countries where cross-border online shopping is most prevalent Japan and Poland have the lowest incidence of cross-border online shoppers

Self-stated domestic and cross border purchasing in past 12 months

% Shop domestically only % Shop domestic and x-border % Shop x-border only

4 4 2 4 3 3 2 4 3 5 5 7 5 7 5 8 6 8 11 12 10 10 12 14 15 15 16 14 14 17 22 22 25 18 22 23 22 28 29 29 32 40 37 41 44 37 37 26 40 37 43 39 59 42 56 52 47 50 55 51 67 55 95 64 78 73 75 74 75 69 67 66 63 59 56 54 55 57 51 52 51 52 49 47 44 37 37 38 38 35 33 29 23 19 13

US CA UK IRE DE FR IT ES NL SE BE PT PL RU HU CZ GR IL AE BR MX AR PE CL NI SA EY IN CN JP TH SIN North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2016 PayPal Inc. Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased in 6 the past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) Sou rce: I psos PayPal I n sigh ts 2016 Latin America and the Middle East have the highest incidence of cross- border online shoppers Cross-border shopping is least common in Asia

Self-stated domestic and cross border purchasing in past 12 months

% Shop domestically only % Shop domestic and x-border % Shop x-border only

4 6 4 9 10 13 15

42 41 40 45 46 42

54 *Results are among all 50 50 49 41 43 consumers surveyed in each region, not weighted for population size. Russia and Poland down-weighted to equivalent sample size North Western Eastern Middle Latin Africa Asia America Europe Europe East America Pacific

©2016 PayPal Inc. Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased in 7 the past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) Sou rce: I psos PayPal I n sigh ts 2016 The majority of cross-border purchases are still made on a computer However in some markets, such as China, UAE and Thailand nearly half of purchases are made on an alternate device, the majority of which are on a smartphone Average proportion of x-border purchases in past 12 month made on each device

Desktop/laptop/notebook Smartphone Ta b le t Other device (e.g. Smart TV, games console, feature phone)

1% 1% 1% 2% 1% 1% 1% 1% 3% 2% 1% 1% 1% 1% 1% 2% 4% 3% 2% 3% 1% 3% 1% 6% 6% 8% 3% 4% 5% 5% 5% 5% 4% 6% 5% 5% 3% 7% 10% 7% 7% 8% 6% 5% 7% 7% 5% 7% 7% 13% 10% 4% 7% 10% 7% 9% 7% 7% 11% 10% 13% 6% 14% 6% 9% 12% 12% 10% 11% 10% 12% 11% 13% 14% 13% 11% 6% 16% 20% 23% 11% 16% 21% 18% 19% 19% 22% 18% 22% 27% 31% 29% 33% 35%

90% 86% 88% 86% 81% 82% 81% 82% 82% 81% 78% 80% 80% 80% 80% 80% 73% 76% 74% 73% 71% 69% 70% 70% 64% 64% 63% 60% 55% 56% 48% 51%

US CA UK IRE DE FR IT ES NL SE BE PT PL RU HU CZ GR IL AE BR MX AR PE CL NI SA EY IN CN JP TH SN North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2016 PayPal Inc. Q33. Thinking only about the purchases you make on websites in other countries, what proportion of your purchases in the 8 last 12 months do you think were made using each device? Base = Cross border shoppers (size shown in appendix) Sou rce: I psos PayPal I n sigh ts 2016 European shoppers lag behind on adoption of mobile for cross-border purchases, with shoppers in Asia Pacific using mobile the most

Average proportion of x-border purchases in past 12 month made on each device

Desktop/laptop/notebook Smartphone Ta b le t Other device (e.g. Smart TV, games console, feature phone)

1% 1% 2% 2% 5% 2% 3% 6% 6% 8% 9% 9% 7% 10% 11% 10% 13% 24% 19% 20% 27%

81% 82% 76% 68% 70% 69% 60% *Results are among all consumers surveyed in each region, not weighted for population size. Russia and Poland down-weighted to equivalent sample size North Western Eastern Middle Latin Africa Asia America Europe Europe East America Pacific

©2016 PayPal Inc. Q33. Thinking only about the purchases you make on websites in other countries, what proportion of your purchases in the 9 last 12 months do you think were made using each device? Base = Cross border shoppers (size shown in appendix) Sou rce: I psos PayPal I n sigh ts 2016 China is the most popular cross-border online shopping destination for global online shoppers, followed by USA and UK

