Long the Internet’s leading online-payments service, PayPal has a 24% market share of U.S. online payments, according to financial-institution consulting firm Celent LLC. PayPal, founded in 1998, boasts 96 million accounts with consumers who want to send payments online without revealing their credit-card or banking information to vendors. To use the service, customers simply set up an account with their credit-card or bank-account details, fill out a payment amount and the email address of the recipient, and send the payment via the Internet to PayPal. If the recipient doesn’t have an account, he simply opens one in order to collect the payment. The service gained traction on eBay and proved to be more popular than an in-house payment system it had been using.
For eBay, which acquired the online-payment business in October 2002, PayPal has been a big asset. The unit has helped accelerate trading on eBay’s auction sites in the U.S., Germany and the United Kingdom. Most recently, PayPal generated 23% of eBay’s total $1.3 billion quarterly revenue. And PayPal’s revenue is growing steadily: It was up 48% to $304.4 million in the fourth quarter compared with a year earlier.