PayPal Holdings, Inc. is an American multinationalfinancial technology company operating an online payments system in the majority of countries that supportonline money transfers; it serves as an electronic alternative to traditionalpaper methods such aschecks andmoney orders. The company operates as a payment processor for online vendors,auction sites and many other commercial and company users.
Established in 1998 as Confinity,[4] PayPal went public through anIPO in 2002. It became a wholly owned subsidiary ofeBay later that year, valued at $1.5 billion.[5] In 2015, eBayspun off PayPal to its shareholders, and PayPal became an independent company again.[2][6] The company was ranked 143rd on the 2022Fortune 500 of the largest United States corporations by revenue.[7] Since 2023, PayPal is a member of theMACH Alliance.[8]
The company was originally established byMax Levchin,Peter Thiel, andLuke Nosek in December 1998 as Fieldlink. Later it was renamedConfinity,[9] a company which developed security software for hand-held devices.[10] When it had no success with that business model, it switched its focus to a digital wallet.[11] The first version of the PayPal electronic payments system was launched in 1999.[12]
In March 2000, Confinity merged withX.com, an online financial services company founded in March 1999 byElon Musk, Harris Fricker, Christopher Payne, and Ed Ho.[13] Musk was optimistic about the future success of the money transfer business Confinity was developing.[14] Musk and Bill Harris, then-president and CEO of the combined X.com, disagreed about the potential future success of the money transfer business and Harris left the company in May 2000.[15] In October of that year, Musk decided that X.com would terminate its other internet banking operations and focus on payments.[16] In the same month, Elon Musk was replaced by Peter Thiel as CEO of X.com,[17] which was renamed PayPal in June 2001 and wentpublic in 2002.[18][19][20] PayPal'sIPO listed onNASDAQ under theticker PYPL at $13 per share and generated over $61 million.[21]
Shortly after PayPal's IPO,eBay acquired the company on October 3, 2002,[22] for $1.5 billion in eBay stock.[16][23][24] More than 70 percent of all eBay auctions accepted PayPal payments, and roughly 1 in 4 closed auction listings were transacted via PayPal.[25] PayPal became the default payment method used by the majority of eBay users, and the service competed with eBay's subsidiaryBillpoint, as well asCitibank's c2it,Yahoo!'sPayDirect, andGoogle Checkout.[14]
In 2005, PayPal acquired theVeriSign payment solution to provide added security support.[26] In 2007, PayPal announced a partnership withMasterCard, which led to the development and launch of the PayPal Secure Card service, a software that allows customers to make payments on websites that do not accept PayPal directly.[27] By the end of 2007, the company generated $1.8 billion in revenue.[28] In January 2008, PayPal acquiredFraud Sciences, a privately held Israeli start-up that developed online risk tools, for $169 million.[29][30] In November 2008, the company acquiredBill Me Later, an online transactional credit company.[31]
By 2010, PayPal had over 100 million active user accounts in 190 markets through 25 different currencies.[32] In July 2011, fourteen alleged members of theAnonymoushacktivist group were charged with attempting to disrupt PayPal's operations. Thedenial of service attacks occurred in December 2010, after PayPal stopped processing donations toWikiLeaks. On 5 December 2013, 13 of thePayPal 14 pleaded guilty to misdemeanor and felony charges related to the attacks.[33][34]
The company continued to build its Merchant Services division, providinge-payments for retailers on eBay. In 2011, PayPal announced that it would begin moving its business offline so that customers can make payments via PayPal in stores.[35] In August 2012, the company announced its partnership withDiscover Card to allow PayPal payments to be made at any of the seven million stores in the Discover network.[36] By the end of 2012, PayPal's total payment volume processed wasUS$145 billion.[37] and accounted for 40% of eBay's revenue, amounting toUS$1.37 billion in the 3rd quarter of 2012.[38]
In 2013, PayPal acquired IronPearl, aPalo Alto startup offering engagement software,[39] andBraintree, aChicago-basedpayment gateway, to further product development and mobile services.[40] In June 2014David Marcus announced he was leaving his role[41] as PayPal President; Marcus joined PayPal in August 2011 after its acquisition ofZong, of which he was the founder and CEO.[42] David Marcus succeededScott Thompson as president, who left the role to joinYahoo.[42] PayPal announced that Marcus would be succeeded byDan Schulman, who previously served as CEO ofVirgin Mobile and Executive vice president ofAmerican Express.[43]
It was announced on September 30, 2014, that eBay would spin off PayPal into a separate publicly traded company, a move demanded in 2013 by activisthedge fund magnateCarl Icahn. The spin-off was completed on July 18, 2015. On July 20, the company was relisted onNasdaq under the same ticker symbol it used shortly before it was acquired by eBay, PYPL.[44][45][46] On January 31, 2018, eBay announced "After the existing eBay-PayPal agreement ends in 2020, PayPal will remain a payment option for shoppers on eBay, but it won't be prominently featured ahead of debit and credit card options as it is today. PayPal will cease to process card payments for eBay at that time." The company will "instead begin working withAmsterdam-basedAdyen".[47]
On July 1, 2015, PayPal announced that it was acquiring digital money transfer companyXoom Corporation. PayPal spent $25 a share in cash to acquire the publicly traded Xoom, or about $1.09 billion. The deal was closed in the fourth quarter of 2015. The move strengthened PayPal’s international business, giving it access to Xoom’s 1.3 million active U.S. customers that sent about $7 billion in the 12 months ending on March 31, to people in 37 countries.[48][49]
