How Paypal becomes soo successful

Being able to easily send payments online is one of the great conveniences of the modern era. Sending a payment instantly to someone online just 25 years ago was practically unheard of, but then PayPal came on the scene and everything changed. Other companies have since emulated their services, but PayPal continues to be the leader in this industry.

The Big Picture

PayPal Holdings Inc is a payment processing company based in San Jose, California. PayPal operates worldwide, facilitating payments for online vendors, various commercial users, individuals, and auction sites. PayPal brings in revenue by charging a fee per transaction based on the amount of the payment and where it is being sent. In 2018, revenues were just over $15.45 billion. As of 2019, PayPal has 286 million users in over 200 markets worldwide, and transactions are made in 100 different currencies. The global digital payment market was valued at 3.4 trillion US dollars in 2018 and is expected to surpass $10 trillion by 2026 as people increasingly pay for items and services through the internet. Other payment methods simply can’t match the speed and convenience of digital payments. However, this forecast depends on internet availability and sufficient technology in developing markets. It will be up to PayPal to maintain its top status in this increasingly competitive space. But how exactly did PayPal get to where they are today?

The Beginning

PayPal started out as a company named Confinity, which was founded in December 1998. Confinity’s focus was developing technology to be utilized in handheld devices. The founders included Peter Thiel, Nax Levchin, Ken Howery, and Luke Nosek. In 1999, PayPal was developed as a money transfer service within Confinity. The vision the company had was to create a borderless currency that wasn’t controlled by any government. Founder Luke Nosek later stated that this mission failed because the investors were pressuring them to release a product as quickly as possible. Around the same time that PayPal was being developed, Elon Musk was launching a financial services company called And in March 2000, Confinity merged with Musk saw the potential of the PayPal service and decided to focus solely on developing that sector of the company. Soon after this, Musk was ousted as CEO and replaced by Peter Thiel. This move was largely based on disagreements concerning Musk’s plan to move the company’s operations to Microsoft Windows. Then was renamed PayPal in 2001 and the platform took off from there.

The Choice

PayPal’s operations grew rapidly through 2001, and the ownership team felt the time was right to take the company public in 2002. PayPal brought in over $61 million in its initial public offering with a market cap of less than a billion dollars, and this was considered a successful IPO for the relatively small tech company. But PayPal just had about six more months as an independent entity before a deal was reached for eBay to acquire the company for $1.5 billion. At the time, the bulk of PayPal’s business was coming from eBay auctions, and eBay was looking to expand the use of electronic payments on the platform as about 60% of purchases were made through check or money order. eBay and PayPal had actually been rivals leading up to merge, but eBay found it impossible for their Billpoint service to compete with PayPal. PayPal also got much greater visibility from the deal, and this proved to be a pivotal choice that took PayPal to a completely new level.


PayPal took another giant step when it purchased a company called Braintree in December 2013 for $800 million. Braintree had acquired the peer-to-peer money transfer app Venmo the year prior, for $26.2 million. It’s seen as a more Millennial-friendly branch of the company. Venmo is currently accepted at more than 2 million merchants. By the beginning of 2019, there were 40 million active Venmo accounts, and the total payment volume has been steadily increasing year after year. PayPal’s acquisition of Venmo came just months before Apple launched its own digital payment service called Apple Pay. While Apple Pay is certainly a competitor PayPal will be keeping its eye on, it has not yet achieved the same reach as PayPal as it is only offered in 60 markets versus PayPal’s 200 as of the end of 2019. But Apple CEO Tim Cook has been prioritizing the expansion of this service, and there is huge growth potential. However, Venmo has similar potential in the peer-to-peer money transfer space as it has not gained widespread recognition just yet. It also sets itself apart by offering a social media component with transactions being displayed on the user’s newsfeed. Even though this is a very competitive market, there are a few reasons why PayPal has managed to stay ahead of the game.


PayPal had plenty of competition in its early years, but none were able to gain much traction. Google Checkout, Yahoo’s Pay Direct, and Western Union’s BidPay service were all discontinued while PayPal thrived. PayPal stood out because of its convenient features like invoicing and multiple payment methods, and it was also very easy to sign up and send money right away. One of the top factors in their success was their backing by eBay.


The transaction fee they take in from each sale. A total of 9.9 billion payments were made through PayPal in 2018, up from 7.6 billion payments the year before. The total payment volume in 2018 was $578 billion, up 27% from 2017. Transactions totaled 15.45 billion dollars in 2018, and that figure has been increasing year after year. It’s clear by these numbers that PayPal isn’t going anywhere and is still seeing incredible growth. In 2018, PayPal partnered with Synchrony Financial to expand its consumer credit operations. PayPal has acquired 21 companies over the last 10 years, with the most recent being the tech company Honey, which automatically applies online coupons. PayPal bought Honey in November 2019 for $4 billion. They also invested 500 million dollars in Uber in 2019, although that investment hasn’t been working out so well since Uber’s shares dropping has cost PayPal about $215 million of their investment. But PayPal continues to look ahead with ambitious plans for the years to come.

The Feature

In 2014, it was decided that eBay would spin off PayPal into an independent publicly-traded company. This went into effect in July 2015. PayPal’s agreement with eBay ends in 2020, and while it will still be a payment option, PayPal will no longer process card payments for eBay and will not be prominently featured alongside the other payment options. PayPal has been preparing for this by expanding to numerous merchants outside the eBay community. Daniel Schulman, who became CEO in 2014, still envisions PayPal as being the future of online payments. He plans for PayPal to become an even bigger influence in finance with added ATM access, bill payments, and integrated services from the companies they have acquired. Schulman has described a future where people no longer wait in line to pay for things as payment will become a seamless part of the shopping experience. He wants PayPal to be at the forefront of this technology. 


PayPal originated in the digital payment industry as we know it today. They paved the way for other players who are trying to claim their piece of the market share. Although PayPal has been in the game the longest and is, therefore, the most established brand with a higher level of brand loyalty, they will need to continually evolve and innovate their products to maintain their lead and stay competitive. We can confidently state that PayPal is the king of online payments today, but there is potential for other competitors like Google and Amazon to make up ground and claim the crown in the years to come. There’s a group of former PayPal employees who are referred to as the PayPal Mafia. The 6 members of the group are Elon Musk, Luke Nosek, Keith Rabois, Peter Thiel, Ken Howery, and Reid Hoffman. The companies they have founded among themselves include SpaceX, Yelp, Linked In, Tesla Motors, Palantir Technologies, and YouTube.

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