Paypal: Analyse

Résumé du document

Paypal is an e-commerce business that process payments and money transfers to be made through the web. It is an electronic alternative to traditional modes of payment. It performs payment processing, for a fee for online vendors, auction cites and other users. It corporate head quarters are located in San Jose, California. However, the company also has a substantial volume of operations in Nebraska, Germany and Ireland. Founded by Peter Thiel and Max Levchin, their initial business model was to launch a person-to-person payment network. However, as business volume began to grow, they entered the online auction market places. Incidentally, eBay was also operating Billpoint as its payment system and branded it "eBay Payments." The existence of PayPal ensured the beginning of a fierce but short road of competition between eBay's Billpoint and the latter. By October 2000, Paypal upgraded most of its customers to "business accounts," and hence captured higher returns. The beginning of the end of the duo's competition, however, ground to a halt when in July of 2002, eBay acquired PayPal for $1.4 billion. This decision was partly because of the popularity of PayPal and partly because more than fifty percent of eBay's customers were using PayPal's services.

Extraits

[...] eBay, in its mission statement, defines its revenue source as commerce between individuals and small businesses. When it Purchased PayPal in 2002, eBay recognized its limits and created the opportunity to expand its reach beyond this market. By combining eBay's growth and the continued efforts of PayPal's Website Payments Pro with PayPal's large merchant strategy, corporate presence and opportunities will be increased among all sales volumes and demographics. Overall corporate value will be strengthened as PayPal increases brand value and separates itself from eBay's “online flea-market” reputation, allowing both business units to be more effective in both cooperation and independent growth. [...]

[...] As previously defined, PayPal's core business is the facilitation of online payments and its core competency is doing so in a safe, quick, and convenient manner. A large part of the value that PayPal adds, both for merchants and consumers, lies in the network that they constitute. For PayPal to sustain its competitive advantage, it is essential to maintain and strengthen this network. Because large merchants have a high transaction volume involving a great number of consumers, growth in this area will be both directly profitable and add value to the PayPal network. [...]

[...] If Google payment systems could be a substitute, then it is prudent to conclude that its threat to substitutes is high since more than 70 percent of all online transactions begin with a search and Google being the premier search engine. However, PayPal's overall cost to merchants is considerably low. PayPal Competition PayPay's main competitors include the credit card ecosystem which include “subsystems” of card associations, Issuers and Acquirers. Given the fact that a greater proportion of all online shoppers still use credit or debit cards, PayPal is faced with the issue of wooing those customers to “journey” through its service in their online payments. Other competitors include credit card gateway providers. [...]

[...] Some disadvantages should be also considered. First, this is a costly strategy as PayPal would have to increase its sales force and Research and Development investments. Moreover, as cards are the predominant payment solution for large merchants, this would be hard for PayPal to keep this strategy cost-effective. Second, if PayPal ratcheted up its off-eBay initiative, we could wonder how credit card companies would react. Indeed, once PayPal starts to represent a real threat to the banks in the offline world, banks and card companies can raise their rates. [...]

[...] Becoming a bank would also differentiate PayPal from its competitors like Google, as they do not offer these services. As a disadvantage, this strategy would put PayPal at direct competition with banks, which could result in an increase in transaction fees. If banks increased their transaction costs to PayPal for direct transfer payments, this would negatively affect PayPal's profitability. Another disadvantage of this strategy is that adding bank services to PayPal's portfolio is not expanding their core competency of facilitating transactions. [...]