how paypal works
paypal offers payment services for consumers and for merchants who accept paypal merchants use a paypal card reader in brick and mortar stores or enable paypal as a payment option on their websites consumers can pay invoices and transfer money with relative ease cash can be transferred to any email address or phone number whether or not the recipient has a paypal account if they don t have an account they will then be prompted to make one after you send the money users need an email address to sign up for an account and must provide a credit card debit card or bank account to complete the setup your mobile number will also be verified paypal verifies the information to make sure the person setting up the account is the rightful owner before the service can be used shoppers can choose the paypal option to complete purchases online if the retailer has the service transactions are completed within minutes funds may be available immediately for business owners after a sale in some cases some or all of the funds may be held for up to 21 days this is most common for newer sellers without a history 2paypal offers businesses a range of solutions for their day to day operations this includes payment portals for online and in person transactions business management services and credit and financing options business owners must also provide an email address in order to create an account paypal attempts to make online purchases safer by providing a form of payment that does not require the payor or payee to disclose credit card or bank account numbers to the website or store therefore the money is secure privacy is protected paypal feespaypal makes much of its revenue from fees it charges merchants rather than from the consumers who pay with it there is no fee for using paypal to pay for a transaction if the payment is in your home currency there is no fee if you send cash to a friend or relative rather than a business again in your home currency there s no fee for transferring money to and from paypal and your bank account unless you choose an instant transfer other transactions incur fees the paypal branded credit and debit cards are of course free to use but can incur fees for certain things like any other card interest can apply with the credit card as well other fees apply to less routine transactions such as buying and selling cryptocurrencies and receiving charitable donations paypal vs its competitorspaypal holds a 37 8 share of the market for online payments making it the second largest online payments platform as of june 2024 stripe is slightly ahead with a 37 9 market share the next closest competitors authorize net and square point of sale are far behind with 5 6 and 4 1 market share respectively 5that doesn t necessarily mean they re better but it does mean that you ll encounter more merchants using paypal and stripe than other platforms stripe is a payments platform with two headquarters located in san francisco and dublin ireland stripe connect is a newer stripe offshoot this version is designed to serve the needs of small online businesses especially those who want to go global it allows these businesses to accept dozens of credit cards in 135 currencies using stripe as a go between 6a side by side comparison of stripe and paypal by forbes concludes that their services and fees are comparable though paypal may be better and easier for small merchants while stripe can be more easily customized by merchants 7special considerationsalthough paypal is not a bank it is subject to many of the same consumer protection regulations by which banks are governed for example the extent of your liability for an unauthorized transaction is determined by how promptly you notify the bank that unauthorized activity has occurred in your account notifying paypal quickly when you have concerns will help to limit your liability and it is recommended that paypal users check their accounts regularly 89history of paypalan early version of paypal as we know was launched in the late 1990s as a payments system for palm pilot users by a software company called confinity the company later merged with x com an online banking company and officially took the paypal name in 2000 10paypal broke into the mainstream as the preferred payment mechanism for ebay buyers and sellers the auction site decided to acquire paypal in 2002 and made it the site s official payment service while working to expand its reach in 2015 paypal was spun off as an independent company company shares trade on the nasdaq under the ticker symbol pypl throughout its history paypal has acquired other companies that serve different parts of the financial transaction digital money transfer and payments markets some of these acquisitions brought technology enhancements and additional features that were incorporated into the paypal platform as the companies were absorbed paypal purchased braintree owner of the rival service venmo in 2013 11in addition to those two paypal s brands now include xoom zettle hyperwallet honey chargehound paidy and simility 12paypal charges users no fee for a regular transfer but adds a fee for instant transfers 13