Top online destinations among all online shoppers surveyed* (% of online shoppers have shopped in each country in past 12 months)

UK/GB China 13% 21%

USA 17% Germany 7% Japan 4% *Results are among all consumers surveyed in each region, not weighted for population size. Russia and Poland down-weighted to equivalent sample size

©2016 PayPal Inc. Q27. Thinking about shopping online, from which of the following country or geographies’ websites have you purchased 1 in the past 12 months? Please include your home country if applicable.Base: Online shoppers (base size in appendix) Sou rce: I psos PayPal I n sigh ts 2016 0 Clothing and apparel is the most popular category for cross-border purchases globally followed by consumer electronics Top cross-border categories among all online shoppers surveyed* (% of x-border shoppers shopping x-border in each category)

Clothing/apparel, footwear and accessories 46

Consumer electronics, computers/tablets/mobiles & peripherals 29

Travel and transportation 25

Digital entertainment/education (e.g. e-books, digital music) 24

Toys and hobbie s 23

Entertainment/education (physical items) 20

Cosmetics/beauty products 20 *Results are among all consumers surveyed, not weighted for population size. Russia and Poland down-weighted to equivalent sample size ©2016 PayPal Inc. Q28. In the past 12 months what kinds of products have you purchased from websites in other countries? Base: Cross-Border shoppers (size shown in appendix) Sou rce: I psos PayPal I n sigh ts 201611 More open attitudes to cross-border shopping are seen in smaller Western European & Eastern European countries while major western countries and some Asian countries show more negative attitudes and prefer ‘global’ stores

I would not feel comfortable making I prefer large 'global' stores (e.g. It is not important to me if I trust online stores from other purchases from a foreign website Amazon or eBay) when the online retailer is based countries as much as stores that is not in my own language purchasing from another country abroad or not from the country I live in

% Agree 90 80 70 60 50 40 30 20 10 0 US CA UK IRE DE FR IT ES NL SE BE PT PL RU HU CZ GR IL AE BR MX AR PE CL NI SA EY IN CN JP TH SG North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

©2016 PayPal Inc. Q. To what extent do you agree or disagree with each of the following statements? 12 Base: Online shoppers (size shown in appendix) Sou rce: I psos PayPal I n sigh ts 2016 Despite consumers in the Middle East being most comfortable with cross-border purchases, they still prefer large global stores

% Agree 80

10 North America Western Europe Eastern Europe Middle East Latin America Africa Asia Pacific

*Results are among all consumers surveyed in each region, not weighted for population size. Russia and Poland down-weighted to equivalent sample size

©2016 PayPal Inc. Q. To what extent do you agree or disagree with each of the following statements? 13 Base: Online shoppers (size shown in appendix) Sou rce: I psos PayPal I n sigh ts 2016 Consumers shop cross-border to find better prices, and to access products they wouldn’t find in their own country Top reasons for shopping from other countries, among all cross -border shoppers surveyed* (% selecting each statement)

#1 Better Prices (76%) #2 Access to items not available in my country (65%)

#3 I can discover new and interesting products (59%)

#4 Websites in this country have more variety/ availability of different products and styles (52%)

#5 Shipping is more affordable (50%)

*Results are among all consumers surveyed, not weighted for population size. Russia and Poland down-weighted to equivalent sample size Sou rce: I psos PayPal I n sigh ts 2016 Q34c. You say you have made purchases online from the “country”/”countries” shown at the top of the “column”/”columns” on the right. Please select your main 14 reasons for shopping on websites from this/these “country”/”countries” rather than the country where you live Base: Cross Border shoppers spending in each country. Free shipping and payment security are the top factors that could drive more cross-border shopping Top potential drivers for cross -border purchasing, among all online shoppers surveyed* (% selecting each statement)

#1 Free shipping (46%)

#2 Secure way to pay (44%)

#3 Items that are hard to find locally (40%)

#4 Costs shown in local currency (37%)

#5 Lower overall cost (35%)