On September 1, 2015, PayPal launched itspeer-to-peer payment platform "PayPal.Me", a service that allows users to send a custom link to request funds via text, email, or other messaging platforms.[50] Custom links are set to be structured as PayPal.me/username/amount requested.[50] PayPal.Me was launched in 18 countries including the United States, United Kingdom, Germany, Australia, Canada, Russia, Turkey, France, Italy, Spain, Poland, Sweden, Belgium, Norway, Denmark, Netherlands, Austria and Switzerland.[51] PayPal had 170 million users, as of September 2015, and the focus of PayPal.Me was to create a mobile-first user experience that enables faster payment sharing than PayPal's traditional tools.[50]
On May 17, 2018, PayPal agreed to purchase Swedish payment processoriZettle for $2.2 billion. This was PayPal's largest acquisition until late November 2019 and the company claims that it is the in-store expertise and digital marketing strength that will complement its own online andmobile payment services.[52] In 2018, PayPal became a jersey patch sponsor of thePhoenix Suns.[53] On March 19, 2019, PayPal announced its partnership withInstagram as part of the company's new checkout feature, "Checkout on Instagram".[54][55] In June 2019, PayPal reported that Chief Operating OfficerBill Ready would be leaving the company at the end of the year, transitioning into the role of commerce chief forGoogle.[56]
In October 2019, PayPal reported a loss of $228 million on investments, largely due to a failed return from a $500 million investment inUber.[57][58] On January 6, 2020, PayPal acquiredHoney for over $4 billion. This is PayPal's largest acquisition to date. It more recently signed a deal with NBCUniversal.[59] In June 2020, PayPal announced a $530 million commitment to support Black-owned businesses and minority communities in the United States.[60]
In January 2021, PayPal became the first foreign operator with 100% control of a payment platform in China, gaining an advanced position in the local online payment market.[61] In an international survey conducted in March 2021 byMorning Consult, PayPal was found to be the second most trusted brand globally.[62] In June 2022,Shopify partnered with PayPal to offer Shopify Payments to merchants in France.[63][64] In February 2023, PayPal announced layoffs for 2,000 of its workers, or 7% of its total workforce.[65] It was reported in February 2023, that CEO Dan Schulman will step away from his role by the end of 2023. Schulman will continue to serve on the board of directors after vacating the position.[66] In August 2023, the company namedIntuit executive Alex Chriss CEO, effective September 27, 2023.[67]
In August 2023, PayPal launched a U.S. dollarstablecoin, called PayPal USD (PYUSD) for payments and transfers.[68] In November 2023, it was announced that theSEC launched a legal investigation into both PayPal and Paxos, the trust responsible for issuing the stablecoin.[69] PayPal said it was cooperating with the subpoena from the SEC’s Enforcement Division.[70] In October 2023, it was announced PayPal has sold itsreverse logistics subsidiary,Happy Returns toUPS for an undisclosed amount.[71]
In 2024, PayPal executives announced the company's aim to revive growth in their branded checkout products amidst increased competition from big tech, following an upward revision of the full-year profit forecast.[72][73]
The fiscal year for PayPal is from January 1 to December 31. For fiscal year 2019, Paypal reported earnings of US$2.459 billion, with an annual revenue of $17.772 billion, an increase of 15% over the previous fiscal cycle. PayPal's shares traded at over $108 per share, and its market capitalization was valued at over $127.58 billion in December 2019.[104][105]
TheCOVID-19 pandemic has accelerated the growth of digital payment platforms, including PayPal, at the expense of the traditional banking sector.[107] As a result, Paypal has seen an increase in its stock to up to 78% in 2020 as of October. In addition, total payment volume has increased 29% amounting to $220 billion increasing positive investor sentiment.[108]
PayPal laid off hundreds of workers across US offices and moved jobs overseas during 2020-2022 pandemic.
PayPal's 2024 monogram designed by Pentagram, which is a modified version of the 2014 logo[109]
PayPal's services allow people to makefinancial transactions online by granting the ability totransfer funds electronically between individuals and businesses.[110] Through PayPal, users can send or receive payments for online auctions on websites likeeBay, purchase or sell goods and services, ordonate money or receive donations. It is not necessary or required to have a PayPal account to use the company's services.[110] Certain packaging may come withtracking numbers. PayPal account users can setcurrency conversion option in account settings.[111] The PayPal app is available online or at theiTunes App Store andGoogle Play. One year after acquiringBraintree, PayPal introduced its "One Touch" service, which allows users to pay with a one-touch option on participating merchants websites or apps.[112]
In 2007, PayPal acquired the online credit productBill Me Later, Inc.,[113] which has since been rebranded as PayPal Credit and provided services forComenity Capital Bank, the lender of PayPal Credit accounts. Founded in 2000, Bill Me Later is headquartered inTimonium, Maryland.[114] PayPal Credit offers shoppers access to an instant online revolving line of credit at thousands of vendors that accept PayPal, subject to credit approval. PayPal Credit allows consumers to shop online in much the same way as they would with a traditional credit card. The rebranding of Bill Me Later as PayPal Credit also means that consumers can use PayPal Credit to fund transactions virtually anywhere PayPal is accepted.[115] In 2015 PayPal agreed that PayPal Credit would pay a $25 million fine to settle a complaint filed in Federal Court by theConsumer Financial Protection Bureau.[116]
From 2009 to 2016, PayPal operated Student Accounts, allowing parents to set up a student account, transfer money into it, and obtain a debit card for student use. The program provided tools to teach how to spend money wisely and take responsibility for actions.[117][118] PayPal discontinued Student Accounts in August 2016.
