What is PayPal? A Simple Guide…

by | 24/02/2021 9:56 am
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What is PayPal? What do people use it for? Should you be using PayPal? In this guide, we’ll take you through everything you need to know – including a brief history of how PayPal got started…


Today mobile and online payments are increasingly common-place. There’s Apple Pay, Samsung Pay, Google Pay…the list goes on and on.

But before mobile and online payments were all the rage there was PayPal.

PayPal was one of the first online payment processors on the scene – and it’s still one of the largest. Here’s what you need to know about the service that launched an entire industry.

PayPal History

What is PayPal? A Simple Guide…
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It’s hard to believe, but PayPal is now 22 years old. It was founded in December 1998 at the height of the Dotcom boom (or, more accurately, bubble).

But in 1998 the company was called Confinity.

A year later, Confinity merged with X.com. X.com was a historic moment in PayPal’s history. Though you may not have heard of X.com – you’ve certainly heard of its owner: Elon Musk.

Yes, that Elon Musk. The eccentric billionaire owner of Tesla and SpaceX.

Matter of fact, PayPal is how Musk got his billions. A little more than a year after the merger of Continuity and X.com, the modern PayPal was born. The company officially changed its name and went public in 2002.

However, in another turn of events, shortly after PayPal went public, online auction giant eBay bought the company.

The move made sense for eBay as in the early days PayPal was the primary way people paid for goods they bought on eBay.

But the saga doesn’t end there. In 2015 eBay spun off PayPal into its own company again.

But bottom line: in the 22 years since PayPal was founded, it went from just being the way people pay for their online auction winnings to the way we pay for most things online – and the way we send (or receive) money from our friends and family.

Nowadays it’s heard to find an e-commerce site that doesn’t take PayPal as a form of payment.

Why Was Elon Musk Fired From PayPal?

Back in 2000, shortly before PayPal went public, Elon Musk was fired from PayPal. Musk apparently found out about this while on holiday in Australia.

According to reports, Musk was keen on switching PayPal’s servers from UNIX to Microsoft’s Windows platform. The rest of PayPal weren’t keen on the idea and had Musk removed from the company.

He still made billions from the eBay acquisition. But his firing from PayPal was what lead to the creation of his newer, infinitely more interesting companies – Tesla, Space X, and the Boring Company.

“Going from PayPal, I thought, ‘Well, what are some of the other problems that are likely to most affect the future of humanity?’” he told graduates during his 2012 commencement speech at the California Institute of Technology. “It really wasn’t from the perspective of what’s the … best way to make money.”

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Why Should I Use PayPal?

It just makes your life easier. PayPal payments are so pervasive on the web, virtually every e-commerce site uses PayPal’s system.

A big advantage of using PayPal is you don’t need to give your personal payment card details to every site on the internet.

When you want to buy something from the site, you just need to click the PayPal payment button and the money will automatically be taken from your PayPal account (if you have a balance) or the credit or debit card associated with the PayPal account.

And as already stated, PayPal makes peer-to-peer payments easy. You can quickly send or receive money to/from friends and family with just a few taps using the PayPal app.

How Do I Get A PayPal Account?

It couldn’t be easier: just go to PayPal.com and sign up for an account. On the sign-up page, you’ll need to choose between a personal or business account.

If you’re just planning to use a PayPal account to pay for purchases online and send money to friends and family you just need a personal account.

What is PayPal? A Simple Guide…
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Does PayPal Cost Money?

For most transactions via Personal PayPal accounts, no. PayPal does charge businesses a transaction fee–usually a fixed fee plus a percentage of the total transaction.

But for personal users, you’re unlikely to ever see a fee – especially if you just use PayPal to pay for online goods and send money to family.

How Do I Pay With PayPal?

After you’ve created a PayPal account, you simply log into that account in your web browser. Then, whenever you see a Pay with PayPal button in an online shopping cart, just click that and follow the instructions. Your purchase will be paid via your PayPal account in just a few steps.

And it’s not just websites, many apps offer Pay with PayPal options inside of them, so you can use your PayPal account across a variety of platforms.

