Careers at PayPal
PayPal’s mission is to build the web’s most convenient, secure, cost-effective payment solution.
In 1998 Max Levchin, an online security specialist, reached out to Peter Thiel, a hedge fund manager, about financial backing for a system that could transfer money using wireless devices such as cellular phones. The two worked together to garner $3 million from the Nokia Corporation and established a Field Link, a provider of encryption software for mobile devices. They put the product on the market, but it performed poorly among consumers, much to their disappointment.
The two renamed the firm Confinity, and in October 1999, with a staff of six employees, it unveiled PayPal, a service through which money could be sent using handheld devices. Unfortunately, consumers still didn’t care. Then Levchin and Thiel had a revelation – product sales were beginning to take off on the Internet; however, no suitable system yet existed to enable electronic payments. eBay, a successful online auction site, had customers pay with checks and money orders sent through snail mail. A handful of firms established new electronic currencies positioned as a substitute for the dollar; however, they faced distrust and significant pushback from consumers and businesses.
PayPal stood out because it utilized the dollar as its exchange medium and e-mail (jointly with banking networks) as its transfer medium. If it did go online, potential customers would be able to open an account and deposit money, or link it to a bank or credit card account. Sensing an opportunity, Levchin and Thiel launched a website. Not long afterwards, in March 2000, Confinity was acquired by X.com, headed by Elon Musk. X.com took the PayPal name and began aggressive promotion of the site; one effort involved offering of $10 to each new account signee.
In an eight-month period (from January to August 2000), PayPal exploded from 12,000 accounts to 2.7 million. The company’s success was heavily driven by its convenience – for example, money could be sent to someone even if the sender did not have an account (though the recipient was required to). The service’s low transaction costs also played a role – it was free for eBay shoppers, and sellers only needed to pay a fee equaling 1.9% of the selling price.
In June of 2000, PayPal launched a new business account offering, geared towards commercial and high volume individual customers. It applied a fee of 30 cents plus 2.9% of each exchange – much less than what many retail locations pay for credit card sales. While consumer accounts were restricted to $500 in credit card payments every six months, these accounts were allowed to engage in a limitless amount of such payments. Because of these attractive features, not long after their introduction, business accounts represented over 20% of the company’s business.
PayPal’s success expanded throughout 2001. By that summer, customer account volume had soared to nine million. Further, the firm’s 500 employees were processing more than 120,000 transactions on a daily basis. Industry analysts forecasted the company would be worth $10 billion by 2005. Feeling confident, the company went public in 2002. Not long afterwards, it was acquired by eBay, which had already been driving significant business its way – in fact, 60% of its transactions were from eBay auctions. Today, PayPal is the worldwide leader in online payment solutions.
Benefits at PayPal
Business model of PayPal
PayPal has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:
- Consumers: This segment consists of individuals. They can make purchases; send and receive money; set up recurring payments; and make donations to charities and other nonprofits.
- Merchants: This segment consists of businesses. The service allows them to accept web, mobile, and in-store payments from consumers, as well as conduct online invoicing.
PayPal offers two primary value propositions: convenience and security. The company’s platform enables consumers and merchants to carry out simple digital and mobile payment transactions through a third party. At the same time, it offers a risk management system that prevents illegal, fraudulent, or high-risk transactions, giving customers a sense of confidence.
Other minor value propositions offered by the brand are as follows:
- Brand: PayPal maintains a highly-recognized and trusted brand in the online payments industry.
- Scale: PayPal’s global scale gives it significant reach. As of the end of 2015 it had 179 million active customer accounts that included 13 million merchants, and had processed $282 billion of total payment volume in over 200 markets around the world.
PayPal’s main channel is its website, through which its customers conduct the majority of their transactions.
That said, it also operates through the mobile channel. Customers can utilize its mobile app, as well as the services of its two mobile payment subsidiaries, Venmo and Xoom.
PayPal’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main website without interaction with employees.
Despite the nature of this relationship, PayPal makes a significant effort to ensure the satisfaction of its users. The company employs over 8,000 people in its customer service organization, who work in operation centers around the world and speak more than 20 languages.
PayPal has also developed trust and security programs to give customers a sense of comfort. Its Buyer Protection Program provides additional protection to consumers for eligible purchases by reimbursing them for the full amount of the purchase if the item does not arrive or is significantly different than the seller’s description.
Its Seller Protection Program offers additional protection to merchants. Specifically, in cases where buyers claim a purchase was not authorized or that an item was never sent, it covers the seller for the payment on qualifying sales. Offering such programs to both parties helps to ensure confidence on both sides.
PayPal’s key activities focus on platform management. The company’s business model entails maintaining a common platform between three parties: consumers, merchants, and banks. The platform includes its website and mobile apps.
PayPal does not directly access payment card networks, such as MasterCard and Visa, that enable its acceptance of debit and credit cards. Instead, it relies on banks or other payment processors to process transactions.
As for its mobile apps, it relies on third-party developers to create the systems, providing application programming interfaces, software development kits, and other tools.
PayPal has a proprietary global technology platform that it uses to connect millions of consumers and merchants around the world (more than 200 markets). The company has historically had its capital requirements satisfied by the corporate-wide cash management policies of eBay.
However, as it spun off as an independent company in 2015, it will depend more on bank financing in the future. In addition, PayPal is heavily investing into its human talent pool in order to stay competitive.
PayPal has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. As part of eBay for over a decade, it shared economies of scale and scope in employees, costs, and customer and vendor relationships. It still maintains some relevant agreements with eBay; however, charges for certain services may rise as a result of its separation.
PayPal’s biggest cost driver is transaction expenses, which largely consist of the costs incurred to accept a customer’s funding source of payment. Other major expense drivers are in the areas of customer support and operations, sales and marketing, and product development.
PayPal has two main revenue streams, which are as follows:
- Transaction Revenues: Revenues generated from net transaction fees charged to consumers and merchants based on the volume of activity processed through its platform, including the PayPal, PayPal Credit, Venmo, Braintree, and Xoom products.
- Other Value-Added Services: Revenues generated from subscription fees, gateway fees, interest/fees earned on the PayPal Credit loans receivable portfolio, gain on sale of participation interest in certain consumer loans receivable, revenue share earned through partnerships, interest earned on certain PayPal customer account balances, fees earned through Paydiant products, and other services provided to consumers and merchants.
info: Dan earned a Bachelor’s in Economics from Middlebury College and an MBA from New York University. He has an extensive background in payments and mobile technology that includes former positions as Group President of Enterprise Growth at American Express and President of the Prepaid Group at Sprint Nextel Corporation.
info: John earned Bachelor’s and Master’s degrees in business administration from Baylor University. He has over 20 years of financial management experience that includes being the EVP and CFO of United Airlines. He leads PayPal’s financial operations, regional finance, and investor relations.
info: Jonathan graduated Magna Cum Laude from Dartmouth College and holds a degree in Politics, Philosophy, and Economics from Oxford University. He has more than 25 years of international leadership experience and leads PayPal’s business development and global strategy efforts.
info: Tomar has work experience covering almost every aspect of R&D, technology, business strategy, risk management, and marketing. His past employers include 3DV Systems and McKinsey & Company. He oversees risk management at PayPal, including enterprise, regulatory, credit, and financial risk operations.
info: James earned a Bachelor’s of Science degree from Stanford University. He has over 25 years of technology experience that spans the military, academic world, business consulting, payments, and enterprise platforms and infrastructure. He leads PayPal‘s efforts in developing secure, innovative payment solutions.
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