In November 2009, PayPal partially opened its platform, allowing other services to get access to moreAPIs and to use its infrastructure in order to enable peer-to-peer online transactions.[119] On November 28, 2011, PayPal reportedBlack Friday brought record mobile engagement, including a 538% increase in global mobile payment volume when compared with Black Friday 2010.[120] In 2012, the company launched "PayPal Here", a small business mobile payment system that includes a combination of a freemobile app and a small card-reader that plugs into asmart phone.[121]
PayPal launched an updated app foriOS andAndroid in 2013 that expanded its mobile app capabilities by allowing users to search for local shops and restaurants that accept PayPal payments, order ahead at participating venues, and access their PayPal Credit accounts (formerly known as Bill Me Later).[115]
On October 21, 2020, PayPal announced a new service allowing customers to usecryptocurrencies to shop at 26 million merchants on the network starting in 2021. Paypal has been usingPaxos Trust to provide the back end infrastructure allowing users to manage and trade cryptocurrencies in accordance todata privacy rules and financial regulations. Paxos has been in charge of acquiring the necessary regulatory approvals for Paypal to facilitate cryptocurrency assets. As part of the announcement, PayPal secured the first conditional cryptocurrency license from theNew York State Department of Financial Services, which will allow customers to purchase cryptocurrencies such asbitcoin,Litecoin,Ethereum, andBitcoin Cash.[122][123][124] In March 2022, PayPal introduced a flat-fee structure for cryptocurrency transactions under $200; transactions over $200 incur a 1.8% fee for purchases or sales up to $1,000, and 1.5% for any transaction amount greater than $1,000.[125]
As of 2022[update], PayPal operates in 202 markets and has 426 million active, registered accounts. PayPal allows customers to send, receive, and hold funds in 25 currencies worldwide.[126]
PayPal's success in users and volumes was the product of a three-phase strategy described by former eBay CEOMeg Whitman: "First, PayPal focused on expanding its service among eBay users in the US. Second, we began expanding PayPal to eBay's international sites. And third, we started to build PayPal's business off eBay."[127]
In the first phase, payment volumes were coming mostly from the eBay auction website. The system was very attractive to auction sellers, most of which were individuals or small businesses that were unable to accept credit cards, and for consumers as well. In fact, many sellers could not qualify for a credit card Merchant account because they lacked a commercial credit history. The service also appealed to auction buyers because they could fund PayPal accounts using credit cards or bank account balances, without divulging credit card numbers to unknown sellers. PayPal employed an aggressive marketing campaign to accelerate its growth, depositing $10 in new users' PayPal accounts.[127]
Until 2000, PayPal's strategy was to earn interest on funds in PayPal accounts. However, most recipients of PayPal credits withdrew funds immediately. Also, many senders funded their payments using credit cards, which cost PayPal roughly 2% of payment value per transaction.[citation needed]
To solve this problem, PayPal tailored its product to cater more to business accounts. Instead of relying on interests earned from deposited funds, PayPal started relying on earnings from service charges. They offered seller protection to PayPal account holders, provided that they comply with reimbursement policies. For example, PayPal merchants are either required to retain a traceable proof of shipping to a confirmed address or to provide a signed receipt for items valued over $750.[citation needed]
After fine-tuning PayPal's business model and increasing its domestic and international penetration on eBay, PayPal started its off-eBay strategy. This was based on developing stronger growth in active users by adding users across multiple platforms, despite the slowdown in on-eBay growth and low-single-digit user growth on the eBay site. A late 2003 reorganization created a new business unit within PayPal—Merchant Services—to provide payment solutions to small and large e-commerce merchants outside the eBay auction community. Starting in the second half of 2004, PayPal Merchant Services unveiled several initiatives to enroll online merchants outside the eBay auction community, including:[127]
Lowering its transaction fee for high-volume merchants from 2.2% to 1.9% (while increasing the monthly transaction volume required to qualify for the lowest fee to $100,000)
Encouraging its users to recruit non-eBay merchants by increasing its referral bonus to a maximum of $1,000 (versus the previous $100 cap)
Persuading credit card gateway providers, includingCyberSource and Retail Decisions USA, to include PayPal among their offerings to online merchants.
