So as we look at PayPal
this is an interesting company because you may say
"Oh man, they've been around a long time
They're old tech. I don't like PayPal.
I don't like their fees or something else."
Well, they are charging large fees because they've been very
very successful and they have a huge number of customers
and therefore they can start charging fees like banks do
Whereas they didn't start out with
such large fees or certainly not with such a large market share
PayPal is an interesting company because it was started by Elon Musk
an entrepreneur that I have a lot of admiration for
things that he's done that are creative and interesting
But at any rate, Elon Musk started up a business
It was the big idea focused behind it essentially
was to allow people to make digital payments from one wallet to another
one digital wallet to another using a virtual currency
This may sound like a cryptocurrency
but there was no crypto and it was not a separate currency
They were using US dollars and so in this sense
it might be like a tethered cryptocurrency
So there's some overlap between payment and retail transactions and currencies
But we'll deal with cryptocurrencies and their opportunities
and challenges and threats to banks in another session
This is an earlier threat that was very much real
has very much hit banking retail transactions and payment processing
This company started up in the year 1998
merged with Musk's company in 2000
took on the name of his company
which at the time was X.com and then became PayPal in the next year
Musk was also fired the next year
You might have think of it as Musk retiring and somebody else being brought in as CEO
but Elon says he was fired
So I tend to believe him
At any rate, he then used the money from the IPO and
later acquisition of PayPal after being
very successful the next year to raise a ton of money
and Elon owned a good piece of the business
and that helped him get other businesses started
which he's running today
In 2002, PayPal went through an IPO
By the end of 2002
they had then been acquired by eBay for
a 77 percent increase in valuation over their IPO price
That's 77 percent return in a couple of months. That's not bad
By 2010, eight years later
PayPal has reportedly said they have over 100 million accounts
in over 190 different markets or geographic areas
So, 190 different markets
not all countries like Hong Kong isn't really a separate country
Hong Kong is a separate market
It's a separate set of regulations
It's a separate currency but it's not a separate country from China or a part of China
But in 190 different markets and in 25 different currencies, Paypal does business
So it's been very successful and is very global
This company also has done a lot of acquisitions
The second company we're going to talk about is Braintree
which was acquired by PayPal in 2013
Braintree, in turn, had already acquired by that point Venmo
which is the third company we're going to talk
about because the business models are different
Why are we going to talk about three firms owned by PayPal?
They started up differently and their business focuses are
different but they are in the payment and retail transaction space
By 2015, eBay announced that they were going to spin off PayPal
By 2015, also PayPal acquired Xoom
Now, you may not know Xoom
If you're in the US, you probably would use Venmo
But Xoom is like Venmo
If you're outside the US
maybe you don't know Venmo but you might have used Xoom
Xoom tends to be outside the US
Venmo is inside the US but they're similar in space
So PayPal has acquired both
and Xoom is used in many different countries with
many different currencies and fits with PayPal's global focus
So very successful firm
done a lot of interesting things
Another successful firm later acquired by PayPal was Braintree
Braintree is a merchant payment gateway service
They were started with the name Braintree rather than an
interactive payment processing or finance because the entrepreneurs who founded it said
"We want to appeal to high-tech people.
We want to appeal to Silicon Valley.
We want to raise awareness not with
businesses because we'll get the business if we've got the right application,
we want to raise awareness of partners to help us develop this new idea,
to get excited about it."
They launched a service to provide almost an instant signup service for
financial services firms to be able to very quickly and
easily be able to accept merchant cards like Visa and Mastercard
or American Express or to accept PayPal
They also will accept bitcoin
if you prefer bitcoin and other cryptocurrencies
So, they're very flexible
They'll let you make payments in many different ways
and they're very easy to set up
They started in 2007
Today, they are across the world in many different countries on four continents
and have over 500 employees
They acquired Venmo, the third firm that we're going to talk about
for 26 million in 2011 and in that same year
later that year, no
sorry, two years later
they were acquired by PayPal for 800 million
So, they've been very successful
Gone from a startup raising a couple million of VC funding to selling out in 2013
which is six years after their founding
to a giant in the business
A giant in the business who is also a disrupter of financial services
and also a new pioneer of a different way of thinking about finance
Theodore Henry King CLARKAssociate Professor
