Receiving money via the Internet is one of many modern conveniences we take for granted, but before it became possible someone had to devise the technology and create the infrastructure which enables it.
PayPal is, by some margin, the biggest name in online payment technology – at least for now. How long its reign will last we cannot know – but we do know how it ascended to the throne.
The company began life in 1998 under a different name and with a somewhat different focus. Confinity made security software for the Palm Pilot, enabling payments to be made on the then wildly popular PDA.
The firm then began work on broader technology for transferring money online, leading it into a fierce but short-lived rivalry with one of the world’s earliest online banks. X.com had been founded in November 1999 by a South African entrepreneur you may have heard of: Elon Musk, who is now rarely far from the technology headlines thanks to media darlings SpaceX and electric car manufacturer Tesla.
Within months the two firms had concluded that they would be better off working together rather than against each other. Musk was impressed by Confinity’ s developing technology and In March 2000 they merged. Later the same year Musk decided to abandon X.com’s other ventures and focus his efforts solely on the Confinity technology. It was the decision which made him a billionaire. The combined company was renamed PayPal in 2001.
Success was rapid and decisive. Within a year the director of PayPal had decided to offer shares for $13 apiece in an initial public offering. (IPO).This proved to a resounding success, bring in a hefty $61 million – the equivalent of several times that amount today.
The rest, as they say, is history. PayPal dominates online payments in the same way Google dominates internet search. But just like other technology firms, it has struggled to meet the needs of its millions of users around the world, becoming something of a blunt instrument and at times applying its rules and operating principles in a heavy-handed, inflexible manner.
In 2002, not long after the iPO, PayPal was wholly acquired by online auction site eBay, and remined a subsidiary for a full 12 years, before returning to independent life in 2015 following pressure from major shareholders. Newly independent PayPal is now so vigorous that it has begun acquiring firms in in its own right. In 2015 it bought out major rival Xoom.com, which was of similar vintage to PayPal.
Technology never stands still, and you can bet your last virtual dollar that online payment systems will continue to evolve. PayPal no longer has quite the monopoly on online money payment systems it once enjoyed: rivals include Skrill, Stripe and Payza. But for the time being at least, the crown remains firmly on the head of PayPal.
Photo of PayPal HQ in San Jose by Sagar Savla (Creative Commons)