PayPal

Overview

PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers; it serves as an electronic alternative to traditional paper methods such as checks and money orders. The company operates as a payment processor for online vendors, auction sites and many other commercial and company users, which involve a fee. Established in 1998 as Confinity, PayPal went public through an IPO 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 its shareholders, and PayPal became an independent company again. The company was ranked 143rd on the 2022 Fortune 500 of the largest United States corporations by revenue.

Early history

The company was originally established by Max Levchin, Peter Thiel, and Luke Nosek in December 1998 as Fieldlink. Later it was renamed Confinity, a company which developed security software for hand-held devices. When it had no success with that business model, it 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 with X.com, an online financial services company founded in March 1999 by Elon Musk, Harris Fricker, Christopher Payne, and Ed Ho. Musk was optimistic about the future success of the money transfer business Confinity was developing. Musk and Bill Harris, then-president and CEO of the combined X.com, disagreed about the potential future success of the money transfer business and Harris left the company in May 2000. In October 2000, Musk decided that X.com would terminate its other internet banking operations and focus on payments. In the same month, Elon Musk was replaced by Peter Thiel as CEO of X.com, which was renamed PayPal in June 2001 and went public in 2002. PayPal's IPO listed on NASDAQ under the ticker PYPL at $13 per share and generated over $61 million.

eBay subsidiary (2002–2014)

Shortly after PayPal's IPO, eBay acquired the company on October 3, 2002, for $1.5 billion in eBay stock. 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 5 December 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 seven million stores in the Discover network. By the end of 2012, PayPal's total payment volume processed was US$145 billion. and accounted for 40% of eBay's revenue, amounting to US$1.37 billion 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. On July 20, the company was relisted on Nasdaq under the same ticker symbol it used shortly before it was acquired by eBay, PYPL. On January 31, 2018, eBay announced "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 spent about $7 billion in the 12 months ending on March 31, to people in 37 countries. On September 1, 2015, PayPal launched its 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 2018, PayPal became a jersey patch sponsor of the Phoenix Suns. On March 19, 2019, PayPal announced its partnership with Instagram as part of the company's new checkout feature, "Checkout on Instagram". In June 2019, PayPal reported that Chief Operating Officer Bill Ready would be leaving the company at the end of the year, transitioning into the role of commerce chief for Google. In October 2019, PayPal reported a loss of $228 million on investments, largely due to a failed return from a $500 million investment in Uber. On January 6, 2020, PayPal acquired Honey for over $4 billion. This is PayPal's largest acquisition to date. It more recently signed a deal with NBCUniversal. In June 2020, PayPal announced a $530 million commitment to support Black-owned businesses and minority communities in the United States. In January 2021, PayPal became the first foreign operator with 100% control of a payment platform in China, gaining an advanced position in the local online payment market. In an international survey conducted in March 2021 by Morning Consult, PayPal was found to be the second most trusted brand globally. In June 2022, Shopify partnered with PayPal to offer Shopify Payments to merchants in France. In February 2023, PayPal announced layoffs for 2,000 of its workers, or 7% of its total workforce. It was reported in February 2023, that CEO Dan Schulman will step away from his role by the end of 2023. Schulman will continue to serve on the board of directors after vacating the position. In August 2023, the company named Intuit executive Alex Chriss CEO, effective September 27, 2023. In August 2023, PayPal launched a U.S. dollar stablecoin, called PayPal USD (PYUSD) for payments and transfers. In November 2023, it was announced that the SEC launched a legal investigation into both PayPal and Paxos, the trust responsible for issuing the stablecoin. PayPal said it was cooperating with the subpoena from the SEC’s Enforcement Division. In October 2023, it was announced PayPal has sold its reverse logistics subsidiary, Happy Returns to UPS for an undisclosed amount. In 2024, PayPal executives announced the company's aim to revive growth in its branded checkout products amidst increased competition from big tech, following an upward revision of the full-year profit forecast. In January 2026, PayPal announced the acquisition of Cymbio, an AI-specialized company enabling PayPal to expand into agentic AI. In February 2026, PayPal announced the appointment of Enrique Lores as CEO, replacing Alex Chriss. In February 2026, PayPal Holdings attracted takeover interest from potential buyers after a stock slide wiped out almost half of its value. The shares jumped as much as 9.7 per cent on the news. In July 2026, it was reported that Stripe and Advent International had made a joint offer to acquire PayPal.