Hiring a new sales force to acquire large merchants such asDell,Apple's iTunes, andYahoo! Stores, which hosted thousands of online merchants
Reducing fees for online music purchases and other "micropayments"
Launching PayPal Mobile, which allowed users to make payments using text messaging on their cell phones
PayPal can be used in more than 200 countries/regions.[136]
Different countries have different conditions:Send only (Package Service allows sending only, valid in 97 countries),PayPal Zero (package suggests the possibility of enrollment, entry, and withdrawal of funds in foreign currency, but the user can not hold the balance PayPal account, operates in 18 countries),SRW Send – Receive – Withdrawal (the possibility of enrollment, input-output and the ability to keep your PayPal account balance in the currency and to transfer to the card when the user sees fit, operates in 41 countries) andLocal Currency (SRW plus opportunity to conduct transactions in the local currency, 21 countries).
In July 2017, PayPal announced a partnership withBaidu, to allow the Chinese firm‘s 100 million mobile wallet users to make payments to PayPal’s 17 million merchants through the Baidu service.[137]
As of March 2011, PayPal has made changes to the User Agreement for Indian users to comply withReserve Bank of India regulations.[139] The per transaction limit had been set to USD $3,000, since October 14, 2011. However, on July 29, 2013, PayPal increased the per transaction limit to USD $10,000.[140] This brings the per transaction limit for India in line with the restrictions imposed by PayPal in most other countries.
PayPal has disabled sending and receiving personal payments in India, thus forcing all recipients to pay a transaction fee.[141]
PayPal plans to make India an incubation center for the company's employee engagement policies. In 2012, PayPal hired 120 people for its offices inChennai andBengaluru.[142]
On 8 November 2017, PayPal launched domestic operations under PayPal Payments Private Limited and now provides digital payment solutions for merchants and customers in India.[143] As of 2020, Paypal supports the domestic card systemRuPay and is planning to further integrateUnified Payment Interface in collaboration withNational Payments Corporation of India.[144] PayPal now has the largest global engineering team in India outside of the US, which is spread over Bengaluru, Chennai andHyderabad.[145]
PayPal is available in Israel[146] but is not available in thePalestinian territories. Nor can Palestinians working in theWest Bank orGaza access it but Israelis living insettlements in the West Bank can use PayPal. This decision has prompted Palestinian tech companies to seek a policy change from PayPal.[147]
In late March 2010, new Japanese banking regulations forced PayPal Japan to suspend the ability of personal account holders registered in Japan to send or receive money between individuals, and as a result these account holders are now subject to PayPal's business fees on all transactions.[148][149]
In Pakistan, users can useXoom, a money transfer service owned by PayPal.[150] In October 2018,Pakistan's government used Xoom to help crowdsource funds for the purpose of building two dams.[151]
Eight years after the company first started operating in the country, Paypal ceased operations in Turkey on 6 June 2016 when Turkish financial regulator BDDK denied it a payment license. The regulators had demanded that PayPal's data centers be located inside Turkey to facilitate compliance with government and court orders to block content and to generatetax revenue. PayPal said that the closure will affect tens of thousands of businesses and hundreds of thousands of consumers in Turkey.[152][153]
In January 2017, the PayPal team was scheduled to visitSri Lanka in mid-January to re-establish links.[154] In Sri Lanka as of 2021, PayPal can be used only to send money.[155]
In March 2022, during the Russian invasion of Ukraine, PayPal expanded its services for Ukrainian accounts, allowing them to send and receive money from friends and family. Previously, PayPal users in Ukraine could only send money internationally from their accounts, not receive it.[157]
This article needs to beupdated. Please help update this article to reflect recent events or newly available information.(August 2022)
On 30 July 2022,Kominfo blocked PayPal for missing a deadline to register as an electronic services operator underBank Indonesia or theFinancial Services Authority as required by new licensing rules.[159] This resulted in PayPal users in Indonesia being unable to access their funds stored in PayPal, until Kominfo temporarily unblocked the service for 5 days to allow users to withdraw their money.[160][161] PayPal was fully unblocked on 3 August 2022 after registering as an electronic systems operator under the new rules.[162]
In July 2025, PayPal announced "PayPal World," a cross-border platform intended to link PayPal andVenmo with domestic payment systems and digital wallets, beginning with partners such as India’sUnified Payments Interface (UPI), Brazil’sMercado Pago, andTencent’s Tenpay Global.[166][167] Independent reporting described the initiative as aimed at interoperability and potential person-to-person transfers across networks; the company said additional partners could be added over time.[168]
In 2024, PayPaldebit cards were allowed to be added toApple Wallets. This feature was introduced in what was described as the "biggest ad campaign to date" for PayPal. A commercial withWill Ferrell singing a slightly revised version ofFleetwood Mac's "Everywhere" debuted before the firstESPN broadcast ofMonday Night Football of the 2024 season.[169] In 2025, another ad campaign starring Ferrell used an altered version of Fleetwood Mac's "Go Your Own Way".[170]
In the United States, PayPal is licensed as amoney transmitter, on a state-by-state basis.[171][172] But state laws vary, as do their definitions of banks, narrow banks, money services businesses, and money transmitters. Although PayPal is not classified as a bank, the company is subject to some of the rules and regulations governing the financial industry, includingRegulation E consumer protections and theUSA PATRIOT Act.[173]
