PayPal

Type:	Subsidiary of E-bay
Industry:	e-Commerce
Founded:	1998
Founder(s):	Ken Howery Max Levchin Elon Musk Luke Nosek Peter Thiel
Ownership:	Owned by E-Bay
Headquarters:	2211 North First Street San Jose, CA 95131
Country:	USA
Employees:	618
Revenue:	$3.4 billion as of 2010
Website:	www.paypal.com
Blog:	PayPal Blog
Facebook:	PayPal
LinkedIn:	PayPal
Twitter:	@PayPal
Key People
Scott Thompson, President

PayPal is a global payment service provider and a subsidiary of eBay, Inc, one of the leading e-Commerce company based in the United States. PayPal is compose of two other billing services called Payflow Gateway and Bill Me Later. Consumers with PayPal accounts can securely send and receive payments electronically using credit cards and bank accounts. The company is serving more than 103 million accounts within 190 markets and 25 currencies around the world. Its headquarters is located in San Jose California.

History

Max Levchin, an online security specialist and Peter Thiel, a hedge fund manager co-founded PayPal. In 1998, they met at conference at Stanford University where Thiel provided a lecture. Levchin and Thiel agreed to become partners and created the company known as Field Link which produced encyption software for wireless devices such as cellphones and palm pilots. Their idea was to make the handheld devices of consumers as a secure digital wallet. Field Link did not click and the company was re-organized as Confinity. The name of the company was derived from the words confidence and infinity. The company offered money transfer services using palm pilot and other Personal Digital Assistants (PDAs). In 1999, Confinity launched PayPal when its engineer developed a software enabling consumers to pay electronically.

In 2000, PayPal became popular among e-Bay users and offered $10 sign-up bonuses to increase its customer base. During the same year, Confinity merged with its competitor X.com. PayPal was retained as the name of the company. By that time PayPal had already 1 million user accounts.

In February, 2002, PayPal went public and offered 5.4 million shares. Its opening price was $15.41 per share. It was 18 percent higher than the price set by under writers at $13 per share. PayPal enjoyed a 54.5 percent gain at the end of the trading day with its stock price valued at $20.09 per share.

eBay acquired PayPal on October 2002 for $1.5 billion and became its subsidiary. PayPal continued to offer its services to its costumers independently, however eBay decided to discontinue PayPal's online gaming business.eBay's Chief Financial Officer explained that the decision was due to the uncertain legal situations of online gaming. At that time the Congress was on the process of legislating a bill to ban oline gambling.

International Expansion

In 2004, PayPal was introduced as payment option for eBay consumers in United Kingdom. Following in 2005, PayPal opened its first office in China and introduced its website under the simplified Chinese Name BeiBao 贝宝在中国推出。. By 2006, the company expanded in 103 markets and started accepting payments in different currencies.By 2007, PayPal introduced the VISA debit or credit card as a new method to withdraw money for users in 23 countries. PayPal users in the Philippines, Indonesia and India are able to withdraw their money through their local bank account. In 2008, the company have been operating different sites in Asia using 8 different languages. At present, PayPal has 153 million accounts within 173 countries and accepting transactions in 24 currencies around the world.

PayPal Business Model

PayPal's business model allows costumers to choose how to conduct their transactions. Customers can send and received payments by:

• providing fund in a bank account where a customer has access to it
• using a Wells Fargo Bank wire transfer in behalf of PayPal to a third party bank account in the name of the customer
• Wells Fargo Bank processing a check payable to a customer who is selling goods or services
• sweeping funds in the PayPal Money Market Fund to purchase shares in the customers name
• pooling funds with other customer funds and putting it at a FDIC-insured bank under the bank account PayPal, Inc., which serves as agent for the benefit of its customers

