Internal Audit in Fintech companies – Trends,

Opportunities and Challenges

ECIIA Conference 2019: Embrace, Change and Innovation in Internal Audit
Luxembourg Friday, 20th September 2019

Andrea Monti, Head of Internal Audit EMEA, APAC and Global Compliance

©2018 PayPal Inc. Confidential and proprietary.

  Introduction
 PayPal History, Timeline, Latest Key Results
 PayPal’s Mission, Vision, Values
 PayPal’s Growth & Expanding Network

Table of PayPal Internal Audit



 Key Trends and Challenges

Contents  Internal Audit in Fintech - Required Characteristics
 About Internal Audit at PayPal – The Journey
 Internal Audit Team Structure
 Audit Process Overview – Types of Audits
 Key Success Factors

©2018 PayPal Inc. Confidential and proprietary.

PAYPAL HISTORY, TIMELINE, LATEST KEY
RESULTS

©2018 PayPal Inc. Confidential and proprietary.

How we started and became
PayPal

1
MILLION
user mark
Confinity merges with PayPal’s fraud
Elon Musk’s X.com. protection developed. PayPal goes public.
Max Levchin and
Peter Thiel form PayPal officially PayPal’s first customer X.com changes name to eBay Inc.
Confinity. launches. service center opens. PayPal. acquires PayPal.

1998 1999 2000 2001 2002

©2018 PayPal Inc. Confidential and proprietary.

 2018 Full Year:
Recent Milestones & Where we are today Revenue: $15.45B
Payment Volume: $578B
Payment Transactions: 9.9B
Celebrate

10 200M+ Global Scale:

active accounts 218M Consumer Accounts
years of mobile
payments 19M Merchant Accounts
PayPal launches Pay with PayPal exceeds
Available in Venmo. $100B in Total

200+ markets
PayPal One Touch reaches 143
Payment Volume
and $3B in Revenue
merchant markets and over for first time in a
200 consumer markets.
single quarter. PayPal launches new
PayPal acquires
PayPal launches Xoom, CyActive, Fundamentally redesigned services for
PayPal acquires Modest consumer mobile app and the 80M consumer underserved and
One Touch
Braintree (and Payments. and Paydiant. PayPal Business App accounts opted in underbanked
Venmo). launched. to One Touch. community.
Bill Me Later Separation from
eBay Inc. Cumulative PayPal announces
PayPal launches Rebranded mobile TPV hits
PayPal Working PayPal Credit. PayPal acquires intention to acquire
more than $231B (as of Q4).
Capital. PYPL listed on Swift Financial iZettle.
NASDAQ.

2013 2014 2015 2016 2017 2018

©2017
©2018 PayPal Inc. Confidential and proprietary.
PAYPAL’S MISSION, VISION, VALUES

©2018 PayPal Inc. Confidential and proprietary.

PayPal Mission, Vision and Values

We believe that now is the time to reimagine money, to

democratize financial services, so that managing and moving money is a right for all
citizens, not just the affluent.

We believe every person has the right to participate fully in the global economy. We
have an obligation to empower people to exercise this right and improve financial
health.

As a leader in Financial Technology, we believe in providing simple, affordable, secure

and reliable financial services and digital payments that enable the hopes, dreams and
ambitions of millions of people around the world.

It is our duty and privilege to be Customer Champions. We have a fundamental

commitment to put our customers at the center of everything we do. We must be bold
and innovative and execute flawlessly against our immediate goals, with our eyes
always on the future.

©2018 PayPal Inc. Confidential and proprietary.

Delivering on our Mission, Vision and Values

PayPal is delivering on our strategy to become the

world’s leading and largest open and independent
digital payments platform
and to help drive the global transition to digital payments.

We are committed to democratizing money and to expanding the

consumer financial services to the underserved by:

Innovating to Becoming a Partnering across the ecosystem

create engaging and payments partner of choice for to make PayPal available
rewarding customer businesses anywhere people want to shop,
experiences pay, manage and move their
money

©2017
©2018 PayPal Inc. Confidential and proprietary.
PAYPAL’S GROWTH & EXPANDING
NETWORK

©2018 PayPal Inc. Confidential and proprietary.

