This essay has a total of 2683 words and 12 pages.


Archil Avaliani
International University in Germany
Supervisor: Prof. Keiichi Nakata
PayPal is an account-based system that allows anyone with an email address to send and
receive online payments. This service is easy

to use for customers. Members can instantaneously send money to anyone. Recipients are
informed by email that they have received a

payment. PayPal is also available to people in 38 countries. This paper starts with
introduction to the company and its services. The

information about the history and the current company situation are covered. Later some
interesting and different technical issues are

discussed. The Paper ends with analysis of the company and several future recommendations.
PayPal, Payment Systems, E-business, Money Transactions, PayPal Analyses.
1. Introduction
2. PayPal as e-Business
3. Technical Issues
4. Analysis (of PayPal as e-Business)
5. Conclusion
6. References
1.1 - PayPal -A Popular Company
This paper is about a company called PayPal. First I will touch the general information about the company, then provide
information about several details and finish with several useful future recommendations.
PayPal (formerly that was founded in 1998 belongs to an Electronic Payment Systems, more precisely to
Generic Systems subgroup. It is located in San Jose and carries out services that provide the possibility of sending and
receiving money by means of computers in an easy, secure and fast way using an account-based system. This can be
done by anyone (a private person or legal entity) who has an email address. When the money is transferred, a message is
sent to the recipient's email address notifying about the transaction. At the same time
certain security measures are taken

during these operations. One can still charge his or her account without having an electronic card, using the bank
transfer or a paycheck. Transferring money is as easy as sending an email for customers.

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(Fig.1, What is PayPal, retrieved on February 15
, 2004 From: PayPal Developer Conference Keynote, Alex Kazim, VP Marketing,
05/08/03. Data available on )
In 2002, PayPal was acquired by eBay. It has quickly become popular. Today the company offers services in thirty-eight
countries and has about forty million customers for today. In most of these countries it
supports bank withdrawal service

and is especially popular among eBay customers. Fig.1 briefly illustrates Company's business. The system enables its
users to send money, using computers. The same can be done by means of mobile phones that are support Web. During
money transfer the service fee is charged to the customers' bank account, credit card or PayPal balance. At present two
thirds of the customers use this service while participating in an online auction. It must also be noted that opening a
Personal account and certain basic services provided by PayPal are free of charge. There are certain charges for opening
Premier and Business accounts and for additional types of services. The company has a successful business. Number of
customers is increasing. Therefore the company's profits also. In year 2002 company had a significant gross. Its one-
year sales growth was 134% ($236.6) and one-year employee growth was 94.2% (1200 employees).
1.2 - Type of the Business
PayPal is a credit card processor or also called E-Transaction Company that allows businesses and individuals to send
and receive money. The Jurisdiction differs according to state and sometimes from country to country. As a financial
company it has a statute "Money Transmission Act" (may have different name depending on the state).
2.1 - Services and Products
Several types of products and services are provided by the company. Individual/Business accounts, Merchant and
Auction tools, Third-party software, Shipping services via UPS and a PayPal debit card.
PayPal Accounts:
There are three different account types that differ in the services offered. Personal
accounts are free, for individual use

only, and include only core features. Premier and Business accounts are charged a decent fee to receive payments, and
include our premium features, suchlike the ability to accept credit card payments and the PayPal Shopping Cart.

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Personal account basically only offers to send money and receive money from non-credit card payments for free. This
type of account is especially popular because of its "Auction Tools". Premier features in addition to personals' one are
the following. It allow to receive money from credit cars for low fees, has customer service hotline support, offers
special seller tools and ATM debit card for selected users. This account type also allows mass payment, which means
one can pay thousands of customers at once. Business accounts is the most powerful one. In addition to all services
mentioned above it allows to do business under a corporate or group name. Multiple Login is also supported. The
following table (Fig.3) clearly shows the difference between account fees.
(Fig.3, PayPal Fees, Retrieved on February 10
, 2004 From:
Merchant and Auction Tools
Merchant Tools are for website payments and consequently gives opportunity to accept credit cards for online payments.
It allows the user to manage and track his or her payments. For creating the website one can purchase third party tools,
that are PayPal products, like Shopping Cart and Buy Now buttons. PayPal also provides other third party tool for
making your work easy and also supports you to establish a proper payment process. Several businesses auction tools
provided by PayPal are very useful. They helps to manage the whole process for auction. For both Merchant and
Auction Tools there is some source code available for free from other developers. PayPal provides developers website
and discussion forums where one can get help about development issues. Business customers can add conventional
shopping card functionality that is already provided by PayPal.
Mass Payments:
Some businesses need to make high volume payments to their customers or suppliers. For this case, Mass Pay
functionality is provided. One can just upload a text file of special format that includes
information about the amount of

money and recipients information and PayPal will batch this payments and process them automatically. It is important to
note that PayPals Merchant tools support multi-currency property.
What is PayPal debit card about?
One can request a PayPal ATM/Debit Card and use it to make payments everywhere the MasterCard or Cirrus logos are,
or even withdraw the money from an ATM. Unfortunately, as mentioned already, the Debit Card is only available to a
limited number of Verified Canadian members at this time.
2.2 - Profitable Business
The company gets most of its money from the services and development tools. Because it is considerably cheaper in
comparison to other money transfer services and other credit card companies' merchant service, even small businesses
can afford it. There are about 42,000 web sites that accept PayPal. The very important thing that made PayPal more

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profitable, successful and popular company is that it became an eBay Company. As one can notice, Fig.4 and Fig.5 show
significant jump in the forth quarter of year 2002. (Q402). Because eBay was already very popular by that time, many
customers found it more convenient to use PayPal. This increases the customer number, because eBay was able to make
money transactions easily also for customers who didn't have a credit card.
(Fig.4 and Fig.5, Total Payment Volume, retrieved on February 2004 From: PayPal Developer
Conference Keynote,Alex Kazim, VP

Marketing, 05/08/03. Data available on
3.1 - Security and Scalability of online payments
PayPal consists of four major network components that reside at: PayPal Facilities, Equinix Data Center, Cable and
Wireless data center and PayPal Operations and Customer Support facility. The most responsive data and hardware of
the network are distributed on Equinix and Cable & Wireless data centers. (eBay Information book)
To reduce the number of failures the company has redundant Internet connections, fault tolerant power and fire control
systems and physically secure place. Security is a very important issue for companies like PayPal. Especially because
many people try to get money by using the weaknesses of e-business systems. PayPal uses multiple layers of network
security; encrypted database and communication with SSL among the systems components to make sure that they
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