IT.Can Fintech Evolution/Revolution October 23, 2017 This box will not be visible in Slide Show mode or when printed.

Quick Facts: PayPal IMPORT $4.2 Billion >$100B market cap, almost $13B in projected revenue 2017 203 markets globally, ~18k employees 218M customers including 17M merchant customers 26% YOY growth in payments 54% YOY growth in mobile commerce Canada 5th largest market (after US, UK, DE & AU), 1st international market for PayPal (est. 2006) 45% gender & ethnic diversity on Board, 100% gender pay equity globally IMPORT $4.2 Billion

Myth #1: Fintech is new Usage Guidelines Slide Description: Plain Divider Slide Heading: PayPal Sans Big Thin 37pt Subheading: PayPal Sans Big Light 18pt Usage: Use this slide as a section divider to better organize chapters of content within a presentation. Additionally, this slide can be used as a high impact quote or descriptor to reinforce content messaging. Myth #1: Fintech is new ©2015 PayPal Inc. Confidential and proprietary. This box will not be visible in Slide Show mode or when printed.

Myth #1: Fintech is new   Indeed, there are numerous instances in which nonbanks have been able to provide “bank-like” services at lower cost (or higher rate of return) to the individual or corporate customer…” – US Federal Reserve Bank of Minneapolis, 1982 Whether it’s money transmission from a 100 years ago (Western Union as a development to their telegram business), ATMs in the 1970s (developed by IBM in partnership with Lloyds), cheque imaging, electronic bill payment even the adoption of digital wallets (PayPal), the notion that the role of technology and non-bank competition is something entirely new is simply false. This has been going on for a long time.

WEF Beyond Fintech report from this year: payments, insurance, deposits & lending, capital raising, investment management, market provisioning

Toronto Financial Services Alliance: Building Toronto into a Global Fintech Leader

Myth #2: Fintech operates outside the existing financial ecosystem Usage Guidelines Slide Description: Plain Divider Slide Heading: PayPal Sans Big Thin 37pt Subheading: PayPal Sans Big Light 18pt Usage: Use this slide as a section divider to better organize chapters of content within a presentation. Additionally, this slide can be used as a high impact quote or descriptor to reinforce content messaging. Myth #2: Fintech operates outside the existing financial ecosystem ©2015 PayPal Inc. Confidential and proprietary. This box will not be visible in Slide Show mode or when printed.

Myth #2: Fintech operates outside the existing financial ecosystem Banks (and networks) are gatekeepers Fintechs must collaborate with incumbents to operate Obligations flow downstream to customers Card Rules PCI DSS OSFI guidance, e.g B-10 Code of Conduct for the Credit & Debit Card Industry Often coupled with the notion that fintech is new, is the that fintech is occurring outside the traditional system. The truth is that – perhaps with the exception of certain developing countries – fintech innovation is largely taking place in connection with the existing financial system in partnership with traditional financial institutions.   And, of course, banks themselves are investing billions into fintech, internally and through acquisition. Some models seem to by-pass traditional financial structures. Marketplace lending Crowdfunding Mobile money Prepaid or closed loop debit cards Bitcoin and other cryptocurrencies However, even in these models, the traditional financial system is a key part of the process. Much of the capital for marketplace lenders comes from institutional investors. Crowdsourced funds are deposited in traditional financial institutions and so on. Bitcoin which does represent a more radical departure, has thus far had a minimal impact on the market.

Myth #3: Fintech is unregulated Usage Guidelines Slide Description: Plain Divider Slide Heading: PayPal Sans Big Thin 37pt Subheading: PayPal Sans Big Light 18pt Usage: Use this slide as a section divider to better organize chapters of content within a presentation. Additionally, this slide can be used as a high impact quote or descriptor to reinforce content messaging. Myth #3: Fintech is unregulated ©2015 PayPal Inc. Confidential and proprietary. This box will not be visible in Slide Show mode or when printed.

Myth #3: Fintech is unregulated Many new fintechs are unregulated; they can operate in Canada without setting up base here. The resulting regulatory gap makes it all the more important that Canadian consumers understand how fintechs operate. – Lucie Tedesco, Commissioner, FCAC New tech often captures the attention of regulators. There is often an assumption that because technologies are novel, there is a regulatory gap.   But most of what fintech is about is improving the customer experience and partnering with the existing financial infrastructure to hold deposits, enable investments, etc. Standalone innovations can be disruptive and force traditional systems to evolve, but it is through partnership with established financial services providers that fintechs are best able scale solutions. Which also means that much of the risk associated with financial services will remain with traditional institutions or be mitigated by the rules that apply to those institutions.

Myth #3: Fintech is unregulated New tech often captures the attention of regulators. There is often an assumption that because technologies are novel, there is a regulatory gap.   But most of what fintech is about is improving the customer experience and partnering with the existing financial infrastructure to hold deposits, enable investments, etc. Standalone innovations can be disruptive and force traditional systems to evolve, but it is through partnership with established financial services providers that fintechs are best able scale solutions. Which also means that much of the risk associated with financial services will remain with traditional institutions or be mitigated by the rules that apply to those institutions. PayPal is subject to well over 100 domestic laws, plus laws with extraterritorial application and foreign laws which impact our global shared services. PayPal is regulated as a bank in Europe, as a quasi-bank in Australia, and as a money transmitter in most other jurisdictions including the US and Canada

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