PayPal is an e-commerce business allowing payments and money transfers to be made through the internet. It serves as an electronic alternative to traditional paper methods such as checks and money orders. PayPal performs payment processing for online vendors, auction sites, and other corporate users, for which it charges a fee. In October 2002, PayPal became a wholly owned subsidiary of eBay. Their corporate headquarters is in San Jose, California.



PayPal account holders must be 16 or over with a debit/credit card or bank account and e-mail address.

Beginnings:

PayPal Corp, as it is known today, is the result of a March 2000 merger between Confinity and X.com[1]. Confinity was founded in December of 1998 by Peter Thiel and Max Levchin, initially as a Palm Pilot payments and cryptography company[2]. X.com was founded by Elon Musk in March of 1999, initially as an Internet financial services company. Both companies were located on University Avenue in Palo Alto. On the Confinity business side, many of its initial recruits were alumni of The Stanford Review, also founded by Peter Thiel, and most early engineers hailed from the University of Illinois at Urbana-Champaign, recruited by Max Levchin. On the X.com side, Elon Musk recruited a wide range of personnel, many of whom remain at PayPal today, such as the current head of product, Amy Klement [3] and several other members of the senior team.

Though growing rapidly, PayPal was losing $10 million a month and was fraught with internal turmoil that led to three CEO changes in its first year of operations. Foreign organized crime rings found ways to steal millions from the young company by automatically registering accounts using stolen identities. To block automated systems from using this form of fraud, PayPal devised a system (see Captcha) of making the user enter numbers from a blurry picture; according to Eric M. Jackson, author of the book The PayPal Wars, PayPal invented this system now in common use; though, there is evidence AltaVista used a captcha as early as 1997, before PayPal existed.

eBay watched the rise in volume of online payments, and realized its fit with online auctions. But rather than work with PayPal, eBay purchased a competing payment service named Billpoint. eBay made Billpoint the official payment system of eBay, dubbing it "eBay Payments", but cut the functionality of Billpoint by narrowing it to only payments made for eBay auctions.

For this reason PayPal was listed in several times as many auctions as Billpoint. In February of 2000 there were approximately an average of 200,000 daily auctions advertising the PayPal service while Billpoint (in beta) had only 4,000 auctions. By April of 2000 there were more than 1,000,000 auctions promoting the PayPal service. PayPal was able to turn the corner and become the first dot-com to IPO after the September 11 attacks.

Near the time when PayPal went public (first quarter 2002), it filed an anti-competition complaint against eBay on the grounds of using its auction venue to attempt to force PayPal off its site. However, the company eventually reconciled with its former rival.

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