Finances

The fiscal year for PayPal is from January 1 to December 31. For fiscal year 2019, PayPal reported earnings of US$2.459 billion, with an annual revenue of $17.772 billion, an increase of 15% over the previous fiscal cycle. PayPal's shares traded at over $108 per share, and its market capitalization was valued at over $127.58 billion in December 2019.

The COVID-19 pandemic has accelerated the growth of digital payment platforms, including PayPal, at the expense of the traditional banking sector. As a result, PayPal has seen an increase in its stock to up to 78% in 2020 as of October. In addition, total payment volume has increased 29% amounting to $220 billion increasing positive investor sentiment. PayPal laid off hundreds of workers across US offices and moved jobs overseas during the 2020-2022 pandemic.

Services

PayPal's services allow people to make financial transactions online by granting the ability to transfer funds electronically between individuals and businesses. Through PayPal, users can send or receive payments for online auctions on websites like eBay, purchase or sell goods and services, or donate money or receive donations. It is not necessary or required to have a PayPal account to use the company's services. Certain packaging may come with tracking numbers. PayPal account users can set currency conversion option in account settings. The PayPal app is available online or at the iTunes App Store and Google Play. One year after acquiring Braintree, PayPal introduced its "One Touch" service, which allows users to pay with a one-touch option on participating merchants websites or apps. In 2007, PayPal acquired the online credit product Bill Me Later, Inc., which has since been rebranded as PayPal Credit and provided services for Comenity Capital Bank, the lender of PayPal Credit accounts. Founded in 2000, Bill Me Later is headquartered in Timonium, Maryland. PayPal Credit offers shoppers access to an instant online revolving line of credit at thousands of vendors that accept PayPal, subject to credit approval. PayPal Credit allows consumers to shop online in much the same way as they would with a traditional credit card. The rebranding of Bill Me Later as PayPal Credit also means that consumers can use PayPal Credit to fund transactions virtually anywhere PayPal is accepted. In 2015 PayPal agreed that PayPal Credit would pay a $25 million fine to settle a complaint filed in Federal Court by the Consumer Financial Protection Bureau. From 2009 to 2016, PayPal operated Student Accounts, allowing parents to set up a student account, transfer money into it, and obtain a debit card for student use. The program provided tools to teach how to spend money wisely and take responsibility for actions. PayPal discontinued Student Accounts in August 2016. In November 2009, PayPal partially opened its platform, allowing other services to get access to more APIs and to use its infrastructure in order to enable peer-to-peer online transactions. On November 28, 2011, PayPal reported Black Friday brought record mobile engagement, including a 538% increase in global mobile payment volume when compared with Black Friday 2010. In 2012, the company launched "PayPal Here", a small business mobile payment system that includes a combination of a free mobile app and a small card-reader that plugs into a smart phone. PayPal launched an updated app for iOS and Android in 2013 that expanded its mobile app capabilities by allowing users to search for local shops and restaurants that accept PayPal payments, order ahead at participating venues, and access their PayPal Credit accounts (formerly known as Bill Me Later). On October 21, 2020, PayPal announced a new service allowing customers to use cryptocurrencies to shop at 26 million merchants on the network starting in 2021. PayPal has been using Paxos to provide the back end infrastructure allowing users to manage and trade cryptocurrencies in accordance to data privacy rules and financial regulations. Paxos has been in charge of acquiring the necessary regulatory approvals for PayPal to facilitate cryptocurrency assets. As part of the announcement, PayPal secured the first conditional cryptocurrency license from the New York State Department of Financial Services, which will allow customers to purchase cryptocurrencies such as bitcoin, Litecoin, Ethereum, and Bitcoin Cash. In March 2022, PayPal introduced a flat-fee structure for cryptocurrency transactions under $200; transactions over $200 incur a 1.8% fee for purchases or sales up to $1,000, and 1.5% for any transaction amount greater than $1,000. As of 2022, PayPal operates in 202 markets and has 426 million active, registered accounts. PayPal allows customers to send, receive, and hold funds in 25 currencies worldwide. In December 2025, PayPal applied with the state of Utah and the Federal Deposit Insurance Corporation to form PayPal Bank, intended to provide loans to small businesses.

