PayPal Holdings, Inc. is an American company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper methods like checks and money orders. The company operates as a payment processor for online vendors, auction sites, and many other commercial users, for which it charges a fee.
Established in 1998 as Confinity, PayPal had its initial public offering in 2002. It became a wholly owned subsidiary of eBay later that year, valued at $1.5 billion. In 2015, eBay spun off PayPal to eBay’s shareholders. The company ranked 204th on the 2019 Fortune 500 of the largest United States corporations by revenue.
October 1999 (as X.com)
|Headquarters||2211 North First Street
San Jose, California, U.S. (corporate headquarters)
La Vista, Nebraska, U.S. (operative center)
|Products||Credit cards, payment systems|
|Revenue||US$17.772 billion (2019)|
|US$2.719 billion (2019)|
|US$2.459 billion (2019)|
|Total assets||US$51.333 billion (2019)|
|Total equity||US$16.929 billion (2019)|
Number of employees
|c. 21,800 (Dec. 2018)|
PayPal was originally established by Max Levchin, Peter Thiel, and Luke Nosek in December 1998 as Confinity, a company that developed security software for handheld devices. It had no success with that business model, however, so switched its focus to a digital wallet. The first version of the PayPal electronic payments system was launched in 1999.
In March 2000, Confinity merged into X.com, an online banking company founded in January 1999 by Elon Musk. Musk was optimistic about the future success of the money transfer business Confinity was developing. Musk and Bill Harris, then-president and CEO of X.com, disagreed about the potential future success of the money transfer business and Harris left the company in May 2000. In October of that year, Musk decided that X.com would terminate its other internet banking operations and focus on PayPal. That same month, Elon Musk was replaced by Peter Thiel as CEO of X.com, which was renamed PayPal in 2001 and went public in 2002. PayPal’s IPO listed under the ticker PYPL at $13 per share and generated over $61 million.
eBay subsidiary (2002–2014)
Shortly after PayPal’s IPO, the company was acquired by eBay on October 3, 2002, for $1.5 billion. More than 70 percent of all eBay auctions accepted PayPal payments, and roughly 1 in 4 closed auction listings were transacted via PayPal. PayPal became the default payment method used by the majority of eBay users, and the service competed 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 added security support. In 2007, PayPal announced a partnership with MasterCard, which led to the development and launch of the PayPal Secure Card service, a software that allows customers to make payments on websites that do not accept PayPal directly. By the end of 2007, the company generated $1.8 billion in revenue.
In January 2008, PayPal acquired Fraud Sciences, a privately held Israeli start-up that developed online risk tools, for $169 million. In November 2008, the company acquired Bill Me Later, an online transactional credit company.
By 2010, PayPal had over 100 million active user accounts in 190 markets through 25 different currencies. In July 2011, fourteen alleged members of the Anonymous hacktivist group were charged with attempting to disrupt PayPal’s operations. The denial of service attacks occurred in December 2010, after PayPal stopped processing donations to WikiLeaks. On December 5, 2013, 13 of the PayPal 14 pleaded guilty to misdemeanor and felony charges related to the attacks.
The company continued to build its Merchant Services division, providing e-payments for retailers on eBay. In 2011, PayPal announced that it would begin moving its business offline so that customers can make payments via PayPal in stores. In August 2012, the company announced its partnership 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 processed was US$145,000,000,000. and accounted for 40% of eBay’s revenue, amounting to US$1,370,000,000 in the 3rd quarter of 2012.
In 2013, PayPal acquired IronPearl, a Palo Alto startup offering engagement software, and Braintree, a Chicago-based payment gateway, to further product development and mobile services. In June 2014 David Marcus announced he was leaving his role as PayPal President; Marcus joined PayPal in August 2011 after its acquisition of Zong, of which he was the founder and CEO. David Marcus succeeded Scott Thompson as president, who left the role to join Yahoo. PayPal announced that Marcus would be succeeded by Dan Schulman, who previously served as CEO of Virgin Mobile and Executive vice president of American Express.
Spin-off from eBay (2014–present)
It was announced on September 30, 2014, that eBay would spin off PayPal into a separate publicly traded company, a move demanded in 2013 by activist hedge fund magnate Carl Icahn. The spin-off was completed on July 18, 2015. Dan Schulman is the current president and CEO, with former eBay CEO John Donahoe serving as chairman. On January 31, 2018, eBay announced that “After the existing eBay-PayPal agreement ends in 2020, PayPal will remain a payment option for shoppers on eBay, but it won’t be prominently featured ahead of debit and credit card options as it is today. PayPal will cease to process card payments for eBay at that time.” The company will “instead begin working with Amsterdam-based Adyen“.
On July 1, 2015, PayPal announced that it was acquiring digital money transfer company Xoom Corporation. PayPal spent $25 a share in cash to acquire the publicly traded Xoom, or about $1.09 billion. The deal was closed in the fourth quarter of 2015. The move strengthened PayPal’s international business, giving it access to Xoom’s 1.3 million active U.S. customers that sent about $7 billion in the 12 months ending on March 31, to people in 37 countries.
On September 1, 2015, PayPal launched their peer-to-peer payment platform “PayPal.Me”, a service that allows users to send a custom link to request funds via text, email, or other messaging platforms. Custom links are set to be structured as PayPal.me/username/amount requested. PayPal.Me was launched in 18 countries including the United States, United Kingdom, Germany, Australia, Canada, Russia, Turkey, France, Italy, Spain, Poland, Sweden, Belgium, Norway, Denmark, Netherlands, Austria and Switzerland. PayPal had 170 million users, as of September 2015, and the focus of PayPal.Me was to create a mobile-first user experience that enables faster payment sharing than PayPal’s traditional tools.
On May 17, 2018, PayPal agreed to purchase Swedish payment processor iZettle for $2.2 billion. This was PayPal’s largest acquisition until late November 2019 and the company claims that it is the in-store expertise and digital marketing strength that will complement its own online and mobile payment services.
In June 2019, PayPal reported that Chief Operating Officer Bill Ready would be leaving the company at the end of the year. In December 2019, Google announced that Ready would become the new commerce chief.
In January 2021, PayPal became the first foreign operator with 100% control of a payment platform in China aiming to become in an advanced position as to the online payments.