How PayPal Innovates to Maintain its Fintech Dominance


First Player Advantage

PayPal was the first name in fintech. It is the grandfather of payment platforms and was almost certainly responsible for the total overhaul of the world of payment systems. Before PayPal, there were banks that issued cheques and held cash deposits. The likes of Visa and Mastercard had recently introduced Debit Cards after the success of Credit Cards a decade earlier. Even then, the primary function of a bank card was to guarantee that a cheque would not bounce. Everything was still paper-based, with embossed cards being run through a sliding press which created carbon copies of the cards’ details and was verified by signature. Right up to the end of the 20th century, cash remained king.

Dot-com Boom and Bust

However, the world was changing. Silicon Valley became a place that we had heard of. The worldwide web came into being. At the start, it was hampered by mind-bogglingly slow dial-up internet connections that required you to unplug your phone to watch a website fail to load. Mobile phones were still the size of a house brick, and sending a text message was a recent innovation. Despite all this, the dot-com boom happened. Investors became incredibly excited at the idea of the world moving online. Then reality struck, and the dot-com bust left many of them severely out of pocket.

A Service Provider that Remains Flexible

However, PayPal, which had been established to service the dot-com industry, went from strength to strength. Rather like Levi Strauss in the Goldrush, the guys behind PayPal were there to help the prospectors, not dig for gold themselves. Their platform, called Confinity, was set up as a peer-to-peer payment device. Started by Peter Thiel, Max Levchin, and Luke Nosek, they merged with Elon Musk’s X bank in 2000 and sold to eBay in 2002. It became the only way to pay for goods on the auction website, meaning buyers and sellers only had to exchange email addresses. PayPal was sold by eBay in 2015 and is now an independent company again

PayPal Does Not Stop Innovating

PayPal has never stopped innovating and continues to be a disruptor in the finance market. No longer part of eBay, PayPal partnered with other online retailers, allowing consumers the choice to use PayPal at most online stores. It had been possible to buy now and pay later with PayPal on eBay for some time. The challenge on other sites was the rise of Klarna, which offered the customer interest-free credit. So not only did PayPal introduce a “Pay In 4” option, but it also launched PayPal credit. PayPal Credit has deferred interest options and is a free service for the first four months, and then anything outstanding attracts interest.

Finding New Partners

As well as integrating itself into the majority of online retail platforms, PayPal has worked with the emerging giants of the online world. One of the USA’s fastest sectors is the online gambling industry. A Research and Market report indicates that by 2023 the industry will be worth $92.9 billion. In States where gambling is legal in the US, many players have the option of wagering at an online casino with paypal. This allows players to deposit and withdraw money without having to reveal their banking details – it is an extra layer of security

QR Codes For In-Store Purchases

In an increasingly cashless society, many independent high-street retailers can now take payment via the PayPal app. First, the shopper has to scan a QR code displayed by the till. Scanning the code activates the in-store checkout. Next, the purchaser is prompted to choose which account or card they want to pay from. The payment will settle immediately, which means the purchase can be completed without any cash changing hands. The advantage for the retailer or coffee shop owner is that they do not have to have merchant agreements with different card issuers and receive the funds rapidly.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.