PayPal

Background

PayPal is part of the eBay company is provides a safer, easier way to pay and get paid online. The service allows anyone to pay without sharing financial information and gives consumers the flexibility to pay in any way they prefer, including through credit cards, bank accounts or account balances. With more than 164 million accounts in 190 markets and 17 currencies around the world, PayPal enables global ecommerce.

History of PayPal

Paypal was founded by Peter Thiel and Max Levchin in 1999 under the name Confinity. The idealistic vision of the company was one of a borderless currency free from governmental controls. However, PayPal's success quickly drew the attention of hackers, scam artists and organized crime groups, who used the service for frauds and money laundering. New security measures stemmed the tide of fraud and customer complaints.

Despite the initial turmoil, PayPal's market share continued to grow. At first PayPal offered new users $10 to join, plus bonuses for referring friends. The service grew so quickly that it soon became the default online payment service. Buyers wanted to use it since so many merchants accepted it, and merchants accepted it because so many buyers were using it. PayPal owes much of its initial growth to eBay users who used the service to pay for items and accept payments for their online auctions. PayPal even beat eBay at the online payment business, trumping eBay's in-house payment system Billpoint so thoroughly that in 2002, eBay bought PayPal. It phased out Billpoint and integrated PayPal into its services. Sellers with PayPal accounts can place icons in their auctions and buyers can simply click on a PayPal logo when they win an auction to make an immediate payment.

eBay spent another $370 million to buy out another PayPal competitor, VeriSign.

Purposes

PayPal is an online payment service that allows individuals and businesses to transfer funds electronically. It uses encryption software to allow people to make financial transfers between computers. PayPal is an online payment service that allows individuals and businesses to transfer funds electronically.

By using Paypal, users can send funds to anyone with an e-mail address, whether or not they have a PayPal account. They'll get a message from PayPal about the funds, and then they just have to sign up for their own account.

Funds transferred via PayPal reside in a PayPal account until the holder of the funds retrieves them or spends them. If the user has entered and verified their bank account information, then the funds can be transferred directly into their account.

Features:

Ebusiness model

PayPal acts a middleman for merchants, banks and credit card companies. Credit and debit card transactions travel on different networks. When a merchant accepts a charge from a card, the merchant pays an interchange, which is a small fee of about ten cents plus approximately 2 percent.

The interchange is made up of a variety of small fees paid to all the different companies that have a part in the transaction -- the merchant's bank, the credit card association and the company that issued the card. If someone pays by check, a different network is used, one that costs the merchant less but moves more slowly.

Both buyer and seller deal with PayPal, having already provided their bank account or credit card information. PayPal, in turn, handles all the transactions with various banks and credit card companies, and pays the interchange. They make this back on the fees they charge for receiving money, as well as the interest they collect on money left in PayPal accounts.

It can be use for:

1. Sending Funds
Pay for online auctions, purchase goods and services, or to make donations.

2. Receiving Funds
Merchants who want to use PayPal to accept payments have a wide range of options available. For basic payments, such as online auctions or simple Web site sales, the merchant can simply provide buyers with their e-mail address, and buyers can make the appropriate payments to the merchant's PayPal account. eBay sellers can place PayPal buttons on their auctions, and the checkout invoice PayPal sends to auction winners will include a link to pay via PayPal.

3. Personal transactions

Transactions do not have to be made on eBay in order to use PayPal. PayPal is also ideal for moving money between strangers, without using credit card or personal information.

PayPal also provides extensive services for online merchants. Without services like PayPal, someone who wanted to accept credit card payments online had to set up a merchant account through a credit card company. Creating a Web interface to use this account could be confusing and difficult. PayPal bypasses this problem. Business or Premier PayPal accounts can set up a Buy Now button, a PayPal shopping cart, or options for ongoing subscriptions and recurring payments.

PayPal also handle transactions for merchants who sell to international users. It can convert funds to whatever currency the merchant wants for 2.5 percent. Currently, PayPal accepts funds in currencies such as; Australian Dollar, Canadian Dollar, Euro, Pound Sterling, U.S. Dollar and Yen.

Strength

Some of Paypal’s strengths include:

1. Accepting Credit Cards without a Merchant Account

Sellers can accept all major credit cards as well as payments from bank accounts. Your customer doesn't have to be a member of PayPal to pay by credit card.

2. Low Cost

There are no initial or monthly fees to join PayPal.

3. Flexible and Easy to Use

PayPal payments can be made in six different currencies for digital or physically shipped products, auctions, services and recurring payments (like subscriptions).

4. Shopping Cart

You can use PayPal's free shopping cart or use other compatible third-party shopping carts.

5. Buyer Network

According to PayPal.com, PayPal has more than 86.6 million accounts in 56 countries and regions. Its large network allows Merchants to reach to these large groups of buyers efficiently and effectively.

6. Merchant and Auction Tools

PayPal has a number of automated tools including financial reporting, shipping calculation, sales tax and value-added tax calculation, and much more. Since PayPal is an eBay company, it is designed to integrate well with eBay auctions.

7. Fraud Detection

PayPal have a Seller Protection Policy is designed to protect the merchant and their Buyer Protection Policy is designed to protect the customer.

Weaknesses

The biggest disadvantage was that your customers also had to register for an account with paypal. However with recent offerings of Website Payments Pro and Paypal Express Checkout much of these disadvantages no longer apply.

For larger value order, customers must also verify themselves by doing a test transaction and then waiting for the first credit card statement to arrive, which will contain the transaction code for the test transaction. Once this code is supplied to paypal, the account is said to be "verified". This rather lengthy process is the main reasons why many people are put off from using paypal.

These disadvantages were serious enough for many businesses to rule out the use of paypal on their ecommerce website.

Critical Analysis Of The Site

Throughout this research, many criticisms were found to be against Paypal. Nevertheless, it provides users with an easy solution to transferring and receiving funds through the internet with its user friendly interface. It can be said to be one of the leading brands online by providing services to users with majority being ebay users. In the long run, Paypal will most likely continue to expand and provide more services to its users and gain a bigger share in the market.