America's No. 1 financial conglomerate

Chapter 358 A protruding nail is unacceptable

The ultimate goal of running a business is to make a profit. After all, Ernst is not a philanthropist, and there is no reason for him to spend real money on a losing business.

Although PayPay is currently in a critical stage of promotion and development, and investment is an essential part of it, burning money is the norm in the Internet industry, and the speed is so fast that it can make people in traditional industries speechless. However, this does not mean that we must blindly throw money around and ignore revenue. Even the most solid financial resources cannot withstand such unrestrained consumption.

"We've already discussed revenue issues before, and the core idea is simply to increase revenue and reduce costs. Take payment methods as an example, we can guide users to prioritize debit card payments over credit card payments."

"For example, once a user links their debit card, we can add a unique verification icon to their account. Even if a user is defrauded while using a debit card for payment, we will provide unconditional compensation, using this as an attractive slogan."

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"In addition, we can also launch a payment rebate program. Users can randomly receive rebate coupons ranging from 0.5% to 5% simply by completing the payment with a debit card. These rebate coupons can be used directly to deduct cash from their next purchase."

"This will both attract users to choose debit card payments and increase the frequency of user transactions."

Peter Thiel spoke eloquently, while Ernst sat to the side, knowing that the other was speaking to him, and that he was the only one who didn't understand the content.

However, PayPal's plan is feasible. Once users generally choose to pay with debit cards, PayPal can significantly reduce its spending on credit card fees, which is undoubtedly a way to generate revenue in disguise.

Previously, when buyers used credit cards to pay, in order to reduce sellers' costs, PayPai did not charge the usual 3% fee, but only the 2.5% fee charged by the credit card company.

If the user pays by debit card instead, the seller will not have to bear the 2.5% credit card transaction fee, even if PayPal does not accept it.

Charging sellers a 1% online payment processing fee still reduces their costs, so they are naturally willing to accept it.

It's a win-win situation: sellers reduce transaction fees, while PayPay increases revenue.

However, this is difficult because American culture is about consuming in advance, and this concept is deeply ingrained in people's consumption culture. Credit cards are almost a necessity in everyone's daily life.

Of course, this doesn't mean that debit card payments have no market. Advance consumption doesn't mean that people don't have a penny in their pockets. There will always be some users who are willing to try more cost-effective payment methods.

"One potential concern we must consider is how to minimize the cost of compensation?"

Credit card fraud is rampant in the United States, ranging from elaborate scams perpetrated by professional fraudsters to petty theft.

As a third-party payment platform, PayPay suffers from even more serious fraudulent transactions.

Criminals steal other people's credit or debit card information, then register PayPay accounts in bulk, bind the stolen information, and then transfer the funds to designated accounts.

Because PayPay acts as an intermediary in the flow of funds, banks' monitoring systems often fail to detect abnormalities in time, mistaking them for normal transfers. By the time the theft is discovered, the perpetrator has already withdrawn the funds and disappeared without a trace.

The stolen funds will need to be compensated by online payment institutions like PayPal, and the amount stolen accounts for 0.7% of PayPal's total transaction volume.

However, this does not mean that PayPal is obligated to reimburse the entire amount. Only if certain conditions are met will online payment institutions like PayPal reimburse the credit card company for the amount stolen.

How much would it increase costs if debit cards were used for unconditional compensation?

Faced with the difficult question posed by Ernst, Peter Thiel appeared calm and composed, clearly having already devised a solution: "Through big data analysis, we conducted in-depth research on the trading behavior of these criminals and discovered that their transactions share many common characteristics."

"These criminals mostly use newly created accounts, and they often transfer money to the same set of fixed accounts. The frequency of account usage also follows certain patterns. Based on these characteristics, we can identify a group of related accounts and freeze the funds in the accounts in a timely manner to prevent further losses."

"As everyone knows, professional online fraud gangs never manually register accounts, since manual account registration is extremely inefficient, and only a few accounts can be registered in a day. They usually use computer programs to batch process registration, transfers, and other operations to improve the efficiency of their fraud."

"Therefore, in addition to identifying suspicious accounts through transaction characteristics, we can also design an anti-theft verification mechanism by adding verification code images to the registration and payment processes. These images will have distorted letters printed on them, which are clearly recognizable to the human eye but cannot be recognized by computer programs."

"In this way, we can also use this method to determine whether locked accounts are controlled by programs during the payment process. Once an anomaly is detected, we can immediately initiate a manual investigation."