Sou rce: I psos PayPal I n sigh ts 2016 *Results are among all consumers surveyed, not weighted for Q39. Which, if any, of the following would make you more likely to buy from a website in another country? population size. Russia and Poland down-weighted to equivalent 11 © 2014 PayPal Inc. All rights reserved. Confidential and proprietary. Base: Online shoppers in each country. sample size Shipping costs & other fees, plus concerns about getting what they have paid for are the main factors deterring consumers from shopping cross-border Top barriers to shopping cross -border, among all online shoppers surveyed* (% selecting each statement)

#1 Delivery shipping costs (35%)

Concern that item may not be #2 received (33%)

#3 Customs/duties/fees/taxes (30%)

#4 Delivery time not fast enough (29%)

Concern the item would not be as #5 described (29%)

Sou rce: I psos PayPal I n sigh ts 2016 *Results are among all consumers surveyed, not weighted Q36. Which, if any, of the following reasons prevent you from making purchases from websites in another country (more often)? for population size. Russia and Poland down-weighted12 to © 2014 PayPal Inc. All rights reserved. Confidential and proprietary. Base: Online shoppers in each country. equivalent sample size When shopping cross-border, most online shoppers would prefer to have a choice of whether to pay in local currency or in their own currency Attitudes to currency conversion among all online shoppers surveyed* (% of online shoppers who agree with each statement)

I would prefer to have the option of paying either in local 72 currency or my own currency I check currency conversion rates before making purchases in 61 foreign currencies I would not feel comfortable making purchases online in a foreign 45 currency

My bank charges me for making payments in foreign currencies 45

I have in the past made purchases online paid in a foreign 42 currency

The fees charged by PayPal for cross-border transactions are 32 generally lower than other payment methods

PayPal charges me for making payments in foreign currencies 27 *Results are among all consumers surveyed, not weighted for population size. Russia and Poland down-weighted to equivalent sample size Q47. Please state whether you agree or disagree with each of the following statements about ©2015 PayPal Inc. 17 shopping online in other countries: Base: Online shoppers in each country Sou rce: I psos PayPal I n sigh ts 2016 The factors having the most influence on consumers’ choice of payment method for shopping cross-border are security & convenience Top 10 reasons for payment method preference among all cross-border shoppers surveyed* (% of all x-border shoppers who gave a preference selecting each statement)

Secure way to pay 53

Convenient way to pay 44

Reasons for payment method preferenceAccepted among by most all cross retailers-border shoppers surveyed 41

Payment is processed quickly 37

Well-known, trusted brand 34

Don't have to share my personal or financial details with the seller 31

Purchase protection 30

Faster checkout 30

I can see what price I will be paying in my own currency 25

*Results are among all consumers surveyed, not weighted for population Habit 20 size. Russia and Poland down-weighted to equivalent sample size

©2015 PayPal Inc. Q44d. For what reasons is this your preferred payment method for online transactions/purchases from websites in another country? 18 Base: Cross Border Shoppers with a preference Sou rce: I psos PayPal I n sigh ts 2016 Shoppers in Africa are most likely to see data security as a barrier to shopping online in their own country. Eastern European consumers show the least concerns about payment security

Barriers to shopping or shopping more often Drivers for shopping online Reasons for Payment method preference (% domestic shoppers/cross-border shoppers with a preferred (% online shoppers selecting each as a barrier) (% online shoppers selecting each as making them more likely to shop) payment method selecting each as a reason for their domestic/cross- border payment preference ) 25 41 53 Concern about security 24 49 58 26 Secure way 46 49 of my financial or 30 51 Secure way to Pay 47 35 to Pay 57 54 personal details 37 51 52 31 48 49

26 24 30 Shopping 24 Shopping 22 I don’t have to share my 33 Concern about identify 28 Visible, trusted 20 30 30 23 personal or financial 26 payment preference

Barriers to Domestic theft/fraud 39 Drivers for Domestic 34 33 payment logo Reasons for domestic 36 22 details with the seller 29 31 26 15

25 34 53 Concern about security 24 42 56 22 Secure way 39 47 of my financial or 26 49 Secure way to Pay 54

