November 16, 1999

Beaming Money by Email is Web's Next Killer App

Free Electronic Payment Service Lets You Securely Send Money to Any Email User In the World From Your PC, Palm Pilot, or Web-Enabled Cell Phone

Beaming Money On-the-Go Will Be the Foundation for Mobile E-commerce And the Next Hot Application for Handheld Users

PALO ALTO, Calif., Nov. 16 /PRNewswire/ -- Confinity, a pioneer in the future of mobile payments, today launched PayPal.com, the first Web-based service that enables consumers to beam money via email, Palm organizers, cell phones, pagers and other web-enabled devices. Unlike current online payment systems that require users to know bank account numbers of payment recipients, PayPal.com users only need an email address to beam a payment.

For consumers, the new service means they can pay money instantly, whether it's from their PC, at an online auction, at a coffee shop, or to a child in college simply by punching in an email address. They can split a lunch tab, pay a bill, or send money for Christmas more conveniently than ever before. Similarly, merchants will be able to receive money at all times without having to be linked to a credit-card service.

"Beaming money instantly, anytime and anywhere, is the next killer application for web users," said Peter Thiel, Chief Executive Officer of Confinity. "Sending a message is great, but sending money is better. By delivering payments through mobile and desktop devices, PayPal.com will create a vast new network of personal electronic money terminals that make the payment of money more convenient and secure than ever before."

As Easy To Use As Email

PayPal.com is an easy-to-use application that allows people to securely send money from an existing credit card or bank account to any email user in the world. After registering for the free service at www.paypal.com, consumers simply enter the recipient's email address and a dollar amount. The money is debited from payor's credit card or bank account, and credited to the recipient. The transaction takes seconds to complete. If the recipient is not yet a PayPal user, he or she simply registers on the PayPal.com site after receiving an email notification, and is immediately credited with the amount in the new account. Funds may be withdrawn at any time by electronic transfer to a bank account or a personal check from PayPal.com. Users may also opt to beam the money on to others.

The First True "M-Commerce" Solution

PayPal.com is the first truly mobile E-commerce (or "M-commerce") solution, allowing person-to-person transactions, anywhere, anytime. Analysts forecast approximately one billion handheld web-enabled devices in use worldwide by 2003, and Confinity aims to make PayPal available on all of them. The service is available immediately for personal computers and PDQ cellular phones in the United States. It will be available for the Palm operating system, which runs on more than 5 million handheld devices, in early December. PayPal will also be introduced to other cellular phone and web-enabled platforms and to international users in the coming months.

One Billion Credit Card Terminals

No other electronic payment service enables such seamless person-to-person payments or operates on such a wide array of handheld devices that are already ubiquitous in people's lives. "PayPal.com expands the number of credit card terminals from 16 million to more than one billion," explains Confinity Board of Advisers member Bill Melton, the founder of Verifone. "Verifone first captured the market for credit card readers, but we hit a wall because only merchants would buy them. PayPal blasts through that wall, enabling every handheld consumer to own a credit card terminal in their pocket."

"A Commercial and Cultural Phenomenon"

PayPal.com positions Confinity at the cutting-edge of the M-commerce revolution, which portends a transformation at least as dramatic as PC-based E-commerce. According to McKinsey & Co. Director Risto Perttunen, "M-commerce will be a technological, commercial and cultural phenomenon as pervasive as the sight of someone holding a telephone conversation as they stroll down the street." Using PayPal, people can beam money across a dinner table or across the globe, whether they are settling a dinner bill, making a person-to-person payment for an online auction purchase, sending money to a child away at college, or transferring funds for a major investment in a new company. With a handheld device, Perttunen points out, "you have a personal Internet at your service much more than you could with a PC. There are many who believe mobile phones will replace your wallet, your credit cards and your keys." PayPal.com plans to be a driving force of this revolution.