The most analogous regulatory source of law for PayPal transactions comes frompeer-to-peer (P2P) payments usingcredit anddebit cards. Ordinarily, a credit card transaction, specifically the relationship between the issuing bank and the cardholder, is governed by theTruth in Lending Act (TILA) 15 U.S.C. §§ 1601-1667f as implemented by Regulation Z, 12 C.F.R. 226, (TILA/Z). TILA/Z requires specific procedures for billing errors, dispute resolution, and limits cardholder liability for unauthorized charges.[174] Similarly, the legal relationship between a debit cardholder and the issuing bank is regulated by theElectronic Funds Transfer Act (EFTA) 15 U.S.C. §§ 1693-1693r, as implemented by Regulation E, 12 C.F.R. 205, (EFTA/E). EFTA/E is directed at consumer protection and provides strict error resolution procedures. However, because PayPal is apayment intermediary and not otherwise regulated directly, TILA/Z and EFTA/E do not operate exactly as written once the credit/debit card transaction occurs via PayPal. Basically, unless a PayPal transaction is funded with a credit card, the consumer has no recourse in the event of fraud by the seller.[174]
In 2008, PayPal Europe was granted a Luxembourg banking license, which, under European Union (EU) law, allows it to conduct banking business throughout the EU.[175] It is therefore regulated as a bank by Luxembourg's banking supervisory authority, theCommission de Surveillance du Secteur Financier (CSSF).[176][177][178] All of the company's European accounts were transferred to PayPal's bank in Luxembourg in July 2007.[179] Prior to the move, PayPal had been registered in the United Kingdom (UK) as PayPal (Europe) Ltd, an entity which was licensed as an Electronic Money Issuer with the UK'sFinancial Services Authority (FSA) from 2004. This ceased in 2007, when the company moved to Luxembourg.[180]
In India, as of January 2010, PayPal has no cross-border money transfer authorization. In an emailed response to questions fromThe New York Times, Reserve Bank of India spokeswoman Alpana Killawalla said, "Providers of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act. PayPal does not have our authorization."[181] As of 2010, PayPal did not have the required Certificate of Authorization.[182]
PaisaPay is an Indian sister service to PayPal. It is owned by eBay.[183] PaisaPay makes possible payments from abroad by PayPal account holders to Indian sellers on eBay.in.
The PayPal Buyer Protection Policy states that customers may file a buyer complaint for not receiving an item or if the purchased item was significantly not as described. The customer can open a dispute within 180 days from the date of payment and escalate it to a claim within 20 days from opening the dispute.
Buyers using a credit card might get a refund viachargeback from their credit-card company. However, in the UK, where such a purchaser is entitled to specific statutory protections (that the credit card company is a second party to the purchase and is therefore equally liable in law if the other party defaults or goes into liquidation) under Section 75 Consumer Credit Act 1974, the purchaser loses this legal protection if the card payment is processed via PayPal.[186]
Also, the Financial Ombudsman Service (for the U.K.) position is that section 75 protection does not apply where PayPal or any eMoney service becomes involved in the credit card transaction. This leaves consumers with no recourse to pursue their complaint with the Financial Ombudsman Service. They only would have recourse in the courts, but in any event they cannot because PayPal is incorporated in Luxembourg and, since the UK has left the EU, is now no longer within the jurisdiction of any UK Courts. The key issues that determine the applicability of section 75 are identified very clearly in Office of Fair Trading v Lloyds TSB Bank Plc and others [2006] EWCA Civ 268 7 and theBank of Scotland v Alfred Truman (a firm) [2005] [EWHC] 583 (QB). This is a legal authority that section 75 protection does exist where one has paid on a credit card for a product, via an eMoney service.[187]
According to PayPal, it protects sellers in a limited fashion via the Seller Protection Policy. In general, the Seller Protection Policy is intended to protect the seller from certain kinds of chargebacks or complaints if the seller meets certain conditions, including proof of delivery to the buyer. PayPal states the Seller Protection Policy is "designed to protect sellers against claims by buyers of unauthorized payments and against claims of non-receipt of any merchandise". The policy includes a list of "Exclusions" which itself includes "Intangible goods", "Claims for receipt of goods 'not as described'", and "Total reversals over the annual limit".[188] There are also other restrictions in terms of the sale itself, the payment method and the destination country the item is shipped to (simply having a tracking mechanism is not sufficient to guarantee the Seller Protection Policy is in effect). The PayPal Seller Protection Policy does not provide the additional consumer protection afforded by UK consumer legislation(most notably theConsumer Rights Act 2015) and in addition, it cannot be enforced in the Courts because PayPal operates from Luxembourg, outside all three of the UK legal jurisdictions.[189]
In early 2006, PayPal introduced an optionalsecurity key as an additional precaution against fraud.[190] A user account tied to a security key has a modified login process. Account-holders enter their login ID and password as normal, but are then prompted to enter a six-digit code provided by a credit card sized hardware security key or a text message sent to the account holder's mobile phone. For convenience, users may append the code generated by the hardware key to their password in the login screen. This way they are not prompted for it on another page. This method is required for some services, such as when using PayPal through the eBay application oniPhone.
