Many people think of the early days of eCommerce when you say “PayPal.” The company first existed on its own, but rose to worldwide renown after it was purchased by eBay in 2002 and turned into their default payment processor. In the market for almost 18 years, PayPal has long since been one of the biggest names in online payments.
PayPal is an online banking network with a long directory of products and services. With 197 million consumer users and 15 million merchant users, representing over 203 global markets with payment available in 25 currencies, PayPal makes up a gross share of virtual transactions. With free consumer accounts and low-cost merchant accounts, PayPal has the user base to continue growing their services and stay in front of the competition.
Where did PayPal come from?
Established under the name Confinity in the United States in 1998, the company was originally out to design hand-held device software. And although their later software became world-renowned as a browser-based payment solution, the company’s ease of transition into the smartphone sphere a decade later may have been an echo of their origins.
A year later in 1999, Confinity launched as a money transfer service, and in 2000 after a dance of a merger with X.com (an online banking company), they jointly began to operate under the name PayPal.
PayPal went public in 2002 and generated over $61 million in sales of shares, before being purchased for $1.5 billion by eBay later that year. PayPal became the form of payment for the majority of eBay bidders, and their growth didn’t stop there.
In late September 2014, it was announced that eBay was spinning off PayPal into its own company. Business had been good for PayPal those first 15 years, but their independence came when payment technologies were all over the board. New software and technology were enabling a seemingly endless stream of electronic payment wallets, solutions, and merchant processing platforms. PayPal was able to ramp-up development and keep pace.
PayPal.Me peer-to-peer (P2P) payments were introduced in 2015, allowing users to send custom links to request funds. That, coupled with the capacity to send money to other consumers by way of their email address, plus the growth of their merchant service catalogue, and PayPal had truly arrived as the jack-of-all-trades payment processor.
Who uses PayPal?
Whether a consumer or merchant user, PayPal has many faces. Or wears many hats. The point is, for those who remember logging into their PayPal accounts to bid on eBay items in 2002, today services span from paying a friend back virtually, to merchant services, to all sorts of money management via the mobile app.
PayPal offers a multitude of services for consumers and merchants.
- Secure online shopping: PayPal offers some of the most secure transaction processing on the internet. Their Purchase Protection includes data privacy, fraud prevention, round-the-clock monitoring, dispute resolution and global buyer protection.
- P2P payments: You can use PayPal.Me or log into your PayPal account to send friends and family funds by way of their email address.
- Inter-account transfers: Technically you can only have one bank account verified on your consumer PayPal, however if you have more than one email address you can set another bank account up with a second set of PayPal login credentials. Transfer money to yourself from bank to bank without the fees.
- Payments in your preferred currency: Payments can be processed by PayPal in 25 different currencies.
- Buy, Sell, and Send: Put simply, you can move money and do it safely across a multitude of PayPal payment technologies and tools.
- Pre-auth payments: For restaurants and the like, you’re able to leave a pre-auth on a client’s card until you have an exact amount to charge.
- Recurring billing and bill-me-later payments: Businesses with all types of payment structures can use PayPal as their merchant service solution.
- Online invoices: PayPal also has a service where you can email clients invoices via your PayPal merchant account. You can manage billing from start to finish on a single platform.
- PayPal debit card: As a merchant, you can even request a debit card to access your PayPal funds right away.
- Mass payments: Make mass payments quickly and securely, and for a reasonably low fee.
- Mobile payment solutions: The hardware and the software are available for PayPal merchants to get paid using their own mobile device as a terminal.
- PayPal Pro: Between the three tiers of merchant membership PayPal offers, spending a little extra gives you access to even more services, like your own checkout page.
- Fundraising Services: The power to fundraise on PayPal cannot go unmentioned. Make fundraising a little easier on everyone, a donation is as simple as logging in and sending funds by way of email address.
What makes PayPal special?
PayPal has come a long way since the early days where no one really understood all they could do with their account. Many of us didn’t even understand why there was a new middle man in providing our credit card information in a sale online.
PayPal has been around for years to help us shop more conveniently, and more securely. To those ends, in 2011 PayPal switched account funding to verified bank accounts instead of debit cards. This opened up a world of possibilities, but called on the company to exercise even greater caution against fraud.
The internet is full of horror stories of PayPal accounts being frozen due to suspicious or unusual activity. How many of those cases protected clients against actual fraud is a little hard to determine. But whatever a user’s feelings about the possibility of their cash getting frozen in PayPal’s fraud department, we all agree that they take security seriously.
In terms of growth, PayPal certainly hasn’t suffered, no matter how strict their security policy is. The number of transactions processed from their every platform and interface reached 4.9 billion in 2015 with the introduction of their PayPal.Me P2P service, up from 4 billion the year before. PayPal’s name recognition goes hand in hand with their security policies, and hundreds of millions of users trust PayPal every day as their online payment solution.
Let’s break it down. The major pros of PayPal are:
- Access to both consumer and merchant accounts
- Consumer accounts are totally free
- Merchant accounts are very cheap to open and maintain with lower traffic
- 25 currencies supported in 203 world markets
- Security Key options have been available as of 2006
- Free peer-to-peer payments
- Donations made easy
- No contracts to lock merchants in long-term
And the major cons are:
- High security, which means higher probability of getting locked temporarily out of funds
- Conversion fee across currencies
- For merchants, once business starts to pick up, the per-transaction fees are often more than they would be with traditional merchant processing services
Overall, PayPal seems to have earned their fame. Their services are consistent, used just about everywhere and by just about everyone, and have many features and service options. For consumers with multiple bank accounts and complex money management, or merchants with high transaction volume, PayPal configuration and charges may not be ideal.
PayPal continues to be not only one of the most popular payment processors in the world, but also a driver of the technology and of the global migration to virtual payment solutions. The company has been quick to respond to trends and has even driven them, starting back in the late 90s when a hand-held device software company started to branch out into online banking and payments.
Whether PayPal continues to follow trends or head off the next innovation, we will keep our ears to the ground.