History and Current Stance of PayPal Wallet in the Financial World
An electronic wallet, within the context of modern payment methods, is not a new option but rather an established tool that we continue to use for several reasons. These include kind of illusion of anonymity (at least in relations with the merchant), convenience of a mobile app, widespread adoption, and extensive functionality.
PayPal can boast of all these features, consistently topping the list of the most popular wallets in the Western world and steadily increasing its volumes. Not having PayPal in the USA, and now even in the EU, is unusual, and this popularity is due to the quality developments of the points mentioned above.
So, what didn’t you know about PayPal? Let's see in today's overview.
The History of PayPal
Many have heard that Elon Musk is associated with PayPal somehow, but not everyone knows the details. PayPal was founded in 1998 under the name Confinity and, within a few years, acquired over a million users by 2000. As one of the co-founders, Elon Musk left the company in the same year, using the proceeds from sale of his stake as investments in his subsequent projects.
We can confidently say PayPal is a pioneer in internet technologies within the financial sector. At that time, this kind of development was truly in demand. It was innovative and necessary for users. In 2002, eBay acquired the company, making PayPal primary payment provider for its platform. PayPal's growth continued even more rapidly after that, and by 2011, its client base had reached over 100 million users in nearly 200 countries, supporting 25 currencies. In 2013, PayPal acquired now well-known transfer platform Venmo, and in 2015, PayPal separated from eBay to become an independent company again. Nevertheless, this did not affect business relationship, and PayPal remains the primary payment provider for the marketplace.
PayPal's functionality focused on international transactions, exchange operations, and P2P transfers for individuals, which the wallet could perform much faster than traditional banks in the USA at that time. PayPal became something new and revolutionary, and for more than 25 years, it has remained a significant player not only in the American but also in the global fintech scene. Today, PayPal has established partnerships with global payment companies such as Visa, American Express, Mastercard, Discover, and banks like Bank of America, Barclays, HSBC, Chase, Wells Fargo, as well as mobile wallets like Google Pay and Apple Pay.
The wallet's functionality is quite extensive, allowing not only to receive payments from friends and acquaintances but also to use it widely in business. In addition to standard wallet-to-wallet transfers, the system offers an invoicing service that allows you to send an invoice to a counterparty and pay it immediately. You can also "request" payment or split payment for services through PayPal. Due to this abundance of functions, it may seem that usage of the wallet is not straightforward, and it takes time to understand it all. Although this is often the case, most users find interface convenient and satisfactory.
PayPal has both fans and ardent opponents in the business world. Due to the widespread adoption of payment method, many businesses have no choice but to integrate PayPal into their websites to receive payments conveniently for customers. However, fees for its services are quite high, and service often sides with the customer in case of problematic payments. The functionality for refunds and chargebacks is well-implemented within the system, so users are quite well-protected, even though PayPal is just a wallet, not a payment card. This somewhat constrains businesses, as they bear all the fees and charges in case of any disputes, even if they are not entirely legitimate.
PayPal payment system has also caught the eye of European Union, which in recent years has become a significant market for it. Europeans have appreciated the convenience of service and switched to it, replacing traditional banking. In turn, local payment methods like Giropay have suffered from this trend. Giropay was closed due to a significant decrease in its client base and transaction volume, and its replacement is the new payment method WERO. We constantly monitor the development of WERO, and to stay updated on all the news, we recommend subscribing to our Telegram channel. WERO will become the European response to PayPal, functioning as a wallet that allows users to make P2P transfers and enables businesses to accept payments. Official sources have also noted the EU's clear intentions to push out American payment companies and develop its own payment methods, allowing the internal market to thrive. Despite comprehensive Western cooperation, growth of US fintech is not really supported by European authorities, and development of WERO involves the efforts of several institutions and banks.
How to integrate PayPal for business
Returning to the collaboration between PayPal and businesses, let's discuss compliance and KYC aspects, which are implemented in an unusual way. Opening a personal account is usually not as complicated as a merchant account, as a personal account can be opened within a day with basic identity documents and a functioning email address. For businesses, the integration is somewhat more complex, although it also starts with basic registration.
PayPal is a closed infrastructure where everything happens within the system. All communication is depersonalized and conducted with a bot assistant and sometimes with support staff. As a PayPal business client, you will not have a personal manager and their direct phone number for all occasions, as is often the case with European payment systems, especially in iGaming segment. Collaboration with this payment system is built on strict principles that are the same for everyone, and account opening and compliance process is standardized down to every step.
Due to this, it is not always easy to clarify individual issues, and unusual business models may be rejected at the initial stages. Additionally, PayPal has implemented an automated account approval system, and all accounts are ready to go live immediately. The compliance will only start reviewing the account once the first transactions have been made, and team can analyze the actual use of your account. If no suspicions arise, you can continue operating; however, if questions do come up, account may be put under review with the funds on it frozen. That’s why it’s so important to study company's policy and the list of businesses that PayPal accepts for processing. This list is available on the website at any time, and if your activity is not listed, do not rush to go live.
PayPal has faced regulatory issues due to this account approval method, as it is not entirely aligned with the standard AML process, where a potential user is fully verified before gaining access to payment functionality. The platform experienced two major data breaches in 2017, leaking personal data of nearly two million clients. Due to the lack of identity verification and account checks, PayPal is constantly a subject to fraudulent threats and is frequently used in various schemes by malicious users, registering on behalf of a third party.
Nevertheless, despite all the drawbacks and weak points, PayPal has come a long way from a startup to an established large company; it has changed owners several times, acquired a number of companies, and even launched its own separate processing structures — Zettle, Hyperwallet, Simility, Paidy. The recent launch of PayPal USD stablecoin further confirms company's strong market position and readiness to evolve with the industry. Company now supports crypto transfers and is actively integrating AI into its operations. What is there ahead for PayPal? Stay tuned with us on the pages of Mono Talks to know.
