A Short History of PayPal
PayPal has come a long way since it was founded in late 1998. Although they specialised in software for handheld devices, their interest was always in security and keeping the customers safe. This mantra would eventually turn them into the multi-billion dollar online payments juggernaut, operating worldwide with an estimated 173 million users.
Originally known as Confinity, the company went public in 2002 after a merger with X.com, eventually becoming their sole internet banking operation. This was a show of faith by company founder Elon Musk, who believed strongly in the future potential in this market. He was right to be optimistic.
Joining Forces with eBay
Perhaps the greatest leap forward for PayPal has been their partnership with eBay. It is now synonymous with the site and has since moved on to many others as a way of securing sending and receiving money.
Ebay bought PayPal for a whopping 1.5 billion dollars in July 2002. It now accounts for the vast majority of all transactions through the site. In 2005, PayPal expanded their business by acquiring Virisign payment solution, which operates as an independent seal of approval for the safety of a website or domain. Further expanding their business by partnering up with Mastercard and the Paypal Secure Card Service, this allowed customers to enjoy the security of PayPal on websites which did not accept payment from PayPal by using a Mastercard number, which is unique to each purchase.
In 2008, PayPal purchased Fraud Sciences, a company which specialised in online risk tools. This bought PayPal greater expertise in proprietary fraud management systems, further enhancing their excellence in the field of internet security. Later that year, they acquired Bill Me Later, a transactional credit company.
One of their greatest leaps forward came in 2011, when the company announced customers could now make payments to PayPal in physical locations. Similar to their partnership with Mastercard, in August 2012, PayPal joined forced with Discover Card to allow PayPal to be used in any of the 7 million stores available through their network.
But all good things must come to an end, as eBay and PayPal’s partnership came to an end as a joint venture when it was announced that PayPal would become its own publicly traded company. But rather than this being a push away from the PayPal brand, the relationship between eBay and PayPal remains as strong as ever, with this split actually symbolising the faith its owners have in the company to go forward into the future standing on its own two feet. Both companies, eBay and PayPal, have achieved such incredible success, it’s hard to imagine anyone arguing against their ability to thrive on their own.
Going Their Own Way
Since then it appears they’ve kept good on the promise to push PayPal into fresh waters. In July 2015, it was announced that PayPal had acquired Xoon Corperation, moving the company into an even more internationally dominant brand by opening it up to a business with 1.3 million customers in the United States alone.
Following this, in September 2015 it was announced that PayPal would be launching PayPal.me. This further simplifies the ability to transact money easily by opening it up to online devices via messaging platforms. With this, PayPal has come full circle from its beginnings as a company focused on security software in mobile platforms, to moving away from that market before coming back to craft a secure, easy payment method
Forgotten History: Anonymous Hack PayPal
Perhaps the only dent in PayPal’s flawless history of internet security excellence and one of the most colourful periods of their history came after the internet hackers ‘Anonymous’, a group of anonymous internet activists, attacked several major sites including law firms ACS:Law and Dunlap, Grubb and Weever. The former was shut down for a few hours and when the site returned, a file appeared which included e-mails, excel spreadsheets listing people accused of sharing media illegally, along with general illegally shared media. These included 8,000 Sky customers accused of illegally sharing media with 5,300 specifically involving pornography, along with 400 PlusNet customers accused of sharing music. All this information was made available on peer to peer networks. Dunlap, Grubb and Weever is a law firm in Leesburg, Virginia and was evacuated after the police were e-mailed a bomb threat that is believed to be connected to Anonymous and Operation Payback.
They also attacked the Australian Federation Against Copyright Theft (AFACT), in a move that unintentionally also took down 8,000 websites that were held on the same server.
Operation Payback ended up taking down the Ministry Of Sound website, the Spanish Copyright Society, Copyprotected.com, the UK Intellectual Property Office, Satellfilm.at, Wage film and Hustler.com, among others.
This is known as one of the worst mass hacks in history. The motivation behind the group appeared to be anger at creative industries for clamping down on copyright, in particular shutting down the peer to peer sharing site Pirate Bay. While the scale of the attack is astonishing, many of these sites did not specialise in security, nor did they deal with money transfers. What they did next is a lesson in the importance of internet security and the importance of what Paypal does as a company.
