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The Success Story of PayPal

  • Ayush Singh Rawat
  • Feb 16, 2021
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PayPal has been in the news since this week as the multi-national company has banned its domestic services within India. This might come as a shock to many but RBI’s rules have made the company retract its steps in India. These rules are in compliance with keeping every person’s sensitive financial information safe and secure. Security is the most important stone but with PayPal exiting India, how does it affect us? 


The leaving ensures that PayPal services won't be fully functional, which leaves the loyal users in a pickle. As PayPal has achieved so much over a short span of time and literally scaled great heights, its absence in India would surely hurt us.


So, let’s take a glance at what makes PayPal a great company and how has it achieved to grow leaps and bounds.


History of PayPal


PayPal was established in 1998 as Confinity. At that time it was a company that provided security software for mobile devices but experienced no success. With the ashes of Confinity, rose the ranks of PayPal. An exclusive platform for digital payments, PayPal was launched in 1999.


In March 2000, Confinity joined hands with X.com, an online banking company owned by none other than the richest man in the world, Elon Musk. He had high expectations out of Confinity during its infant stages and was keen on taking over it.


Due to this, he had a falling out with his X.com co-owner, Bill Harris which led to Harris’s departure in the summer of 2000.


In October of that year, Musk decided that X.com would terminate its other internet banking services and focus on PayPal. Within 2 fortnights, Elon Musk was replaced by Peter Thiel as CEO of X.com, which was renamed PayPal in 2001 and went public in 2002.


(Also read: Success Story of Razorpay)


Pals with eBay


Shortly after PayPal's IPO, eBay bought the company on October 3, 2002, for $1.5 billion. More than 70 per cent of all eBay auctions accepted payments via PayPal, and roughly 1 in every 4 closed auction listings were transacted via PayPal.


PayPal became the trustworthy payment method used by the majority of eBay users, and the service battled with eBay's subsidiary Billpoint, as well as Citibank's c2it, Yahoo!'s PayDirect, and Google Checkout.


In 2005, PayPal acquired the VeriSign payment solution to provide extra security support. In 2007, PayPal announced a partnership with MasterCard, leading to the making of the PayPal Secure Card service, a software that allows its esteemed customers to make payments on websites that do not accept PayPal directly.


The company expanded its Merchant Services division by providing e-payments for retailers on eBay. In 2011, PayPal announced that it would begin catering to a business offline so that customers can make payments via PayPal in stores. 


In August 2012, the company announced its integration with Discover Card to allow PayPal payments to be made at any of the 7 million stores in Discover Card's network. By the end of 2012, PayPal's total payment volume accounted for 40% of eBay's revenue, amounting to US$1,370,000,000 in the 3rd quarter of 2012.


It was announced on September 30, 2014, that eBay would demerge with PayPal into a separate publicly-traded company, finally happening on July 18, 2015.


eBay and PayPal parted ways in 2015 and became separate public companies, but have maintained close business ties.


But recently eBay announced that it will stop working with PayPal in 2020 and start transitioning to Adyen, an Amsterdam-based payments company. It claims that Adyen provides better customer experience as it enables smooth payment flow and simplifies the end-to-end experience for buyers and sellers.


PayPal Business Model Dissected


As we have established earlier PayPal makes money primarily by processing customer transactions on the Payments Platform and from other value-added services.


We’re going to take a look at the ecosystem the company was able to build throughout the years via acquisitions and international expansion.


PayPal has successfully assembled the galaxy of payment systems and apps around itself that comprise platforms and mobile gateways that allow it to penetrate several markets. Within PayPal there are other four primary brands:


  • Braintree

  • Venmo

  • Paydiant

  • Xoom


(Suggested reading: The Success Story of boAt)



What is Braintree?


In 2013, PayPal acquired Braintree, a company that allows acceptance and processing of payments. This was an all-cash deal of $800 million, and as reported by TechCrunch after the acquisition, eBay Inc.


Braintree’s global platform allows payments for innumerable online and mobile commerce innovators. It eliminates the need to have a payment gateway and a merchant account separately. In addition to this, Braintree lets you utilize your own merchant account and use its payment gateway. 


