PayPal: A case study

Editor's Notes

• #2: This presentation will Analyse the degree to which Internet business is constantly developing and innovating using a detailed case study of the Internet business PayPal. There will be three presenters who you will hear present, my name is Jayllee and I will be discussing the first segment, followed then Kim and Kristina who will further analyse the Internet case study. I hope you enjoy the presentation. If you have any questions or comments please feel free to contact us below.
• #6: This report will analyse the continuous development of the internet business using a detailed case study of the online payment service PayPal. To investigate the degree of development which has and is still occurring the report will identify a brief overview of the internet, E-commerce and it’s development. Explore in detail Paypal and how is has revolutionized the Internet business, using relevant and informative case examples of current developments and innovations, while also noting PayPal’s current standing within the online business noting competing businesses and activities.
• #7: The internet is defined as “a computer network comprising or connecting a number of smaller networks, such as two or more local area networks connected by a shared communications protocol” (oxford dictionary). The internet has been a key resource in allowing the evolution of business where businesses have shifted from real time markets to digital markets, or more commonly known as E-Commerce
• #8: The World Wide Web (WWW) was created by Tim Berners-Lee in 1990 as an application which utilises the Internet to serve a purpose (Berners-Lee, 1999). This purpose kick started the evolution of internet businesses, providing the required accessibility for users globally.
• #9: . E-commerce is “a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business.” (Investopedia, 2015). The internet from a business perspective is said to be ‘a marketplace so massive, and so diverse, that nothing is beyond commodification’ (Ryan 2010), meaning everything has a potential niche market on the internet. The internet business interlinks consumers and businesses instantly (Nickson, 2010) The internet is arguably one of the most valuable resources in the world for businesses, providing instant access breaking down barriers and levelling the playing field for small, medium and large size businesses, “A small company can look as large as a big company and be as accessible . . . on the Web” (The history of online shopping in nutshell, 2010).
• #10: E-commerce has become significant in terms of breaking down physical barriers, changing political and legal laws while also increasing opportunities for entrepreneurs through ease of seating up online businesses as well as offering a selection of goods which has never before has as many competitors. . Online business require a safe and secure method of receiving and transferring financial payments. PayPal provides a reputable safe and secure method for online businesses, users and organizations to make payments online. With the maturing and growth of the internet, key factors such as accessibility, security, innovation and communication are all constantly being developed adjusted and adapting to new processes and demands from internet users.
• #11: The internet business interlinks consumers and businesses instantly (Nickson, 2010). Online business require a safe and secure method of receiving and transferring financial payments. PayPal provides a reputable safe and secure method for online businesses, users and organizations to make payments online.
• #22: eBay brought PayPal in 2002 for the relatively small sum of $1.5 billion (Rubin, 2015). While they parted ways in July 2015 with PayPal’s value at over$50 billion (Rubin, 2015), the partnership between PayPal and eBay, spanning over 10 years, laid the foundation for some of the most well known growth in online commerce.  “If you are trying to do something new, there is no evidence of historical success or failure that might provide you with sufficient guidance to make an informed decision”(Cohan, 2013). This is a good way to look at PayPal. They did not start as an online payment company, but as a software security designer called Confinity (Cohan, 2013). Cohan (2013) is examining start-ups, and it’s a poignant reminder that PayPal was once a start-up, and not the multibillion dollar, worldwide company it is today.
• #23: PayPal’s main source of innovation is the way they take something existing – online payment – and simplify it, making it easy to use and eliminating concerns that consumers have with competition offerings (Cohan, 2013).
• #24: Newly launched PayPal.Me is a prime example: Peer to peer (p2p) payments via a unique, personalised URL (Perez, 2015). Peer to peer sharing is not a new concept, and neither is payment that uses it as a platform (Rao, 2015), and Heggestuen (2015) estimates that all kinds of p2p payments – cheque, cash, money order, digital transfer – came to around USD450 billion in 2014. Of that number, it is estimate that 30% of them were done via mobile (Heggestuen, 2015). In 2002, around PayPal’s change into how we know it; “P2P networks are emerging as a significant vehicle for providing distributed services (e.g. search, content integration and administration) both on the Internet and in enterprise” (Krishnan, Smith, & Telang, 2002).
