"He also says that Banks are more conservative than PayPal - in that they can't go after a business model where there is going to be fraud - and the game is to minimize the losses."
It seems to me that deal with fraud is an important part of any bank's business.
"We started with this, 'Fraud is going to kill us. What can we do to save ourselves?' They started from, 'We have no fraud. How can we build this and not let any fraud in'
He also goes says something about how in the Internet world it is very hard to verify someone - the more information you get to verify (e.g. PayPal verified account) - the more 'safe' user you are. And something about how the Banks couldn't do this (virtual transactions) because most of them were public companies and couldn't hide $10m/month in fraud losses (what PayPal was losing a month to fraud at that critical point) and not spook their institutional investors.
It seems to me that deal with fraud is an important part of any bank's business.