President and CEO John Donahoe said: “Bill Ready [CEO of Braintree] and his team add complementary talent and technology that we believe will help accelerate PayPal’s global leadership in mobile payments.


What is Venmo?


When your brand name becomes a verb (just like “WhatsApp me”) that company might be on the right path down the success lane. Venmo had become so prominent among millennials that it has become a slang (“Venmo me money”). Braintree was taken over by Venmo in 2012.


Thus, before Braintree joined hands with PayPal, it had already acquired Venmo, making them the original brothers of this payment’s family.


Venmo is an app that allows users to share and make payments with friends for a variety of services.


The social aspect of this app is important, and it is also what makes Venmo so successful among millennials. It allows youth to connect with their friends, which marks the youthful aura around it and the features also operate at the same wavelength as the gen-z.


What is Paydiant? 


The Paydiant Platform is a white-label mobile wallet solution. Thus, it provides payment solutions for merchants and banks, as well as for resellers and distributors, and point-of-sale and ATM providers.


In short, they can integrate with branded mobile wallet apps that work at the point of purchase at retail, restaurant, fuel site, cash access atm, and other in-person locations.


What is Xoom?


Xoom is a monetary service that provides worldwide money transfers through PayPal. It allows consumers to send & receive money, pay bills and reload mobile phones from the United States to 52 countries.


As pointed out by PCmagXoom lets you send money to recipients in 66 different countries, as well as top up cell plans and pay utilities abroad. It’s a convenient and well-designed service, though its rates are less favourable than some of the competition.“



Revenue Sources


PayPal revenue streams are divided into two main categories:


  • Transaction revenues: The transaction fees that are charged to consumers and merchants primarily based on the volume of activity, or Total Payments Volume.

  • Other value-added services: The revenues derived principally from interest and charges earned on loans and their interest.



KPI(Key Performance Metrics)


PayPal’s success can be measured with 3 performance metrics, namely;


  • Active customers account- It was formulated in the 3rd quarter of 2020 that there are 361 million registered accounts. 2020 saw a jump of 22% from previous year numbers.

Representing the total number of active user accounts (in millions) of Paypal from Q1 2010 to Q3 2020.

                                         Total number of active user accounts of Paypal, Source: Statistica

  • Payment transactions- 4.01 billion payments were completed in the 3rd quarter of 2020  excluding transactions processed through our gateway and Paydiant products.

  • Total payment volume- In the third quarter of 2020, PayPal’s net payment volume amounted to be around 246.7 billion U.S. dollars, representing a 38 per cent growth.


Showing the total payment volume (in billions) of PayPal from Q2 2019 to Q3 2020.

                          Total payment volume of PayPal, Source: Statistica

 Success Mantra of PayPal


  • Targeting the Youth- PayPal has defined the Youth as there target audience and has churned great features and usability purposes for them. Most of the youth don't have access to credit cards so PayPal acts as a saviour as it allows electronic exchange of money for them. 

  • Opening dimensions- Credit card is used for a person to merchant payment, person to person payment was one market untapped until PayPal came along. PayPal allows you to pay someone electronically who is not a merchant and/or does not have a merchant account.

  • Network effect- Most of the merchants and consumers have PayPal accounts, it makes the service more interconnected, valuable and easier to use for the next person/merchant joining the network.

  • Security- Merchants and service providers are very loose at giving security utmost importance and tend to be prone to financial theft but PayPal provides end-to-end encrypted transactions providing security for extra protection against fraud and identity theft.

  • Ease of use- PayPal provides hassle-free transactions as you just need your PayPal id and password to transact money which makes it easy, fast and more reliable way to pay.


(Recommended read: The success story of Lenskart)





PayPal has proved its mettle all across the globe and has created a special spot for itself in the market. It is one of the most successful electronic payment methods and will continue to do so. 


The recent news for PayPal in India just highlights the differences between the RBI and the company as the company was put through with many conditions resulting in the in-service withdrawal of domestic payments through PayPal in India.

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