Finally, as QR codes have become more common, PayPal now lets you use their app to scan a QR code so you can make contactless mobile payments on the fly.

What is PayPal Business?

Around 2003, PayPal was still deeply embedded inside eBay. But during this time eBay was experiencing sluggish growth. It was during this period that PayPal began planning its next big phase where it would appeal directly to businesses of all sizes by offering merchant account facilities.

PayPal Business also allowed PayPal to make more money. With its standard account model, PayPal planned on making money from the interest accrued by money in its accounts.

However, the way people used PayPal put the dampers on this model; most people didn’t leave money in their personal PayPal accounts long enough for it to accrue any interest, so PayPal needed something else, something more reliable.

What is PayPal
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And this was how PayPal Business was born. Starting in and around 2003, PayPal began offering a complete merchant service to businesses – and not just those that used eBay. From here, with new facilities available for small businesses, PayPal was able to charge for “services” rather than waiting for interest to clear.

Between 2004 and 2015, PayPal Business grew rapidly, helped in no small measure by the fact that PayPal gifted any merchants $1000 for brining new merchants to the platform.

PayPal also cut transaction rates from 2.2% to 1.9%. It also inked deals with VISA and CyberSource to bolster its credit card gateway processing abilities. It then began actively going after big companies like Dell, Apple, and Yahoo.

And that’s a brief overview of how PayPal Business got started.

Can You Run A Business Using Just PayPal?

Can you run a business with PayPal? Yep. In fact, it is one of the easiest ways to get started really quickly when you’re first starting out.

With a PayPal business account, you can send and receive invoices, view accounts activity, and generally do everything you need to run a business.

PayPal business is recommended for anyone that trades under a business name, so if you’re a freelancer or a blogger, and you have a registered company, you could and should be using PayPal Business instead of the standard PayPal platform.

PayPal vs PayPal Business: What’s The Difference?

With a standard PayPal account, you can send and receive money, use it to pay for goods and services and even connect a bank account to it, so you can quickly and easily transfer money from PayPal to your current account.

But that’s about it; PayPal’s non-Business account is designed to facilitate simple, secure online payments. It does not feature any business-focussed features. Things like invoicing, account management, refunding tools, etc,.

If you want to manage your accounts, get detailed overviews of what’s coming and going in your accounts on a weekly, monthly, and yearly basis, you will need a PayPal Business account.

In addition to this, with a PayPal Business account, you can send branded invoices, manage inventory, create reports – reports like your financial progress year-on-year – and grant multiple users access to the account which is handy if you have an accountant.

PayPal Working Capital

If you’re a PayPal Business user, you also get access to PayPal’s very impressive Working Capital initiative. Essentially, PayPal Working Capital is a loan system, just with a little twist.

PayPal does not require credit checks to apply for Working Capital. You can get approved for the funding in minutes, and the payments are entirely flexible.

How flexible? Well, PayPal has a pretty novel way of dealing with repayments of the loan. It deducts sums from you PayPal account automatically, but you get to decide how much it takes and when.

And the deductions – or, repayments – are weighted against your sales, so if you don’t make any money, or your sales drop off for a month or two, your payments are reduced.

Here’s how PayPal explains it:

You pay back the loan automatically with a percentage of your sales that you choose when you apply. The higher your sales, the faster you repay. On days without sales, you won’t pay a thing, but you need to repay a minimum of 5% or 10% every 90 days to keep your loan in good standing.

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List of Big Companies That Use PayPal Business

PayPal Business isn’t just for start-ups and bloggers. Quite a few large corporations use PayPal Business to manage their accounts and send and receive invoices.

Here’s a list of just a few large corporations that use PayPal Business:

CompanyWebsiteCountryRevenueNo of Employees
QA Limitedqa.comUSA$200M to $1000M>5000
American Red Crossredcross.orgUSA$800 Million>10000
Tilly’stikkys.comUSA$600 Million<5000
MSLGROUPmslgroup.comFrance$700 Million1000-5000

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