PayPal Trust & Safety Study

September 2008 Dene Rogers (1-408-967-5536 or [email protected])

Prepared by

Confidential and Proprietary Objectives, Methodology and Sample

Confidential and Proprietary 2 Objectives and Target Population

Background •! As part of the ongoing effort to strengthen the PayPal brand, particularly in the sphere of and protection, PayPal sought to understand the current practices and vulnerabilities of the users in the , Canada, France, Germany, Spain and the United Kingdom.

Objectives •! To develop interesting and informational material for press releases highlighting PayPal’s role providing information security: –! Demonstrate the need for consumer protection against and –! Position PayPal as the consumer advocate for online safety and privacy –! Secure coverage of PayPal’s Privacy Rating and consumer protection offerings

Target Population •! The research covered the following target groups: –! Online consumers who have purchased something online in the last 3 months.

Confidential and Proprietary 3 Methodology and Sampling Frame

Methodology Quantitative research: •! Online based survey through invitations sent to online panelists.

Sampling Frame •! The total sample size of 1,000 respondents per country. •! Quotas were set up during fieldwork to ensure sample distribution by age and gender, as well as PayPal usage. •! The sample supplier for this study was E-Rewards. •! Fieldwork was conducted from May 28th – June 3rd, 2008 in the United States, August 15th – 25th in Europe.

Confidential and Proprietary 4 Top Headlines

Confidential and Proprietary 5 Global Findings: Identity theft is a growing and poorly understood problem

•! Identity theft is more pronounced in English speaking countries. 1 in 10 online consumers in Canada, the UK and the US have been victims of ID theft. Only about 1 in 20 are ID theft victims in France, Germany and Spain. –! Over a third of victims have no idea how the identity theft happened and two- thirds had to be told about it by their creditors or the authorities. •! Almost all online consumers register some level of concern with online scams and identity theft. –! That level of concerned has remained high over the last decade, even while concerns with other aspects of online shopping have subsided. –! Unsurprisingly, victims and friend of victims have the highest levels of concern. •! Credit cards are the most often used form of payment online. –! However, among PayPal account holders (who are familiar with PayPal’s security policies) PayPal is thought to be the most secure payment method, better than credit cards or gift cards. •! Among online social network users, 1 in 6 display information on their sites that they also use for their passwords. –! That is about 1 in 15 online consumers are putting themselves at risk by displaying password related information on social networking sites. –! “How secure is using Fluffy’s name when your MySpace page is dedicated to Fluffy?”

Confidential and Proprietary 6 Canadian Findings: Anglo-American block

•! Canadian online shoppers are similar to American and British consumers in terms of experiences and tastes. –! Three quarters (73%) of Canadian online consumers have online banking. PayPal account holding is relatively lower at 44%. •! Canadians are very confident in their online banking security (90% secure). –! One in ten Canadian online shoppers have experienced ID theft, an additional 24% know an ID theft victim. •! Canadian frequent online shoppers (13%) tend to be slightly more likely to be ID theft victims. –! Canadian consumers’ top online shopping concerns are protecting privacy (53% very concerned), preventing fraud and ID theft (46%) and excessive shipping fees (43%). •! Fraud has decreased 6 percentage points as a concern for Canadians since they started shopping online. Shipping fees are essentially unchanged as a concern over the same period. –! Canadians are heavily reliant on credit cards. •! 92% use credit for online shopping. The closest alternative payment method, PayPal, is only used by 38% of consumers. •! Canadians are big on credit card convenience. 51% say they use them for that reason. •! Canadian PayPal users are more likely to say they are required to use PayPal (37%) than any other reason.

Confidential and Proprietary 7 German Findings: Cautious and Secure

•! German online consumers have the lowest levels of trust in E-commerce... –! Two-thirds (65%) of German online consumers have an online bank account •! Germans are the least confident in the security of their online accounts (49% secure; 47% somewhat secure). •! And more Germans than any other nationality think offline banking is more secure (41%). –! Fewer than half German online consumers rate either credit cards (45%), debit cards (40%) or PayPal (47%) as secure. •! However German PayPal users are more confident (67% secure). –! While over half of German consumers (54%) save their credit cards with online retailers, few Germans (31%) use their computer browsers to store passwords. •! …But Germans have the lowest levels of ID theft and concern with online crime. –! Less than one in thirty (3%) German online shoppers have experienced ID theft, and only 10% know a victim. •! Germans have the least concern that ID theft will happen to them (23% very concerned, 49% somewhat concerned). •! Germans receive the least amount of “” with 78% receiving 1 a month or none.

Confidential and Proprietary 8 Spanish Findings: Unique Concerns

•! Spanish online consumers have some of the lowest levels of exposure to online commerce. –! Less than half (49%) of Spanish online consumers use online baking. A similar number (50%) have PayPal accounts, and only 27% have both. •! Spanish online banking users are satisfied with the safety of their online accounts (89% secure). •! Spanish online consumers also report the least experience with online shopping. 76% have been shopping online for less than five years, and only 9% shop weekly or more often. –! Spanish online consumers also have the lowest rate of social networking site usage (34%) of the 6 countries in this study. –! Spanish consumers are the least familiar with the terms “” (58% very familiar), identity theft (32%), (42%) or “phishing” (29%). •! As a result, Spanish online consumers have unique concerns and preferences. –! As addition to being concerned about online fraud (83%), Spanish consumers are also very concerned about the reliability of online commerce in general. •! 84% are concerned that the purchased product will not be as pictured or imagined, 83% are concerned about poor product quality, and 82% are concerned about not receiving the product at all.

Confidential and Proprietary 9 French Findings: Potentially At-Risk

•! French online consumers resemble those in other countries. –! Two-thirds (68%)of French online consumers have online baking. PayPal has a fairly low market penetration at 36%. –! 6% of French online shoppers have experienced ID theft, an additional 18% know a victim. •! French ID theft victims are most likely to discover it through their credit card statements (45%) and are most likely to contest the charges with the credit card company (70%) or report the fraud to the police (52%). –! French consumers’ top online shopping concerns are protecting privacy (40% very concerned) and preventing fraud and ID the