"As for those robbery-style credit card fraud incidents in reality, even if compensation is required, the amount of money involved is usually relatively small, and the impact is limited."

Seeing that Ernst no longer raised any objections, Peter Thiel steered the conversation back to revenue.

Vice President Eva Heck was the first to propose her idea: "Could we try selling value-added services, such as establishing a dedicated membership system for enterprise users?"

"Tell me more details." Peter Thiel's eyes lit up, and he looked at Eva Heck with anticipation, clearly showing great interest in the proposal.

"My idea is to first set a screening criterion, such as accounts that receive more than 30 payments per month, or accounts that receive more than $1000 in payments for three consecutive months, and identify these accounts as enterprise-level users. Then, we can launch additional value-added services for these users and guide them to activate them."

After hearing Eva Heck's suggestion, Peter Thiel frowned and fell into deep thought.

After a moment, he slowly shook his head. "This plan is not feasible. This kind of division is too deliberate and can easily make users feel that we are forcing them to spend money. Once we are complained about by users, we may face legal action, which would be extremely detrimental to the company's reputation and development."

Peter Thiel's words were like a bucket of cold water, instantly extinguishing Eva's newly ignited enthusiasm, and the meeting room fell silent once again.

Just when everyone was at a loss, Peter Thiel's eyes suddenly lit up. He pointed at Eva Heck and said excitedly, "Your suggestion has given me a new idea! We can completely change the way we make users actively activate value-added services."

He looked around at everyone present before revealing his idea: "Instead of forcing activation, we will set a reasonable threshold, such as a monthly payment amount of $1000. Once a user's monthly payment amount exceeds this threshold, the excess amount will be placed in a pending state."

"If sellers want to receive this extra amount of money quickly, they must upgrade to the paid version and activate our value-added services."

"If you don't activate the value-added services, the excess funds will need to be held on the PayPal platform for half a month before they can be transferred to the seller's account."

This plan essentially aims to achieve the same goal as Eva Heck's proposal: to promote value-added services and increase revenue. However, by changing the approach, it not only avoids the risk of forced consumption but also increases PayPay's profit-making methods.

Sellers can charge value-added fees for activating the service. Even if they don't activate it, their funds can generate considerable revenue by simply keeping them on the PayPaI platform for half a month and earning interest.

Although it's a case of false advertising, it's an excellent idea.

This practice is bound to cause dissatisfaction among some sellers, but sellers only account for 3% of PayPai's user base, with the vast majority of users being buyers.

As long as they can retain this huge buyer base, sellers, in order not to lose potential customers, have no choice but to choose to activate value-added services, even if they are dissatisfied.

No seller would be willing to put their funds on PayPal's platform for a small membership fee.

After identifying the three core directions—guiding debit card payments, optimizing anti-theft mechanisms, and launching value-added services—the group refined the details of the plan, and the meeting officially concluded.

However, PayPal says there's still a problem that hasn't been solved, namely the issue of burning through cash.

PayPal's monthly operating costs are currently as high as $450 million. The funds it previously earned by partnering with Enron and other Wall Street giants to generate revenue have now been almost entirely depleted.

PayPal now has less than $4000 million in cash on hand, and the company's upcoming user acquisition campaign will further increase its monthly costs.

Based on the current rate of cash burn and the impending increase in costs, PayPal's cash reserves can only last for five or six months at most.

This is also a key reason why Ernst sought financing in the past. Financing can not only replenish the company's funds and alleviate financial pressure, but also build connections.

You can't just invest your own money in development, can you? Nobody does that.

However, judging from the current situation, Peter Thiel knows that it is basically impossible to successfully raise funds in the short term.

Ernst knew this too; Wall Street shouldn't even think about it, they wouldn't invest money in PayPal.

Clementine, who used to send herself to Ernst's bed, used to call every two or three days, but now she hasn't contacted him for several days.

Ernst initially thought something had gone wrong, but now it seems he's learned about Bi's situation and is taking a wait-and-see approach.

"You don't need to worry about the funds. Just focus on managing PayPay." Ernst reassured Peter Thiel, seeing his worried expression.

There's no need for Ernst to elaborate further; this confrontation is no longer just a matter between PayPal and BIL.

Ernst wanted to crush Amazon and eBay completely in e-commerce, and also to curb the arrogance of Wall Street.

If a nail sticks out, you have to hammer it down one by one to teach it a lesson.

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