Where would we all be today without PayPal, our dedicated and caring online bank?

PayPal. The story behind it is one of those that you can remember for a long time.

The story starts with Peter Thiel and Max Levchin building the first digital wallet on the planet, integrated in those palmpilots back in the day.

New friends were keen to start a company immediately and called it Fieldlink, which they later changed to Confinity. Elon Musk, was also astounded by the idea of digital payments at the same time and his mission was to build the first online bank.

Musk did just that. He had bought a domain X.com and started a company with the same name.

X.com was experiencing difficulties from the very beginning, starting with serious arguments on which one of the board members was going to take control of the company. After ultimatums and disputes, Elon Musk turned out to be the one managing it himself.

X.com had partnered with Barclays in it’s very beginning. That had already built some strong base under the startup.

Elon Musk, having more than $300 million from his previous venture was able to do some expensive marketing strategies, like paying new users $20 and $10 for their referrals.

Also, with all this budget, Musk was able to hire massive amount of engineers in a short period of time. With all of these bright engineers under his wing, Elon Musk was able to get his online bank live in 3 months, of course, after some insanely intense work.

The company X.com now had all the features of a bank, just online, and also offered digital payments from one account to another, just what Confinity did.

At the same time, Confinity had only been finishing up with those person-to-person payments and decided to change it’s name to PayPal.

PayPal found out about what X.com was doing and started worrying about it not having as many features as Elon Musk’s company did.

Confinity had turned to Ebay, a largely growing company at that time and made a deal on integrating PayPal’s payment system into the emerging e-commerce giant. The deal with Confinity had a huge impact on Ebay.

Before, transactions between buyers and sellers on Ebay had taken a significantly long time because of 10-day Western Union transfers or sending bank checks through mail.

X.com then noticed what Confinity did and followed with the same marketing approach on Ebay. Letting the sellers on Ebay advertise and make additional income from referrals was the main strategy of both of those companies at the time.

The competition was burning between these two, and PayPal, even being the more popular kid on Ebay, was consistently losing money every day.

So now, there was no other option for Peter and Max than merging with X.com. The now stronger company decided to go with the name X.com and welcomed PayPal’s founders on board.

After the merger, X.com, now a combination of 2 fintech companies hired a new CEO who had many connections in the industry and wanted to do things his way.

As a result of the new CEO’s strategy of trying to get users of PayPal register for the Elon Musk’s online bank, X.com was losing money very quickly. Disputes started to emerge in the board of the company, especially between Peter Thiel and the new CEO.

Peter had soon resigned and Elon, after getting to know what was going on, quickly took the company in his own hands and became the CEO.

Even more disagreements grew, now between Levchin and Musk. After Elon Musk had ordered to remove PayPal’s logo from the site and soon after, went for a vacation, he was fired behind his back. 

Here ends the story of Elon Musk being the head of PayPal, but he still had the most significant piece of the company of all and the company itself was just beginning to emerge. During the dotcom crash, the company had become solely PayPal and in 2002 it went public.

After the successful IPO, PayPal had raised 63 million dollars. Not long into the future, it was purchased by Ebay.

55 countries were already using the payments system in 2006, and in 2011 there had been 100 million users worldwide doing transactions on a daily basis. After 6 years, the number of users had doubled to more than 200 million.

PayPal had become so big that Ebay could not handle it any longer, so the e-commerce giant released it from it’s paws to become a public company once again. During the years of PayPal’s large growth, company had acquired many now successful startups and businesses in the fin-tech, mobile banking and security industries.

One of the most crucial things PayPal had to deal with from its early beginnings was security and preventing fraud. Tech savvy individuals, most notably from Russia and Nigeria were doing a lot of harm to the company.

As it was losing loads of cash and could not afford to invest too much time and money into security, this was a very large problem.

Only after being bought by Ebay and getting public PayPal could start acquiring companies which were strongly advanced in data security, fraud security and fair transactions.

Some of the companies the revolutionary had acquired in the 2000s were Braintree, a division that deals with and provides a payment system for e-commerce merchants. Paydiant an American company, which provides cloud-based services for banks, ATM’s and merchants of different kind, also Xoom, which many of you may already know, that provides brilliant, fast and safe transactions.

BillMeLater is another company it had acquired in 2008. It was founded in 2000 and it is currently widely used, was renamed to PayPal Credit after the acquisition.

The payments provider is now even a part of the Fortune 500 index, which is a very big deal. We haven’s also mentioned that PayPal has the VeriSign payment solution which it had acquired in 2007 and has a partnership with MasterCard, which made the production and release of PayPal Secure Card possible.

PayPal is acquiring and constantly looking for future company acquisitions. There had recently also been a partnership with Instagram. Also, the company had bought Honey in 2019 which will definitely lead to some interesting and hopefully great business practices.

So, the company is large and successful, but how should retail and institutional investors approach PayPal’s stock and how well are their finances put together?

First thing to mention in terms of the finances of PayPal is that the reported earnings are, on average, 2.5 billion dollars per year. As of today, the company has more than 300 million active users and is dealing with their accounts in 202 different countries.

With a market-cap currently bigger than McDonald’s, this growth company and it’s stock are viewed as the number one fin-tech company on the planet.

The stock of PayPal is quite popular between investors, although the average trading volume is not that high, after the Covid-19 market crash it is becoming more and more liquid and volatile. After the crash, the stock had a significant recovery, going through the roof by about 200%.

So all the bullish players: long-term holders, retail investors and even most of the traders were very satisfied with the stock they own. Covid-19 had opened the doors even wider for fin-tech companies. A very small amount of people would pay cash for food delivered these days.

There are lots of wanna-be competitors of PayPal, but they are hardy reaching their puberty when this giant had been out there for more than 20 years and is to be considered the “alpha dog” in town.

We, of course are talking about startups such as Trustly, Skrill, Stripe, Payoneer and others like them. The majority of people haven’t ever heard of them.

However, we think that there is a lot to come in terms of mergers and acquisitions between these new and not-so new startups of digital payments and mainly financial technology.

There are lots of PayPal haters out there as well. People are creating Facebook pages and groups and dissing the company for hurting them in some way. It often turns of like this because PayPal is and will probably always be an independent and unregulated online bank.

But there is way too much value given to society by PayPal that none of us can really live without it these days. We should also often acknowledge what was given to us after this online bank. The famous PayPal Mafia is building revolutionary things till this day and changing the world at sight.

Not to mention, millions of businesses worldwide would be having a very hard time accepting payments today if, more than 20 years ago guys like Peter Thiel, Elon Musk and Max Levchin wouldn’t have designed and built this amazing payment system we are using each day.

Stripe, Skrill or Payoneer wouldn’t have been able to follow up with their great platforms as well. There are so many important things to learn from the story of PayPal or the company itself so one can apply them to his own life. Or business.

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