Leadership

• Scott Thompson, President
• Ranjana Clark, Senior Vice President, Chief Customer & Marketing Officer
• Patrick Dupuis, Chief Financial Officer
• Ed Eger, Senior Vice President and General Manager of North America, Core Payments and Emerging Markets
• Rupert Keeley, Senior Vice President of Asia Pacific
• Mark Lavelle, Vice President of Strategy and Business Development
• Renier Lemmens, Vice President of PayPal Europe
• David Marcus, Vice President of Mobile
• Gary Marino, Senior Vice President of Credit Products & Risk
• John McCabe, Senior Vice President of Worldwide Operations
• Dianne Mills, Senior Vice President of Human Resources
• John D. Muller, Vice President of Legal, General Counsel
• Leonard Shen, Chief Compliance Officer
• Sam Shrauger, Vice President of Global Product and Experience

Awards & Recognition

The company's most recent awards include:

• Ernst & Young Entrepreneur Of The Year 2011- The company's president Scott Thompson was named as one of the winners in Northern California in recognition for accomplishment as a business leader and contribution to the community.
• Fast Company Top Innovator in Finance- Its initiative in integrating different payment options such as mobile apps and devices and allowing third party developers to work on its system was given recognition making it the most innovative company in finance.
• Tech Exec Networks Information Security Executive Awards 2010- PayPal's Chief Information Security Officer, VP Information Risk Management of PayPal Michael Barrett was recognized as one of the leasing security expert because of his initiative in supporting technical innovations in security standards in a broad scale.
• Lithium Technologies Social CRM Excellence Award- In 2010, PayPal won the Best New Community category.
• Best of Omaha- PayPal ranked 1 as Best Employer for the year 2009 and 2011.

Legal Battle

Patent Infringement Lawsuits

In February 4 2002, the Initial Public Offering of PayPal was delayed due to a patent infringement lawsuit filed by CertCo, a private online security and risk management company based in New York. CertCo alleged that PayPal's electronic system infringed its patent no. 6,029,150 (Payment and Transactions in Electronic Commerce System), which was awarded by the United States Patent and Trademark Office (USPTO) on February 22, 2000. PayPal denied CertCo's allegations and described it a deliberate attempt to disrupt its initial public offering. On April 25 2002, PayPal settled the lawsuit with CertCo. According to them the settlement agreement involved "a non-consequential payment and mutual releases." The details of the settlement agreement were not disclosed to the public.

A second patent infringement case was filed by Tumbleweed Communications at the US District Court of Northern California on May 7, 2002. Tumbleweed Communications claimed that PayPal violated its electronic notification processes and document storage and retrieval patents. E-bay, the parent company of PayPal agreed to settle the legal charges under a cross licensing agreement o December of the same year.

On September of 2002, another patent infringement case was filed against PayPal by First USA Bank, N.A., a subsidiary of Bank One Corporation. The company claimed that PayPal infringed its two patents; one was the use of telephone numbers and personal identification numbers and the use of e-mail addresses as transaction identifiers for its cardless payment system. First USA Bank asked the court to issue an injunction order to stop PayPal from using its payment system. In addition the company asked for financial damages from PayPal. On the other hand, PayPal denied the accusations and promised to fight the case in the court.

Class Action Lawsuit

PayPal faced another legal battle in 2002 days after its Initial Public Offering. A class action lawsuit was filed by the law firm Jacoby & Meyers in behalf of consumers at California Superior Court in Santa Clara County alleging that the company violated the Federal Electronic Fund Transfer Act. According to Atty. Gail Koff, PayPal locked a customer's account instead of freezing, the amount of transaction in question when it suspects that a fraud has been committed. Since the consumers entire accounts were frozen, they weren't able to make any business transactions (send and receive payments). They claimed that PayPal's restriction to their accounts is illegal. A similar class action lawsuit was filed by Girard, Gibbs & De Bartolomeo, a law firm in San Francisco at the U.S. District Court for the Northern District of California. In 2004, PayPal settled the class action lawsuit and agreed to pay $9.25 million which will be distributed to all the complainants. The administrative costs and legal fees were included in the settlement.

Shareholders Lawsuit

On July 7, 2002, two shareholders of PayPal filed a lawsuit against the company's merger with eBay. The shareholders claimed that eBay's proposed price for the Paypal stocks is "inadequate and unfair", which is 0.39 eBay shares for every PayPal share. The total value of the transaction was $1.5 billion. Despite the objections, the Department of Justice cleared the Ebay and PayPal merger after conducting an investigation.