Money is
Changing

Mass Adoption Digitization

of Mobile Devices of Cash

©2018 PayPal Inc. Confidential and proprietary.

 Our Network

GLOBAL

MERCHANTS CONSUMER

Online In app

DATA * SECURITY

In store In new contexts

TECHNOLOGY & PAYMENTS PLATFORM

©2018 PayPal Inc. Confidential and proprietary.

PAYPAL INTERNAL AUDIT

©2018 PayPal Inc. Confidential and proprietary.

Key Trends and Challenges

• Regulatory Framework
− Operating with licenses in regulated markets
− Evolving regulatory framework across markets / jurisdictions
− Increase in regulators’ level of scrutiny

• Fintech Industry Trends

− Competitive landscape, product innovation:
• Risk Management
• Fostering Innovation and Risk-Taking

©2019 PayPal Inc. Confidential and proprietary. 13

Internal Audit in Fintech - Required Characteristics

• Being able to come on the journey with the Company and teams, yet retain independence.

• Being across the fundamentals of the technology and being part of the product(s) journey – from inception to
launch.

• Being Agile

• Pragmatism

• Learning mindset to emerging products and technologies

• Understand the emerging micro-cultures of the teams in scope of audits

©2019 PayPal Inc. Confidential and proprietary. 14

 About Internal Audit at PayPal – The Journey
• Over the past few years (2012 – 2019), PayPal Internal Audit has gone through a transformation from a
flat, decentralized regional program focused on initiatives, to a global, risk-based program staffed with
seasoned financial services/tech professionals. Some key growth points are highlighted below:
− A consolidated global risk assessment which drives the annual plan and on-going re-calibration

− IA department: upgrade of staff and build-out of a job hierarchy, moving from a flat, dedicated global staff to a technically skilled,
globally located staff today

− Rotation of staff into key management roles

− External QAIP review conducted by the Institute of Internal Auditors (IIA), with Internal Audit receiving the highest rating
possible and solidifying the independence of Internal audit.

− Growth of data analytics in the audit process

©2019 PayPal Inc. Confidential and proprietary. 15

Internal Audit Team Structure

Audit Operations Auditors

Se
nio • Setting strategic and tactical plans
r • Representing IA to Audit Committee and Executive stakeholders
Dir
ect
Analyze or
Ensuring Audit Report’s message is appropriate for Executive
audience
Portfolio Delivering Audit Report to Global Head of Audit with zero
Manager defects

• Ensuring integrity of workpapers

Monitor &

QAIP
Develop Sr. Manager / Manager
• Delivering Draft Audit Report to Portfolio Manager
Report with minimal defects

• Managing project from Planning through

Fieldwork
Senior Auditor • Ensuring timely completion of key
milestones of the audit
Train Implement
• Executing testing
• Ensuring timely completion of key
Audit Associate milestones of the audit

Training
©2019 PayPal Inc. Confidential and proprietary. 16
Audit Process Overview - Types of Audits
• Financial / Operational / Compliance Audit
Business process, initiative, or project review
− Corporate Financial audits provide reasonable assurance that financial statements are accurate, stated completely, and in compliance with
accepted accounting principles.
− Operational audits focus on the effectiveness and efficiency of operational processes, including the overall control environment.
− Compliance audits focus on adherence to legal/regulatory requirements or industry standards; may apply to process and technology areas.

• Technology Audit
− Technology audits focus on technology systems’ ability to process information / transactions accurately, timely, completely and securely, including
the processes related to building and supporting these systems.

• Results: Audit report or memo with areas for improvement, related risks and management’s corrective actions is provided to the Audit Committee
and Management.

©2019 PayPal Inc. Confidential and proprietary. 17

Key Success Factors

• Data Analytics
− Anchor all Internal Audit activities into data

• Continuous re-assessment of critical risks

− Risk-based approach requiring an on-going re-calibration of the Internal Audit focus
− Focus on critical prevailing and emerging risks

• Business knowledge
− Combined understanding of products, technology and relevant regulatory obligations

• Have an open learning mindset, apply common sense, be part of the solution

©2019 PayPal Inc. Confidential and proprietary. 18