Thistwo-factor authentication is intended to make it difficult for an account to be compromised by a malicious third party without access to the physical security key, although it does not prevent the so-calledMan in the Browser (MITB) attacks. However, the user (or malicious third party) can alternatively authenticate by providing the credit card or bank account number listed on their account. Thus, the PayPal implementation does not offer the security of true two-factor authentication.[191]
It is also possible to use a mobile phone to receive anmTAN (Mobile Transaction Authentication Number) viaSMS.[192] Use of a security code that is sent to the account holder's mobile phone is currently free.[193]
As early as 2001, PayPal had substantial problems withonline fraud, especially internationalhackers who were hacking into PayPal accounts and transferring small amounts of money out of multiple accounts. Standard solutions for merchant and banking fraud might use government criminal sanctions to pursue the fraudsters. But with PayPal losing millions of dollars each month to fraud while experiencing difficulties with using theFBI to pursue cases of international fraud, PayPal developed a fraud monitoring system to detect potentially fraudulent transactions.[194] This development of fraud monitoring software at PayPal led Peter Thiel to createPalantir, a big-data security company whose original mission was to "reduce terrorism while preserving civil liberties."[195]
In 2015, 150,000 Spanish cardholders had their funds frozen in an apparent fraud case involving a PayPal service provider, Younique Money, which was the de facto administrator of the cards. Previously, PayPal had charged €15 to all its card users without authorization (150,000 users). As of March 2015, most funds had not been returned.[196][197][198]
On December 21, 2024, YouTuber MegaLag uploaded a video revealing how the popular online shopping web browser extensionHoney was indiscriminately stealing money from online creators who useaffiliate links, including from YouTubers who Honey was paying to sponsor the extension in their videos.
Usually, when a person clicks on an affiliate link to a product—such as one provided in the description of a YouTube video sponsoring the product, or one embedded in a product review article—a revenue cookie is generated for the affiliate link, so that if someone buys a product because they saw a promotion of that product, the promotor will be credited for the sale and be paid a percentage. If the buyer clicks on multiple affiliate links for a product before buying it, usually the last clicked link is the one credited for the sale.
However, if a buyer had the Honey extension installed in their browser, then upon reaching a merchant's checkout page, the extension would ask if the buyer wanted Honey to check for coupons. If the buyer clicked yes, Honey would delete the cookie for the last clicked afffiliate link and replace it with Honey's own affiliate cookie, regardless of whether or not the buyer used any of the coupons Honey found, and even if Honey didn't offer any coupons at all. By doing this, Honey would take all the affiliate credit and money for the sale, leaving the creator who actually promoted the product (who owned the supplanted affiliate link) with nothing.
Honey has also been exposed for intentionally hiding better deals that users would recommend online and instead pulling out worse discounts from the cashback program, which the company has full control over.[199][200][201]
In 2003, PayPal voluntarily ceased serving as a payment intermediary between gambling websites and their online customers. At the time of this cessation, it was the largest payment processor for online gambling transactions. In 2010, PayPal resumed accepting such transactions, but only in those countries where online gambling is legal, and only for sites which are properly licensed to operate in those jurisdictions.[202]
Since at least 2005, PayPal has maintained an Acceptable Use policy which disallows "transactions involving... items that are considered obscene... [or] certain sexually oriented materials or services." Their enforcement of the policy has been a constant source of controversy between PayPal and people within or related to the sex industry. In 2014, PayPal notified subscription service providerPatreon that it was moving to cease integration with Patreon as a platform as the result of Patreon permitting "adult content" on their platform. Patreon then removed access to PayPal services for creators who produced sexual content.[203]
If PayPal determines an account has been used for fraud, for another purpose that violates PayPal's Acceptable Use Policy, or without the account holder's authorization, PayPal puts limitations on, or freezes, the account.[204] PayPal has been involved in several public controversies or disputes after freezing the account of high profile users such asRichard Kyanka—then-owner of the websiteSomething Awful—in September 2005,[205]Cryptome in March 2010,[206][207][208] andApril Winchell—the owner ofRegretsy—in December 2011. The account was reinstated, and PayPal apologized and donated to her cause.[209] In September 2010, PayPal froze the account ofMarkus Persson, aMinecraft developer. Persson publicly said that he had not received a clear explanation from PayPal as to why the account was frozen, and that PayPal was threatening to keep the money in the account if they found any suspicious activity. His account contained around €600,000 ($655,842 USD).[210]
PayPal's partnerMasterCard ceased taking donations toWikiLeaks in 2010, and after theU.S. State Department said WikiLeaks was engaged in illegal activities, PayPal followed suit by suspending—and later permanently restricting—payments to the website.[211]Hacktivist supporters of WikiLeaks retaliated by coordinatingcyber attacks on PayPal, MasterCard, and other companies that took action against WikiLeaks.[212]
In February 2011, PayPalunbanned the account of a website that supportsIraq War resisters after it had enough information to fulfill itsknow your customer guidelines. TheChelsea Manning Support Network claimed the backdown was a reaction to a petition to the company to reinstate the account.[213]
In May 2013, PayPal declined to pay a reward offered in its Bug Bounty Program[214] to a 17-year-old German student who had reported across-site scripting flaw on its site.[215] The company wrote that the vulnerability had been previously reported, and chastised the youth for disclosing the issue to the public, but, uniquely, sent him a "Letter of recognition" for the discovery.[216]
In May 2014, PayPal blocked the account of a Russian human rights organisation "RosUznik", which supported political prisonersarrested at Bolotnaya Square.[221][222]
As of January 2015, a class-action lawsuit against PayPal was filed in Israel,[223] claiming that they arbitrarily froze accounts and held funds for up to 180 days without paying interest and thereby directly profited from it. In the examples given in the lawsuit, PayPal had received complaints against small vendors which were later resolved, but the PayPal account was closed. The lawsuit requests that PayPal be declared a monopoly and thus regulated accordingly.