• #25: PayPal focusses a lot of their growth efforts on partnerships. eBay is obviously the biggest example, helping the company grow to eclipse it’s larger parent company by the time they parted ways in 2015. PayPal partnered with Discover Financial Services in the US to issue physical payment cards that could be used at physical stores within their network (Team, 2013). They launched a physical point of sale (POS) solution with a card reader attached to a mobile device in conjunction with partners (again, US only) (Team, 2013). On a wider scale, in 2009 they opened their system to third party developers to extend their reach and utilise their market share in online payment systems – indieGoGo, a popular crowdfunding website, wouldn’t exist without it (Macsai, 2011). Locally, they partnered with the Co-Op bookstores in Australia as of 2012 in order to give students alternative ways to buy learning material (PayPalAustralia, 2012).
• #26: As of July 2015, Rubin (2015) asserted that eBay was trading at around $34 billion, compared to PayPal’s $50 billion. At around the same time, PayPal shares were trading for nearly double that of eBay’s (Rubin, 2015). Innovation in the online payment sector is speeding up, and being tied to a company like eBay limits the opportunities available to PayPal – they can’t be used on Amazon in the US, for example, as it is a direct eBay competitor. (Mishkin, 2014). Gordon (2014) split their growth strategy into 4 areas: 1 – Innovation. Mobile and instore payments, plug in devices. Payments space is rapidly changing, and PayPal has a chance of competing in all areas 2 – Digital and physical Commerce. Online business, mobile devices, and physical retail store, PayPal has a hand in each of them. “Agnostic platform to allow retailers and devs to leverage network programmes” (Gordon, 2014). This is especially important, as it notes the network that PayPal is a part of and continually building3 – Digital wallet to mobile wallet to no wallet. Focus on the ability for consumers to make payments without relying on cash or cards. The focus is on the consumers, not the way you pay. 4 – Changed consumer shopping experience. “Differentiated and frictionless payment expereince across all channels, devices, and all methods of payment” (Gordon, 2014)
• #27: As of late 2015, PayPal’s main competition are Stripe, and Applepay. ApplePay is limited by its Apple connections – their brand compatibility (or lack thereof) is well known As far as Stripe goes: Allegedly, PayPal lost 2105 customers (website gateways) in 2015, while Stripe gained 3558 - However, they still have a 91% market share (Techlabs, 2015). Stripe offers a simpler transaction fee structure, a clean API, and a heavy focus on customers, which is an area where PayPal have historically fallen short (Techlabs, 2015).
• #28: Paypal sucks and screw paypal have been around since PayPal’s inception. They made a brief stir in American media, but the news pages aren’t being updated any longer. Between PayPal’s own proliferation in their google searches and pages like these (these are the two most prevalent), it’s difficult to know what information to trust. There have certainly been issues with PayPal’s customer service (they were very thoroughly online based and getting hold of people was difficult) and the way they process funds – many people have had funds blocked and accounts banned. There is a balance that needs to be found between protecting people from online fraud and auto-freezing accounts with no easy way to verify either way. It is definitely an area, unrelated to innovation, that needs to be examined
• #29:   PayPal is an excellent example of a company that encompasses a wide range of growth and innovation throughout their development. Viewing their timeline of development from their beginnings, through the merger with x.com and eBay, their decade long partnership, and PayPal eventually outgrowing their parent company, is a good way to see the progression of the online payment industry. PayPal innovates by attempting to stay ahead of the curve, and in and of itself they do it well. They also use strategic mergers and partnerships as a means of growth to allow them to further innovate. However, customer dissatisfaction is always going to be an issue for them. While not as prevalent as it once was before 2010, there are a multitude of websites online – which have migrated to facebook – that are still receiving posts daily about bad customer service and accounts frozen for reasons that the people concerned never have explained to them. Innovation is vital in the cut throat world of internet commerce, but it means nothing if customers are dissatisfied.