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PayPal was founded in late 1998 by American Peter Theil, former securities lawyer and options trader. He and a group of friends from Stanford University created the company Confinity. Peter Theil financed Max Levchin, a software developer who saw the need for a secure software system that allowed electronic transfer of payments.
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Other investors rapidly showed interest, including Nokia Ventures which put up $3 million and Deutsche Bank which contributed a further $1.5 million. Following its launch in November 1999, Confinity attracted more backers including investment bank Goldman, Sachs & Co which invested $23 million in Confinity’s PayPal.com. With the rapid expansion of the Internet, PayPal soon had 1.5 million account holders generating a throughput of $2 million per day.
This rapid success led to eBay naming PayPal.com its primary online payment service. X.com, an online bank founded by Elon Musk, and PayPal merged to become the world’s largest secure online payment network. The name PayPal remained although X.com was listed as the parent company.
In early 2002, PayPal was floated on the stock market for around $ 900 million. By July 2002, PayPal account holders numbered 16 million with 295,000 payment transactions taking place every day.
In October 2002 eBay acquired PayPal for around $1.5 billion.
The PayPal service enables anyone with an e-mail address to make and receive online payments quickly and securely using the existing payment infrastructure with the benefit of the latest fraud prevention technology.
By 2004, PayPal, located in San Jose, California, had 50 million account holders with its services available in some 45 countries.
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