In May 2015, PayPal blocked an account intended to raise money for the production of print copies ofBoris Nemtsov's investigative report "Putin. War" on Russian military involvement in Ukraine.[225][226] The explanation by PayPal was that "PayPal does not offer the opportunity to use its system for collecting funds to finance the activities of political parties or for political aims in Russia", though PayPal'sAcceptable Use Policy does not mention financing for political goals.[221]Non-governmental organizationFreedom House issued a statement by Susan Corke, director or Eurasia Programs, saying,
One of the Russian government’s most effective tactics for stifling criticism of President Putin and the government’s human rights abuses is to accuse critics of conducting ‘political activities’ and claiming them to be improper or illegal. It is disturbing, to say the least, that PayPal has supported those tactics by denying individuals the right to help pay for publishing ‘Putin. War,’ the work of murdered opposition figure Boris Nemtsov. PayPal should immediately lift this ban, to help, rather than hinder, press freedom in Russia.[227]
By 2016,ConsumerAffairs had received over 1,200 consumer reviews of PayPal, resulting in an overall satisfaction rating of one star out of five for the company.[230] Consumers have also launched numerous anti-PayPal Facebook pages and Twitter accounts to air their complaints.[231]
In February 2017, PayPal froze the account ofNews Media Canada, a Canadiantrade association, in response to a payment fromThe Reminder, aFlin Flon,Manitobacommunitynewspaper, that was intended to cover the fee for the Reminder's submission of articles for consideration in a nationwide journalism contest run by News Media Canada, including one discussingSyrian refugees. PayPal cited United States regulations as a reason for flagging the transaction between Canadian entities.[232]
In September 2018, PayPal banned radio hostAlex Jones and his websiteInfoWars, saying that his site has content that is hateful and discriminatory against certain religious groups.[233]
PayPal discontinued payments toPornhub models on November 14, 2019,[234] alleging that "Pornhub has made certain business payments through PayPal without seeking our permission".[235] Pornhub criticized the decision as one that affected "over a hundred thousand performers who rely on them for their livelihoods" and steered its payees toward other payment options.[235][236]
In September 2020, PayPal issued new terms of service which introduced a fee for inactive accounts in 19 countries.[237][238] PayPal sent its clients an email about the updated terms, but did not mention introducing such a fee.[citation needed]
PayPal faces criticism over its policy requiring that the name on a user account must match the account holder's legal name, and that any user seeking to change the name on their account must provide government-issued photo identification. Trans and nonbinary users and rights advocates object because this means that any trans user whose preferred name differs from their legal name is forced to use theirdeadname instead. They say this is not only disrespectful, but also endangers trans users, because the name on the PayPal account is revealed to the payee whenever a user makes a payment, therebyouting the user and potentially exposing them to people who may harass or injure them. By contrast, other financial companies, such as MasterCard, have made it easier for trans and nonbinary users to change the names on their accounts.[239]
In July 2021, PayPal announced a plan to collaborate with theAnti-Defamation League (ADL) Center on Extremism, theLeague of United Latin American Citizens, and several other nonprofits to analyze its users' transactions in order to investigate the finances of extremist and hate groups in the United States, and to share the results with law enforcement, policymakers, and other financial corporations.[240][241] The ADL's CEO,Jonathan Greenblatt, stated that this initiative is meant to help "mitigat[e] extremist threats."[241]
In October 2022, PayPal published an update to its Acceptable Use Policy that included a $2,500 fine for the accounts of users PayPal deemed to have been promoting misinformation. Former PayPal presidentDavid A. Marcus criticized the change,tweeting that "PayPal's new AUP goes against everything I believe in".Elon Musk, co-founder of X.com—which merged with Confinity to form PayPal—also criticized the change. Following media scrutiny and criticism on social media, PayPal removed the updated policy from its website, stating, "An AUP notice recently went out in error that included incorrect information. PayPal is not fining people for misinformation and this language was never intended to be inserted in our policy. Our teams are working to correct our policy pages."[245][246]
In March 2002, two PayPal account holders separately sued the company for alleged violations of theElectronic Funds Transfer Act (EFTA) and California law. Most of the allegations concerned PayPal's dispute resolution procedures. The two lawsuits were merged into one class-action lawsuit (In re: PayPal litigation). An informal settlement was reached in November 2003, and a formal settlement was signed on June 11, 2004. The settlement requires that PayPal change its business practices (including changing its dispute resolution procedures to make them EFTA-compliant) and make a US$9.25 million payment to members of the class. PayPal denied any wrongdoing.[247]
