PayPal Case Analysis

Currently, the new technology has developed different methods of payment services through digital mobiles. Paypal is the largest company offering online payments services in America(Ferrer, 2020). Although other payments methods such as Amazon and Alipay companies tend to provide a competitive threat, they are still behind PayPal in transactions made every day. Max Levchin founded the company and called it “Confinity,” In 2000, Elon Musk changed its name to Pay Pal and led a strong marketing campaign that increased the number of registered pay pal users. It was acquired through auction site eBay that serves as an intermediary between the customer and the transactions provided. The pay pal system of payment provides online payments faster than the traditional forms of payments. It is also a safe and confidential payment method since the customer’s data is protected when making transactions. The system requires no initial cost, making it easy to access comfortably. Besides, pay pal provides the necessary tools that create systems for selling and buying goods. Paypal services are available to all users and online sellers in America, and commission charges are provided for every transaction made(Ferrer, 2020). Paypal case analysis is a technique that helps in determining the total number of assets and liabilities calculated in percentage form and analyzed in a balance sheet account in every commercial year.

Additionally, the payment method above is electronic commerce that depends on the internet and other online platforms. It involves online payment systems, for instance, debit and credit cards. Paypal online services are recommended since they are the fastest method of payment. Customers are allowed to use cash or cheques to pay for the goods. The method is convenient in that buyers are always certain and convinced their goods are delivered in time.

Most importantly, after a transaction, PayPal does not disclose any information of the customers’ account, enhancing transactions security(Gonzalez, 2004). It operates on placing little charges on every transaction. For instance, for business accounts, the charge depends on the transaction volume. In contrast, all transactions are free for personal accounts only that the customer cannot receive a credit card payment. Paypal creates positive networks globally.

However, the positive network effects enable entrepreneurs to scale their businesses by; increasing customers’ base, generating the increased profits, and market sharing. The network effects are regarded to be more important since the market share grows successfully and substantially. The PayPal platform has attracted many new users to rely on it through network effects in terms of payments. These networks state that goods and services are more valuable if many people use them (Hagiu, 2016). Precisely, the more increased number of people improves the value of goods and services. Many entrepreneurs have been trying to improve network effects by striving to excel, having the ability to defeat the competition, harnessing the network effects powers, and building a good business model. However, most entrepreneurs find it difficult to initiate and improve the network effects. As a result, online marketplaces become more defensible and more difficult to build. The main challenge is that to attract more suppliers, they need a lot of buyers, and to attract more buyers, they need many suppliers. The challenge affects both the sellers and buyers, making them unable to build good marketplaces. Many entrepreneurs viewed the challenge as a chicken-and-egg problem.

Although it seemed to be a critical problem, the PayPal system developed several tactics that enabled entrepreneurs to demonstrate their products(Nguyen, 2017). The tactics helped them attract many buyers to gain many suppliers. The company had to subsidize the value of the products to its early users to attract new users. It involved paying buyers to use their products with the help of an existing supplier. For instance, when new users joined PayPal, they would give each $20, and if they got a friend who wanted to join, they would give another $20. The process required a huge amount of cash to buy new customers. Although the process was so difficult, they worked hard to succeed (Nguyen, 2017). They did everything to instill confidence and reduce friction in all entrepreneurs. The system purchased things on eBay and paid with pay pal, therefore, helping the pay pal solve the chicken-and-egg problem.

Briefly, the pay pal company is a convenient form of online payment that makes it easier for sellers and buyers to make transactions. It provides quality services that many entrepreneurs rely on upon without a doubt. Paypal has grown worldwide, providing support to both large-scale and small-scale businesses. Besides, it has greatly improved the network effects, thereby solving the chicken or egg problem. In addition, the pay pal system of payment has contributed to the success of many businesses since it operates faster and effectively.

References

Ferrer Roig, B. (2020). Economic and financial analysis of PayPal Holdings, Inc.

González, A. G. (2004). PayPal: the legal status of C2C payment systems. Computer law & security review, 20(4), 293-299.

Hagiu, A., & Rothman, S. (2016). Network effects aren’t enough. Harvard business review, 94(4), 64-71.

Nguyen, H. (2017). https://core.ac.uk/download/pdf/132598747.pdf