Business model evolution

PayPal's success in users and volumes was the product of a three-phase strategy described by former eBay CEO Meg Whitman: "First, PayPal focused on expanding its service among eBay users in the US. Second, we began expanding PayPal to eBay's international sites. And third, we started to build PayPal's business off eBay."

Phase 1

In the first phase, payment volumes were coming mostly from the eBay auction website. The system was very attractive to auction sellers, most of which were individuals or small businesses that were unable to accept credit cards, and for consumers as well. In fact, many sellers could not qualify for a credit card Merchant account because they lacked a commercial credit history. The service also appealed to auction buyers because they could fund PayPal accounts using credit cards or bank account balances, without divulging credit card numbers to unknown sellers. PayPal employed an aggressive marketing campaign to accelerate its growth, depositing $10 in new users' PayPal accounts.

Phase 2

Until 2000, PayPal's strategy was to earn interest on funds in PayPal accounts. However, most recipients of PayPal credits withdrew funds immediately. Also, many senders funded their payments using credit cards, which cost PayPal roughly 2% of payment value per transaction. To solve this problem, PayPal tailored its product to cater more to business accounts. Instead of relying on interests earned from deposited funds, PayPal started relying on earnings from service charges. They offered seller protection to PayPal account holders, provided that they comply with reimbursement policies. For example, PayPal merchants are either required to retain a traceable proof of shipping to a confirmed address or to provide a signed receipt for items valued over $750.

Phase 3

After fine-tuning PayPal's business model and increasing its domestic and international penetration on eBay, PayPal started its off-eBay strategy. This was based on developing stronger growth in active users by adding users across multiple platforms, despite the slowdown in on-eBay growth and low-single-digit user growth on the eBay site. A late 2003 reorganization created a new business unit within PayPal—Merchant Services—to provide payment solutions to small and large e-commerce merchants outside the eBay auction community. Starting in the second half of 2004, PayPal Merchant Services unveiled several initiatives to enroll online merchants outside the eBay auction community, including:

Lowering its transaction fee for high-volume merchants from 2.2% to 1.9% (while increasing the monthly transaction volume required to qualify for the lowest fee to $100,000) Encouraging its users to recruit non-eBay merchants by increasing its referral bonus to a maximum of $1,000 (versus the previous $100 cap) Persuading credit card gateway providers, including CyberSource and Retail Decisions USA, to include PayPal among their offerings to online merchants. Hiring a new sales force to acquire large merchants such as Dell, Apple's iTunes, and Yahoo! Stores, which hosted thousands of online merchants Reducing fees for online music purchases and other "micropayments" Launching PayPal Mobile, which allowed users to make payments using text messaging on their cell phones

Offices

PayPal's corporate headquarters are located in the North San Jose Innovation District of San Jose, California, at North First Street campus. The company's operations center, opened in 1999, is located in La Vista, Nebraska. Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank. The PayPal European headquarters are located in Luxembourg and the international headquarters are in Singapore. PayPal opened a technology center in Scottsdale, Arizona in 2006, and a software development center in Chennai, India in 2007. In October 2007, PayPal opened a data service office on the north side of Austin, Texas, and also opened a second operations center in La Vista, Nebraska that same year. In 2011, joining similar customer support operations located in Berlin, Germany; Chandler, Arizona; Dublin and Dundalk, Ireland; Omaha, Nebraska; and Shanghai, China; PayPal opened a second customer support center in Kuala Lumpur, Malaysia, and began the hiring process. In 2014, PayPal opened a new global center of operations in Kuala Lumpur.

Global reach

PayPal can be used in more than 200 countries/regions. Different countries have different conditions: Send only (Package Service allows sending only, valid in 97 countries), PayPal Zero (package suggests the possibility of enrollment, entry, and withdrawal of funds in foreign currency, but the user can not hold the balance PayPal account, operates in 18 countries), SRW Send – Receive – Withdrawal (the possibility of enrollment, input-output and the ability to keep your PayPal account balance in the currency and to transfer to the card when the user sees fit, operates in 41 countries) and Local Currency (SRW plus opportunity to conduct transactions in the local currency, 21 countries).