PayPal is a type of person-to-person (P2P) payment service. A P2P payment service allows anyone with an e-mail address to transfer funds electronically to someone else with an e-mail address. The initiator of an electronic funds transfer via PayPal must first register with and fund their PayPal account. A PayPal account can be funded with a check or money order, an electronic debit from a bank account or by a credit card. The recipient of a PayPal transfer can either request a check from PayPal, establish their own PayPal deposit account or request a transfer to their bank account. PayPal is an example of a payment intermediary service that facilitates worldwide e-commerce.

PayPal performs payment processing for online vendors, auction sites, and other commercial users, for which it charges a fee. It sometimes also charges a transaction fee for receiving money (a percentage of the amount sent plus an additional fixed amount). The fees charged depend on the currency used, the payment option used, the country of the sender, the country of the recipient, the amount sent and the recipient's account type. On October 3, 2002, PayPal became a wholly owned subsidiary of eBay. Its corporate headquarters are in San Jose, California, United States at eBay's North First Street satellite office campus. The company also has significant operations in Omaha, Nebraska, Scottsdale, Arizona; and Austin, Texas in the U.S.; India; Dublin, Ireland; and Berlin, Germany, and now also in Tel-Aviv, Israel after PayPal acquired an Israeli startup called FraudSciences 1 for $169 million. As of July 2007, across Europe, PayPal also operates as a Luxembourg-based bank.

Beginnings

The current incarnation of PayPal is the result of a March 2000 merger between Confinity and X.com. Confinity was founded in December 1998 by Max Levchin, Peter Thiel, and Luke Nosek, initially as a Palm Pilot payments and cryptography company. X.com was founded by Elon Musk in March 1999, initially as an Internet financial services company. Both Confinity and X.com launched their websites in late 1999. Both companies were located on University Avenue in Palo Alto. Confinity's website was initially focused on reconciling beamed payments from Palm Pilots with email payments as a feature and X.com's website initially included financial services with email payments as a feature.

At Confinity, many of the initial recruits were alumni of The Stanford Review, also founded by Peter Thiel, and most early engineers hailed from the University of Illinois at Urbana-Champaign, recruited by Max Levchin. On the X.com side, Elon Musk recruited a wide range of technical and business personnel, including many that were critical to the combined company's success, such as Amy Klement, Sal Giambanco, Roelof Botha of Sequoia Capital, Sanjay Bhargava and Jeremy Stoppelman.