Strategy Summary of Paypal

Pay Pal Analysis Paypal has taken the payment processing world by storm since its inception. Just as the shift from many isolated banks to a centralized banking system with centralized payment frameworks changed the way that people exchanged money and conducted commerce, PayPal has done much the same thing.

Rather than requiring people to always extend their checking and/or credit card information to customers or buyers, they are instead able to use companies like PayPal as an intermediary so as to ensure that payment is delivered but no banking information is compromised. It is not foolproof as there is still fraud and such but it is a much better option than the financial payment frameworks of yesteryear.

While the model PayPal is using is not nearly perfected and while Android, Apple and others are joining the payment facilitation fray, PayPal is very well positioned. Analysis PayPal is a publicly traded company on the Nasdaq stock exchange. They have only been around since the late 1990's, having been founded in 1998, but they have already built up to nearly 17,000 employees. They are headquartered in San Jose, California and they fall under the financial and credit services industry.

While facilitation of payments for a small sliver of many of the transactions is their specialty, they also extend credit themselves in many situations and they have a very heavy relationship with online auction giant eBay. At one point, PayPal was owned by eBay but the former has since divested of the latter. PayPal was a private endeavor for about four years before going public in 2002. Upon the initial formation of PayPal, the business actually went by the name Confinity.

Also, its initial business niche was to provide security software for devices like PDA's and cellular phones. PayPal is not now nor has it ever been a family business. Rather, it was a group of entrepreneurs that worked together to form what would become PayPal. The impetus and motivation behind the creation of PayPal was alluded to in the introduction to this report. This motivation was to create a payment framework that allowed for better fraud protection and transaction facilitation.

Just as one example, someone wanting to put a deposit down online for a car would previously have to mail cash or issue a credit card or check number. There are obviously risks in doing any of htose things. PayPal offered a solution to this by connecting to the bank accounts of both parties as an impartial and trustworthy intermediary so that the payment could be completed without any unnecessary revealing of checking account numbers, credit card numbers or any other sensitive data (PayPal) (Yahoo Finance).

The founders of the company were Max Levchin, Peter Thiel, Ken Howery and Luke Nosek. From 1998 to 1999, Confinity shifted to being known as PayPal and it emerged as a payment transfer service rather than its original security-only focus. In March 2000, the company merged with a company called x.com, which was founded by notorious entrepreneur Elon Musk. Musk has also been one of if not the main brain-trusts behind other cutting-edge companies like Tesla and Space-X.

PayPal was snapped up by eBay two years later and this remained the case until the end of 2014 and beginning of 2015. PayPal grew a great deal while owned by eBay and at one point accounted for nearly one half of eBay's profits (PayPal) (Yahoo Finance). The current major shareholders of PayPal are The Vanguard Group, Carl Icahn, State Street Corporation, and FMR LLC. Vanguard is the only one of those four that is above five percent, coming in at 5.47%.

The other three top shareholders have between 3.23 and 3.78% of all outstanding shares. Vanguard's total share haul is 66 million while FMR has about 39 million. The other two are in the 40 to 50 million range. Customers of PayPal run the gamut. PayPal has both a consumer-facing portal as well as a business-facing one. In short, PayPal services transactions that are consumer to consumer (e.g. eBay), business to business (e.g. vendors being paid for services/good rendered to other businesses via PayPal) and business to consumer (e.g.

customers paying for goods via PayPal). In the two years since PayPal became its own business, they have not done terribly bad in terms of revenue. For 2014, they reaped $8.025 billion and they upped that to $9.248 billion in 2015. For those same two years, their net income was $419 million and $1.228 billion, respectively (PayPal) (Yahoo Finance). In terms of a mission or vision, PayPal has freshened those up since its split with eBay in 2015.

They consider themselves the "world's open technology payments platform" and also have noted that the "landscape" of payments is changing dramatically and PayPal is filling a void before it is created. Indeed, they tab themselves as being the provider of a payment solution that has long been in the works and that has made paying people online in a safe, secure and expedient fashion much better and extremely easy for anyone with access to the internet via a computer or smartphone, if not both.

In terms of values, PayPal is not afraid to boast about that either. For example, they are on the Human Rights Campaign Foundation's list of best places to work. Further, their values include collaboration, wellness, inclusion and innovation. The company is also very strongly involved in public policy as it relates to financial regulations and the industry as a whole. Indeed, they have an entire part of their website dedicated to just that.

The website contains links to topics such as visits to PayPal corporate headquarters from foreign officials such as those form Luxembourg, a choice to not expand into North Carolina for LGBT-related reasons, cyber security, modern financial tools, trade and commerce across borders and so forth. They go so far as to try and teach people about how digital payments and the associated policy can literally affect one's life (PayPal) (Yahoo Finance).

The company's goals include raising customer counts in existing countries, expanding into new countries, improving and perfecting the laws that regulate and control the industries on a state, national or international level and so forth (PayPal). Of course, companies like PayPal are always susceptible to market forces. The framework of Porter's Five Forces is a perfect example. Indeed, PayPal will have to concern themselves with those five sources.

These forces are bargaining power of the suppliers, bargaining power of the buyer, the threats of new entry by potential competition, threats of substitutes and intensity of rivals and competition (MindTools). Indeed, there was a time when PayPal.