Attacked by Anonymous
Paypal comes into this story when Operation Payback morphed into Operation Avenge Assange. After Wikileaks published US diplomatic cables, companies like Amazon, Bank Of America, Post Finance, Mastercard and PayPal stopped working with Wikileaks and/or froze funds to Wikileaks. As a response, Anonymous attacked several major websites in December 2010, forcing them to freeze funds. Paypal was attacked on the 9th December 2010, temporarily shutting down all transfers before it was safe to release them
While it is believed that no lasting damage was done to the banking industry as a result of the attacks, that is of course largely due to the excellent security pioneered by the likes of PayPal. The intent by some to cause as much financial chaos as possible for a political cause shows how vital PayPal’s work is in keeping our finances safe.
The pros and cons of PayPal
There’s no doubting that PayPal is one of the most popular ways to transfer money online, whether it’s just to buy some old records on eBay or whether it’s a major part of your business. However, as with every money transfer tool, it comes with benefits and costs. Here’s an overview of what you can expect from the PayPal service.
Pros of using PayPal
- You’ll have more ways to receive payments:
Using PayPal doesn’t mean you need to stop taking credit cards payments or using credit card payments. Rather, if you’re a business, you are opening yourself up to more customers who prefer to transfer money using PayPal. It’s always better to have both options.
- PayPal can be used with pretty much everything:
PayPal is probably the most flexible money transfer system on the net. It is integrated in 99% of your online needs, from websites to e-mails. This is especially useful in business, as it simplifies your online needs into one easy to use system.
- It’s easy:
PayPal have worked tirelessly to make setting up an account as easy as possible, while also retaining their excellent standards of safety. Most people already have a PayPal account: if you’ve ever bought anything on eBay, chances are you did it through PayPal.
- There’s no limits:
PayPal doesn’t limit purchases, meaning if you want to spend big money, you are free to do so. While some may say this may lead people to spend risky amounts, particularly when it comes to gambling, most sites have the option to set your own monthly limits and have their own deposit limits anyway. Having a second tier of limits seems like an unnecessary addition. PayPal treats you like an adult that has responsibility over their own funds. Money transfer systems shouldn’t treat people like they don’t know what is best for themselves. After all, they’re tools, not babysitters.
- There are no monthly fees:
Similar services cost money simply to keep open, sometimes running into 3 figures a month. These fees are aimed at businesses rather than individuals buying and selling on eBay or making online deposits, but it’s a big part of the reason why PayPal has separated itself from the pack. It’s no fee policy means it can be used outside of business and be worth the cost.
- PayPal accepts more methods of payment:
Aside from working alongside credit cards, PayPal also accepts checks and transfers into your account. More options means more flexibility, which is great for business and personal use
- It’s safe:
PayPal prides itself on being the safest way to transfer money and the reason it’s so popular is because it delivers what it promises. Not only that, but they have managed to improve the safety of the service, move it onto a mobile platform while making using the service easier and easier over the years. When you consider how widely available it is, how easy it is to use, that it is equally great as a business and personal banking tool and that it has managed to achieve this without compromising on safety, you realise why this service has conquered the online transfer market.
Cons of using PayPal
- PayPal are a target:
While PayPal has a terrific safety record, that does not stop them being targets of ‘spam scams’, also known as phishing. You’re likely to get e-mails in your spam folder telling you your account has been suspended. Even though the likelihood of this happening has little to do with whether or not you actually have a PayPal account, because the site is such a big name, it’s often used as a hook for scam artists to try to get your account information. The solution is simple: ignore them. However, for the most gullible internet user, these scams can cause real difficulties. It’s a side effect of the services runaway success.
- Transaction fees:
PayPal charge a small amount per transaction plus 2.9 per cent. If you’re a merchant or a small business owner, this can add up to a fairly hefty chunk of change. However, this fee does go down if you meet certain sales criteria.
- There’s no live chat:
While most sites that have security at their forefront have a live chat to resolve any issues, PayPal itself does not. This means that if you have an issue, you may struggle to get it resolved quickly.
- Accounts can be frozen:
While this measure does seem quite rare, there are horror stories about PayPal freezing accounts for little to no reason. This can take up to six months to be appealed and for you to have access to your funds. While unlikely, this is a nightmare for anyone who has a lot of money tied up in the service. It’s also worth noting this is much more likely to affect business accounts.
- There’s no appeal process:
If PayPal makes a decision regarding a customer dispute, it is final. If that decision is not what you were hoping for, this is bad news.
Conclusion on PayPal
Overall PayPal is an excellent service, with most of its issues revolving around business accounts. If you’re simply looking to pay for a product or online service, you should have no problems.