PayPal - The Digital Wallet

Trading company that operates in a digital products or services. Assess its business model and suggest how it has successfully differentiated itself from its competitors.

As an active online shopper, with a slight addiction to eBay. I use PayPal as a digital service to safely and securely complete transactions online. PayPal works as an online wallet as it allows me to link my debit card to my PayPal account and pay for items without having to manually insert my card details into the ‘payment’ section of a transaction.

PayPal is a online fin-tech company that has uses for both personal and business transactions. Originally Confinity, the online payment service was set up and founded in 1998 by Luke Nosek, Max Levchin, Peter Theil and Ken Hower. In 1999 it then expanded to offer money transfer options to its users, according to Mercer 2015. In 2000, Confinity was merged with X.com an online banking website, owned by Elon Musk and then PayPal was formed.  In 2002, it was reported by Mercer (2017) that eBay purchased PayPal for $1.5 billion, it was bought for its simplistic layout and its simplistic use 

The online fin-tech company allow its users, both for personal and business use to exchange and transfer money online digitally. As a result, there is are two main functions of the online service, online sales and money transfers. Currently available in 202 countries worldwide with 197 million users with accounts.

According to Investopedia 2017, business model lays out a step-by-step plan of action for profitably operating the business in a specific marketplace. PayPal has a business model that is based on online sales and services. During each transaction, it receives a percentage of the amount being transferred or paid, which depends on the total amount as part of an invoice along with a 0.35 cent charge. Its value proposition that it offers to its users is that it is a safe and secure service that offers 24 hour customer service.

PayPal has a transaction fee revenue model, for each transaction taken through PayPal, it receives a portion of the amount being spent or transferred along with charging a 35 cent charge. The percentage of the fee depends on the type of transaction, for personal use the fee remains at 2.9%, however for business the percentage charged decreases based on the amount of money being spent or transferred into different accounts.

Prior to the increase popularity of online shopping, PayPal was associated mainly with eBay. However, since the PayPal can now be used and is a payment option available when purchasing goods & services online. Customers will be offered options to make a payment by manually entering their personal billing details, including their card details or they can log into their PayPal account to make payment. Now, it is used as an intermediary between a business trading online and the customer.

Competitors that compete with PayPal are similar fin-tech & digital companies such as ClearXChange, Skrill,Payza and recently  Google Wallet, Android Pay and Apple Pay. The traditional bank that allows for online banking can also be considered a competitor.

PayPal stands out from its competitors, in my opinion due to its affiliation and link with eBay which has "171 million users, with 25 million being buyers" (Smith, 2017) Items can be purchased through eBay without having an account and paying as a ‘guest’. It has differentiated itself from its market competitors by way of being free to set up an account, with no monthly fees and its brand reputation.

Of course, you may be wondering why not just use online banking to make payments online?! PayPal offer encryption during transactions and purchase protection, for both buyers and sellers. This means that when buyers make a payment through PayPal, there are being provided with an added means of ‘insurance’ This allows them to claim a refund it the goods or service did not arrive, was faulty or broken upon arrival, received a fake when the advert stated it was authentic, along with other grounds that may warrant a refund within the terms and conditions on PayPal, 2017 Such claims are handled and known as disputes, these must be filled within 60 days of the transaction to be in line for a refund if deemed refundable. Encryption and purchase protection along with 24 monitoring of accounts are available for both buyers and sellers. I recently purchased a book required for a module in my college course, when the book did not arrive I contacted both PayPal & the business that I purchased the book from. As I made the payment for the book through PayPal I received a refund though purchase protection - see below. As it turns out, the book arrived extremely late and as a goodwill gesture, the book shop let me keep the book, who doesn't love free stuff?! 

In comparison to a traditional bank, there are no bank fees that are withdrawn each quarter which allows the user to have more free money to spend on purchases via PayPal. Which in turn allows PayPal to make more money, the more money users have to spend the more chance PayPal will receive a percentage of the transaction which brings in revenue for the company.

PayPal was the first of its kind, that allowed secure and easy payments for customers online. It has a strong brand & reputation behind it that instills confidence into the users both for personal and business use. Its popularity and confidence is shown as it is an available as a payment method within the purchasing process of online trading. It is now the largest online payment system in the world.

PayPal has grown and expanded its brand with the growth and increase in popularity with online shopping. It is a digital company that I admire, adore and will forever use until my debit card gets declined... 

                

Bibliography
Mercer, C. (2015). History of PayPal. Available: https://www.techworld.com/picture-gallery/business/history-of-paypal-1998-now-3630386/. Last accessed 02 Oct 

Smith, C. (2017). eBay Statistics and Facts. Available: https://expandedramblings.com/index.php/ebay-stats/#.WdSd1PmPLct. Last accessed 02 Oct 2017.

PayPal. (2017). PayPal Safety & Security. Available: https://www.paypal.com/us/webapps/mpp/paypal-safety-and-security. Last accessed 02 Oct 2017.



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