PayPal is by far the most popular means of electronic payment – a convenient way to make purchases or transfer money online. It is also one of the oldest, having been bought by and used to popularise the first major online market place, eBay. It is now an independent public company, having been spun off by eBay in 2015.
Some History on PayPal
PayPal may well now be the biggest name in online payments, but at its birth at the very beginning of online trading, it was very small fry indeed. Like many massive companies, its early history is shrouded in myth and mystery. Much like the source of the Amazon (both the river and the company), the precise story of its origin is open to dispute and varied interpretations. Most can agree that it was founded as little as twenty years ago, back in 1998, when some far-sighted American entrepreneurs saw the need for an electronic alternative to paying by cheque or money orders (known as postal orders in the United Kingdom). These soon-to-be tycoons set up their new company, called Confinity, which launched a new electronic money transfer service, called PayPal, the following year.
It was at this point that the now world famous Elon Musk became involved (see below), as Confinity was merged with the youthful Musk’s X.com company. Unfortunately, the new company’s name has apparently unintended but potentially pornographic connotations. It was therefore rejected as the new name for the service, which continued to be known as PayPal.
The new payment service was incredibly popular and expanded rapidly, so much so that the decision was taken to take the new company public in 2002. Its launch on the New York stock exchange generated over $60 million. This must have seemed like a very successful and lucrative launch, but it was blown out of the water shortly afterwards. This was when the rapidly expanding online marketplace eBay saw the new payment system as the perfect vehicle for handling payments between traders and customers on their site. They bought PayPal outright later the same year for what seemed at the time an incredible $1.5 million.
PayPal then became the default choice for eBay transactions, covering around three quarters of all the bargains struck on the site. It was so successful that rival e-payment services set up by internet and financial giants like Yahoo, Citibank and Western Union were soon forced to close.
PayPal continued to grow rapidly whilst under the wing of its eBay owners. By 2010 it was far and away the world’s favoured electronic payment system, with more than 100 million active customers across close to 200 different countries, using a couple of dozen different currencies.
In 2014, the decision was taken to spin-off this incredibly successful operation. This was process was completed in July 2015, when eBay relinquished control of PayPal, which became an independent publicly traded company once again.
The latest figures, from 2017, show that PayPal now has close to 200 million account holders across the world. This includes 20 million accounts held in the United Kingdom alone. The service is now active in over 200 countries across the globe. In addition to the US dollar, customers can also use any of 25 different currencies for their transactions, including all of those most commonly used by UK based customers and travellers, such as the pound sterling and the Euro.
So how does it all Work?
In short, PayPal is a fast, simple and secure way to pay online. It’s easy to sign up and completely free. All you need to do is provide your e-mail address. You’ll need to create a password, and then link your newly created PayPal account to your bank account, debit or credit card. You can even use all three if you wish.
The important thing to note with PayPal is that you don’t need to have any money in your PayPal account. What happens is that when you want to make a purchase, you just tap in your e-mail address and password, or mobile number and PIN if you are using your phone. Your payment is then made by PayPal by automatically deducting your payment directly from your chosen credit or debit account.
There are so many advantages when using PayPal. Firstly, it is free to you the buyer. Sellers pay a small commission for accepting PayPal payments, but you, as the buyer, are not charged at all. Secondly, it’s easy: no reaching into your wallet, purse or handbag for that elusive plastic card; no fiddling with expiry dates and validation procedures – just one click or tap and a password or PIN and it’s done.
Then of course there is the security angle. Because PayPal has your banking details safely stored away, you don’t have to give these to the retailer or seller at all. PayPal takes care of the payment directly. No-one can see your bank card, nor watch you when you key or tap your banking details on your computer, tablet or mobile, nor overhear your conversation on the phone. Your banking details can’t even be hacked, because you’re not sending them!
Just look for the PayPal button when you check out or make payments online. One click or tap and a PIN or password and you’re there. And if you download the PayPal app, you can even make payments to your friends and keep track of all your transactions on your phone.