In June 2003,Stamps.com filed a lawsuit against PayPal and eBay claiming breach of contract, breach of the implied covenants of good faith and fair dealing, and interference with contract, among other claims. In a 2002 license agreement, Stamps.com and PayPal agreed that Stamps.com technology would be made available to allow PayPal users to buy and print postage online from their PayPal accounts. Stamps.com claimed that PayPal did not live up to its contractual obligations and accused eBay of interfering with PayPal and Stamps.com's agreement, hence Stamps.com's reasoning for including eBay in the suit.[248][249]
Craig Comb and two others filed a class action against PayPal inCraig Comb, et al. v. PayPal Inc., alleging illegal misappropriation of customer accounts, and detailing their customer service experiences, including the freezure of deposited funds for up to 180 days until dispute resolution by PayPal. PayPal argued that the plaintiffs were required to arbitrate their disputes under theAmerican Arbitration Association's Commercial Arbitration Rules. The court ruled against PayPal, stating that "the User Agreement and arbitration clause are substantively unconscionable under California law."[250]
In September 2002,Bank One Corporation sued PayPal for allegedly infringing its cardless payment system patents.[251] The following year, PayPal countersued, claiming that Bank One's online bill-payment system was an infringement against PayPal's online bill-payment patent, issued in 1998.[252] The two companies agreed on asettlement in October 2003.[253]
In November 2003,AT&T Corporation filed suit against eBay and PayPal claiming that their payment systems infringed an AT&T patent, filed in 1991 and granted in 1994.[254] The case was settled out of court the following month, with the terms of the settlement undisclosed.[255]
In June 2011, PayPal and Israel Credit Cards, Ltd. (CAL)—a credit card issuer subsidiary ofIsrael Discount Bank—were sued forNIS ₪16 million. The claimants accused PayPal of deliberately failing to notify its customers that CAL was illegally charging them for currency conversion fees.[256]
A class-action lawsuit filed in 2010, in which the plaintiffs contested PayPal's "holds" on funds, was settled in 2016.
PayPal has proposed a settlement in the amount of US$3.2 million inZepeda v. PayPal which has yet to be ratified. As part of the settlement proposal, the company agreed to change some of its policies.[257]
In 2017, following a class action lawsuit between PayPal and its users over unexplained account closures, a settlement agreement was reached—and granted final approval by a federal judge—in which PayPal agreed to pay the class US$4 million, modify the disclosure of its reserve and hold practices, and clarify its dispute resolution process.[258]
In January 2022, a class-action lawsuit was filed against PayPal that claims the company froze accounts without providing adequate explanation, or for arbitrary reasons, and that PayPal told account holders they would "have to get a subpoena" to learn why their accounts were frozen. The lawsuit alleges that PayPal also confiscated funds for itself after 180 days, violating both theRICO Act and PayPal's own policies.[259][260]
On 21 May 2015, PayPal agreed that PayPal Credit would pay a US$25 million fine to settle a complaint filed in federal court by theU.S. Consumer Financial Protection Bureau.[116] The complaint alleged that consumers using PayPal were signed up for PayPal credit accounts without their knowledge or consent, that PayPal had promised discounts and payment options the consumers never received, and that users trying to sign up for the regular, non-credit, PayPal accounts were signed up for credit accounts instead.[116][261] The complaint was filed in theUnited States District Court for the District of Maryland, which ordered PayPal Credit to refund $15 million to consumers and to pay a $10 million fine.[116]
^Ready, Bill (August 19, 2015)."PayPal Acquires Modest".PayPal Stories. PayPal.Archived from the original on August 5, 2020. RetrievedJanuary 20, 2020.
^abGrabianowski, Ed; Crawford, Stephanie (December 13, 2005)."How PayPal Works". How Stuff Works.Archived from the original on November 13, 2006. RetrievedNovember 23, 2014.
^Virgil Larson, "Local building, global growth: PayPal opens facility, plans to expand staff to keep up with business",Omaha World-Herald, March 8, 2007, 1D.
^"Bepress.com".Archived from the original on December 4, 2010. RetrievedJanuary 20, 2011.
^Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001)
^abMargaret Jane Radin et al., Internet Commerce The Emerging Legal Framework 1174–1175 Foundation Press (2d ed. 2006)
^Article 23 of the EU's Banking Directive (Directive 2006/48/EC).
^NYtimes.comArchived July 1, 2017, at theWayback Machine The New York Times, India's Central Bank Stops Some PayPal Services, by Heather Timmons and Claire Cain Miller, February 10, 2010,
^RBI.org.inArchived February 19, 2010, at theWayback Machine Certificates of Authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India
^Miloseski-Reid, Paul (July 29, 2013)."Home Affairs Committee". publications.parliament.uk.Archived from the original on June 15, 2015. RetrievedJune 13, 2015.
^Katzovitch, Guy (June 22, 2011)."ICC-Cal, Paypal sued in Tel Aviv court for NIS 16m".Globes.Archived from the original on October 29, 2013. RetrievedJune 23, 2011.A NIS 16 million lawsuit was filed yesterday with the Tel Aviv District Court against Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) and PayPal Inc., and the claimants have asked the court to recognize it as a class-action suit.
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