![]() Scale: PayPal’s global scale gives it significant reach.Brand: PayPal maintains a highly-recognized and trusted brand in the online payments industry.Other minor value propositions offered by the brand are as follows: At the same time, it offers a risk management system that prevents illegal, fraudulent, or high-risk transactions, giving customers a sense of confidence. The company’s platform enables consumers and merchants to carry out simple digital and mobile payment transactions through a third party. ![]() PayPal offers two primary value propositions: convenience and security. The service allows them to accept web, mobile, and in-store payments from consumers, as well as conduct online invoicing. Merchants: This segment consists of businesses.They can make purchases send and receive money set up recurring payments and make donations to charities and other nonprofits. Consumers: This segment consists of individuals.PayPal has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate: Benefits at PayPalīusiness model of PayPal Customer Segments Today, PayPal is the worldwide leader in online payment solutions. Not long afterwards, it was acquired by eBay, which had already been driving significant business its way – in fact, 60% of its transactions were from eBay auctions. Feeling confident, the company went public in 2002. Industry analysts forecasted the company would be worth $10 billion by 2005. Further, the firm’s 500 employees were processing more than 120,000 transactions on a daily basis. ![]() By that summer, customer account volume had soared to nine million. PayPal’s success expanded throughout 2001. Because of these attractive features, not long after their introduction, business accounts represented over 20% of the company’s business. While consumer accounts were restricted to $500 in credit card payments every six months, these accounts were allowed to engage in a limitless amount of such payments. It applied a fee of 30 cents plus 2.9% of each exchange – much less than what many retail locations pay for credit card sales. In June of 2000, PayPal launched a new business account offering, geared towards commercial and high volume individual customers. The service’s low transaction costs also played a role – it was free for eBay shoppers, and sellers only needed to pay a fee equaling 1.9% of the selling price. The company’s success was heavily driven by its convenience – for example, money could be sent to someone even if the sender did not have an account (though the recipient was required to). In an eight-month period (from January to August 2000), PayPal exploded from 12,000 accounts to 2.7 million. X.com took the PayPal name and began aggressive promotion of the site one effort involved offering of $10 to each new account signee. Not long afterwards, in March 2000, Confinity was acquired by X.com, headed by Elon Musk. Sensing an opportunity, Levchin and Thiel launched a website. If it did go online, potential customers would be able to open an account and deposit money, or link it to a bank or credit card account. PayPal stood out because it utilized the dollar as its exchange medium and e-mail (jointly with banking networks) as its transfer medium. A handful of firms established new electronic currencies positioned as a substitute for the dollar however, they faced distrust and significant pushback from consumers and businesses. eBay, a successful online auction site, had customers pay with checks and money orders sent through snail mail. Then Levchin and Thiel had a revelation – product sales were beginning to take off on the Internet however, no suitable system yet existed to enable electronic payments. Unfortunately, consumers still didn’t care. The two renamed the firm Confinity, and in October 1999, with a staff of six employees, it unveiled PayPal, a service through which money could be sent using handheld devices. They put the product on the market, but it performed poorly among consumers, much to their disappointment. The two worked together to garner $3 million from the Nokia Corporation and established a Field Link, a provider of encryption software for mobile devices. In 1998 Max Levchin, an online security specialist, reached out to Peter Thiel, a hedge fund manager, about financial backing for a system that could transfer money using wireless devices such as cellular phones. ![]() PayPal’s mission is to build the web’s most convenient, secure, cost-effective payment solution.
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