Contents |
PayPal Inc is an online payment mechanism that went from cult status to stardom practically overnight (Lucas, 2003). The mechanism, which lets buyers instantly send money over the Web without typing in credit card numbers, is praised by many users who claim that PayPal is easier and safer to use than plastic (Hof, 2005). PayPal’s services make it possible for potential sellers to set up shop on the Web and begin taking credit card orders in a matter of hours without any initial investment (Gebhardt, 2004).
The original PayPal company was founded in 1998 by American securities lawyer and options trader Peter Theil. Other Stanford University alumni were involved with the financing of the company, along with other big-name investors including Nokia Ventures and the Deutsche Bank. These two investors contributed over $4 million to the backing of PayPal. Upon PayPal’s official launch in November 1999, the company attracted another significant backer in investment bank Goldman, Sachs & Co. Goldman, Sachs & Co invested a further $23 million into PayPal (http://www.internet-story.com/paypal.htm). Less than three years after being formed, PayPal was launched on the public stock market, and instantly began turning a profit (Lucas, 2003).
Despite having its own payment system in Billpoint, in 2001, most of major auctioning site eBay’s transactions were being handled through PayPal (Lucas, 2003). eBay realised the affinity of PayPal among its users, and in October 2001, acquired PayPal for $1.5 billion (Hof, 2005). Billpoint was phased out and PayPal became the major method of payment on eBay.
PayPal’s major affiliation is eBay, but the company also offers its services to a number of independent merchants both in the US and internationally. These companies include Overstock.com and the Apple iTunes music store.
The success of PayPal is unwarranted, with the company being one of the best-known money handlers in the world. PayPal has over 72 million accounts worldwide (Hansell, 2005), compared to American Express, which handles around 65 million accounts (Hof, 2005). In the first quarter of 2005, PayPal handled $6.2 billion in payments (Hansell, 2005). PayPal accepts credit cards in 57 countries, and accepts Euros, Australian Dollars, Pounds Sterling, Canadian Dollars and Japanese Yen (http://en.wikipedia.org/wiki/Paypal). The success of PayPal has prompted many copycats in the market, including a forthcoming option powered by Google, which would act as a direct challenge to PayPal (Hansell, 2005).
In September 2005, the Florida Attorney General shut down a website that was fraudulently soliciting relief donations intended for Hurricane Katrina victims via PayPal.
Also in September 2005, PayPal suspended an account opened by Something Awful's owner Richard Kyanka. Kyanka was using the account for the purpose of collecting donations for the Red Cross to help the victims of Hurricane Katrina. After receiving over $30,000 in donations in 9 hours PayPal locked the account; the process of restoring the account required "proof of delivery" despite the fact that no products were being sold. Kyanka contacted PayPal asking that the funds be given to the Red Cross, PayPal said they couldn't do this but could give the money to United Way, a charity collecting for the same cause that had an agreement with PayPal. Kyanka originally agreed to this, but after learning of previous legal troubles with this charity asked PayPal to refund all the donations. It remains unclear whether simply waiting for PayPal to reach a decision in regards to the account would have resulted in PayPal allowing the money to reach the Red Cross (http://en.wikipedia.org/wiki/Paypal).
Further information can be found at:
Back to Companies
Lauren Spackman 22:26, 16 Oct 2005 (EST)