A Revolution in the Payments Industry

PayPal.com also portends a major shake-up in the banking and payments industry, empowering consumers to an unprecedented extent. Throughout modern financial history, banks alone have controlled the access points to the payments system. These access points include branch tellers, proprietary ATM machines, customer call centers, and even checkbooks. The banking monopoly on these access points allows the industry to charge billions of dollars each year in customer fees. Now, for the first time, web-based solutions like PayPal.com allow customers to own the access points to the payments system through their PCs, cellular phones, and handheld devices, potentially eliminating fees forever. "By being an early mover in this space, we are staking out incredibly valuable real estate on the payment platforms of the next century," said Thiel. The financial intermediaries of the future will be services like PayPal.com, which empower customers and introduce a new level of convenience, security, and value.

A Richer Way to Pay: Beaming Information and Money

Confinity expects PayPal.com to become an accepted means of payment for retail, business and commercial applications, as well as for person-to-person transactions. That's because PayPal will not only facilitate the exchange of value; it will facilitate a richer exchange of information as a seamless part of the transaction. For example, using their web-enabled handhelds, coffee drinkers could order an espresso five minutes before arriving at the store. The menu would be powered by PayPal, which would beam both the order and the payment. Customers could pick up their drinks without waiting in line, and retailers could reduce the number of front-line personnel taking orders. Checking into a hotel would also become an instant no-hassle process, as consumers simultaneously beam their reservation and payment information. Eventually, PayPal will enable consumers to receive instantly and electronically credit slips, coupons, and receipts.

Now Any Merchant Can Offer Sophisticated Affinity Programs Like Airline Miles

Combining payment information with the payment itself also creates opportunities for merchants to offer sophisticated affinity programs. An airline or hotel could beam reward points to a consumer at the same time that the consumer beams his reservation and payment information. With customer permission, retail outlets could also track a customer's buying patterns and level of purchases in order to offer special deals and discounts. A coffee retailer, for instance, could easily identify when a customer has purchased the tenth espresso in a row, triggering a free cup of coffee.

Like AOL's ICQ, A Highly Viral Application

Like free web-based email services, such as AOL's ICQ and Instant Messenger Services, the power and potential of PayPal.com resides, in part, in its highly viral nature. Consumers can simply register on the PayPal.com web site and begin beaming money to anyone who has an email account or to anyone who also has a Palm organizer -- instantly creating new PayPal users. "PayPal.com has the ability to spread globally across the existing telecommunications and Internet infrastructure, as well as across the entire user base of Palm organizers, without requiring consumers to make new purchases in technology," said Thiel. "Money is the ultimate viral application. PayPal.com extends the ability of money to spread from person to person to the Internet and myriad digital devices."

State-of-the-Art Security Protocols

Backed by state-of-the-art cryptography, PayPal.com is significantly more secure than checks and other conventional paper-based payment methods, which can be forged, counterfeited, or stolen. At the heart of the PayPal.com system is Confinity's robust and highly scalable backend architecture that processes payment transactions and connects with the infrastructure of other financial institutions. The system's security protocols were designed with the aid of Dr. Martin Hellman, the inventor of public key cryptography, who also sits on Confinity's Board of Advisers, and Stanford computer science professor Dr. Dan Boneh, who leads a team of researchers in cutting-edge cryptology research. The system includes numerous safeguards and protections for customers. "Thanks to the tremendous assistance of Dr. Hellman and Dr. Boneh, who are world-renowned in their fields, Confinity's team of engineers has designed a secure system that takes advantage of the latest advances in cryptology," said Confinity's Chief Technology Officer Max Levchin. "Both professors reviewed our designs, and tested the system to ensure maximum security for PayPal customers."

Strong Partners Include Nokia Ventures and Deutsche Bank

Confinity is already aligned with strong business and equity partners. It has secured major investments from the venture arms of both wireless communications giant Nokia Ventures and global financial services leader Deutsche Bank. Key backers also include Bill Melton, founder of Verifone and CyberCash; Scott Loftesness, former CEO of Digicash; Scott Banister, Vice President of Ideas for idealab! (the nation's leading Internet incubator); former Hewlett-Packard Vice President Glenn Osaka; and Stanford engineering professor and cryptography expert Martin Hellman.