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PayPal is an Internet-based payment service that offers increased security for online transactions. Pay-Pal is used, for example, at auction sites like eBay and at many other e-commerce Web sites. In the early 2000s, consumers could use many of the services Pay-Pal offered at no charge. By supplying funds from a credit card, bank account, or PayPal money market account, consumers were able to send and request money from one another through the service. For a fee, businesses could take advantage of premium services including the ability to accept unlimited credit card payments on their Web sites. PayPal also enabled wireless Internet devices like personal digital assistants (PDAs) and mobile phones to function as digital wallets.

In its first year of operation, PayPal achieved a great deal of success. More than 5 million users were registered with the service by the end of 2000, accounting for more than $1 billion in payments. According to the company, at that time its transactions accounted for more than 10 percent of all Internet traffic in the area of financial services, and more than two thirds of them generated fees. By April of 2001 the company had registered an additional 2 million users and had doubled the total value of its transactions ($2 billion).

PayPal was a popular means of settling transactions on the Internet in the early 2000s, and the company received accolades from the likes of Fortune Small Business, Red Herring, and Forbes. However, according to the Gartner Group, the company was also scrutinized by the Better Business Bureau because of consumers who said the company failed to respond when they had complaints. The Gartner Group further indicated that vendors like PayPal are not covered by the regulations pertaining to banks, and urged parties to exercise caution when doing business them.


Goldsborough, Reid. "Buying and Selling on the Internet Without Cash." Link-up, May/June 2001.

PayPal. "About PayPal." PayPal, May 30, 2001. Available from

"PayPal's Stumbles Demonstrate the Risk of Person-toPerson E-Payments." GartnerGroup Inc., January 29, 2001. Available from

SEE ALSO: Payment Options and Services, Online