28 54 border 57 border border

to Pay - - personal details 27 - 51 51 27 40 49 preference 30 21 34 Shopping 25 Shopping 20 I don’t have to share my 36 Concern about identify 23 Visible, trusted 18 28 29 21 personal or financial 32 theft/fraud 29 payment logo 34 payment 29 details with the seller Barriers to Cross 27 Drivers for Cross 23 28 28 24 Reasons for cross 18 Q. Which, if any, of the following reasons prevent you from making Q. Which, if any, of the following would make you more likely Q. For what reasons is x your preferred payment method for online purchases from websites in your own country/ in another country to buy from a website in your own country/in another transactions/purchases from websites in your own country/in another (more often)? Base = All online shoppers country? Base = All online shoppers country? Base = All domestic/cross-border shoppers who have a preference *Results are among all consumers surveyed, not weighted for population 19 size. Russia and Poland down-weighted to equivalent sample size Sou rce: I psos PayPal I n sigh ts 2016 Appendix About the PayPal Insights survey and forecasting

20 Global Technical Note This technical note (or a reference to it) should be included with all press releases

Weighted base: Total Online X-border Weighted Total Online X-border shoppers shoppers base: shoppers shoppers On Behalf of PayPal, Ipsos interviewed a representative Western Europe 8000 5807 2521 Middle East 1604 1140 626 quota sample1 of c.800-2000 (28012 in total) adults UK 800 627 190 Israel 800 590 418 (aged 18 or over2) who use an internet enabled device3 in Ireland 800 596 453 UAE 804 550 208 each of 32 countries (UK, Ireland, France, Germany, Italy, France 800 557 132 APAC 4000 3112 695 Spain, Netherlands, Sweden, Belgium, Portugal, Russia, Hungary, Poland, Czech Republic, Greece, Israel, UAE, Germany 800 620 130 India 800 665 121 Egypt, South Africa, Nigeria, Brazil, Mexico, Argentina, Belgium 800 549 324 China 800 675 151 Peru, Chile, USA, Canada, India, China, Japan, Thailand & Netherlands 800 574 187 Singapore 800 582 294 Singapore). Interviews were conducted online between Spain 800 552 258 Japan 800 625 28 30th August and 5th October 2016. Portugal 800 562 361 Thailand 800 565 100 Data was weighted in all countries to adjust for panel bias based on external trend data on incidence of online Italy 800 583 231 Africa 2402 1422 544 shoppers in each country. Sweden 800 586 256 Egypt 801 466 101 Eastern Europe 6400 4697 1863 Nigeria 800 488 263 1 In most countries quotas were applied on age crossed with gender and region representative of online population. No region quota was applied Poland 2000 1512 326 South Africa 801 468 180 in ZA, Singapore, RU & PE. In Egypt, UAE & Nigeria, no quotas were set Russia 2000 1455 727 LATAM 4002 2484 1145 but the survey was mailed out to a nationally representative of offline sample who were screened for internet usage Hungary 800 527 233 Mexico 800 517 257 2 Czech Rep. 800 584 208 Brazil 802 536 181 Aged 18-74 in all European countries

Greece 800 619 369 Peru 800 473 272 3Desktop computer/Laptop/ notebook computer/Tablet North America 1604 1072 371 Chile 800 501 279 /Smartphone/Some other type of mobile phone/Electronic organizer / PDA with wireless voice and data features/Games console with Internet USA 804 573 121 Argentina 800 457 156 connectivity (e.g. Wii) 21 Canada 800 499 264 TOTAL 28012 19734 7765 Market Sizing Estimate and Forecast: Methodology Estimating and forecasting online and mobile sales for the period 2015 to 2018

Inputs Survey Data Forecast Modelling To build the forecast we look at We use the survey data to add From these inputs, we model relationships between key macro- purchase behaviour (penetration category sales growth, changes to the economic indicators. and average spend per head) to online/mobile population, and growth • Total and online population understand the size and in online/mobile spend for those projection of future category populations to forecast total online development (Source: The World spend. and mobile spending. We assume Bank). • Category online purchase that the current rates of adoption • GDP per capita development penetration amongst non-users continues and as (Source: The World Bank). the level of adoption reaches the • Average category spend upper limits we reach saturation. • Total and online retail sales • Smartphone penetration (Source: ONS Report). • Table t pe ne tration

• Total online spend includes mobile spend. Mobile spend includes spend on both smartphones and tablets. • Estimations/forecast based on the following meta categories: Groceries, Food, drink & Alcohol; Health & Beauty; Clothing, Footwear & Accessories; Event tickets; Travel & transportation; Household goods; Leisure, Hobbies & Outdoors; Baby/Children’s Supplies; Entertainment; and Consumer Electronics.