Also, with PayPal Buyer Protection, you are effectively insured against your goods not arriving, or failing to be as expected. If you don’t receive what you paid for, or what you do get is not as described, you can claim a full refund directly from PayPal.
All of this is provided completely free to you the customer in the vast majority of transactions. There are some rare occasions where you may have to pay a small fee. The most common reason for this is that you are likely to be charged a currency conversion fee if the seller’s currency is different to yours.
PayPal remains the most popular and convenient way to make electronic payments when buying goods or services online. It really is the ideal option for paying for anything online swiftly and easily. And what’s more, for almost all typical everyday transactions, it’s completely free. As the company’s own promotional strapline says, it really is “Fast, Simple and Secure”.
Some Background on its Founder Elon Musk
Elon Musk may be the iconic name most associated with the development of PayPal, but in truth he wasn’t around for long. He was the owner of X.com, which merged with PayPal owners Confinity in 2000. He was the original CEO of the newly merged company, but soon fell out with his fellow directors over the future strategy of the payment service. He was subsequently removed from his role, but remained on the board. He also remained the company’s largest shareholder, owning nearly 12% of PayPal’s shares. This meant that when PayPal was acquired by eBay in October 2002, Musk received a cool $165 million by way of compensation.
This fortune enabled him to begin his amazing line-up of technology companies. He remains at the forefront of technological development in the United States to this day. Perhaps the most famous of these is Space X, his space rocket design company. With this company, he has invested heavily in rocket technology, working closely with the US Government funded NASA organisation. Indeed, his own company’s rocket launches now propel NASA’s own satellites into orbit and contribute to supplying provisions for the International Space Station (ISS). This has become an essential support mechanism for NASA ever since the retirement of their Space Shuttles in 2011. Space X is the first commercial company to do this, and one of the very first private companies to venture into space at all.
Space X’s Falcon rockets and Dragon spacecraft are at the cutting edge of modern day space technology, an incredible achievement for a non-state funded organisation. This innovation is demonstrated by the company’s development of reusable technology: they have successfully landed their rockets back on their launch pads. This has been achieved not only on land, but also at sea, where the rocket was successfully soft-landed on a remotely controlled ship. This is not just a clever trick: re-usable rockets are intended to drive down the costs of space technology. Space X has now been awarded a contract by NASA to develop a crew carrying spacecraft, so that it will be able to transport astronauts as well as cargo in the future.
As if this was not enough, the company is aiming even further afield. Musk is planning to reach the planet Mars. He intends to land humans on Mars by 2030, and found a self-sustaining space colony on the Red Planet by 2040. Given the current rapid rate of technological improvement, who would bet against him? He certainly has confidence in his plans, stating that he would like to go to the planet himself. In fact he jokes that he even plans to die there, just not on impact.
But Elon Musk is also very involved with other earth based technologies too. He provides the investment behind his Tesla motors project. Tesla are at the forefront of electrical motor development, selling not only his Tesla branded cars, but also providing electric engines for some big name mainstream car manufacturers like Daimler, Mercedes and Toyota. This technology is likely to become ever more important in the future, as oil is predicted to become more scarce (and therefore more expensive), and as a way of attempting to limit air and noise pollution and carbon dioxide and particle emissions.
In addition to this, Elon is also the name behind Solar City, an attempt to improve solar power generation, and Hyperloop, a futuristic high speed transportation system using magnetic induction motors and compressed air to propel passenger capsules through sealed tubes. And the ideas just keep coming. His most recent projects include the development of a tunnelling machine. With his trademark humour, the name of the organisation responsible for this exciting project is the Boring Company.
Lastly, but almost certainly not finally, he has co-founded a new start-up company called Neurolink. This is an attempt to provide a direct link between the human brain and artificial intelligence by producing brain implants which can communicate with computer software and artificial intelligence technology. The ultimate goal is to enable the human brain to communicate directly with computers and other devices.