Pa(in)Pal: A Company In Denial



We’ve all used Paypal. It’s the lesser of two evils when deciding between the manual input of payment information, or clicking a few buttons. But, in a world of shifting payment systems, and increasing disruptions in the transaction sector, can a company that hasn’t had a true shattering innovation since its inception really keep up with the new kids?


Check(ed) Out

PayPal, originally named Confinity, was established in 1998. At the time, it was innovative because money transfer services lacked its convenience and speed. But the company didn’t really explode until it was acquired by Ebay in 2002. This synthesis allowed the PayPal platform to govern the majority of all of Ebay’s transactions, which gave it an enormous amount of exposure. It quickly expanded to many other markets and websites, even a partnership with Mastercard, leading to $1.8 billion in revenue by the end of 2007.

PayPal seemed to be doing fine in the niche it created for itself for quite a while. So the urgency to innovate wasn’t pressing. In the years following, the biggest moves that the company made were partnerships with companies such as Facebook (for digital goods). It was easy for PayPal to simmer in its throne as the head of transactions for a bit. That is, until the consumer and merchant transaction market became cluttered with innovations. Instantly, PayPal started to feel less like the only option, and more like the antiquated system.


Pay N(ever)

The problem with PayPal is its inability to compete in a landscape of disruption. They started by establishing themselves as a convenient way to store and transfer payments, and that is still their only point of value. They still utilize the same interface, the same clunky website, and the same aged branding they’ve had all along. And consumers noticed.

The introduction of new and more convenient payment methods such as Apple Pay, Google Wallet, Square, Venmo, and even Bitcoin, sent the company scrambling to try and establish themselves as a the best interface for payments in the consumer space. But with the inability to produce new value for consumers, PayPal will ultimately fall flat. There is only so much that a button can do.

And PayPal knows that. This is why they went ahead and bought Venmo. What PayPal has, is a large consumer base. With over 15 years of experience, they should be tapping into the established trust and useage they already have, to shift their value from an accessory to a much deeper payment/transaction system. But even with the acquisition of Venmo, PayPal released its own version called “PayPal.Me”; a move that seems clumsy and repetitive in an already convoluted market.



PayPal feels antiquated, lackluster and like a boring chore in a market where entire transaction overhauls are being invented. The way we interact with money is changing, and PayPal has done little to add to that conversation. Instead of trying to find new outlets in existing systems of payment, PayPal should divert its attention to reinventing them. Otherwise, it will be nothing but retired digital real-estate.


Airbnb: Stop Locking Guests Out!


Instacart: Shopping for groceries has never been more fun

Student comments on Pa(in)Pal: A Company In Denial

  1. An interesting article, especially given how many times I have heard of people having trouble with PayPal. Whether it be people who had their accounts frozen for innocuous reasons, such as PayPal not understanding crowdfunding ( or wondering why one was putting so much money into one’s PayPal account ( I have not heard of any positive experiences involving PayPal. By contrast, I know of a number of people who praise and use Venmo.

    There are certain parts of your post I would dispute- Bitcoin is not a payment service like PayPal, and I do not know of anyone who talks about using Apple Pay or Google Wallet although I can think of a few stores that accept it- but generally I agree. At this point PayPal appears to be treading water and living off of inertia. Many people have been using PayPal for so long it will take some time for people to stop using it as a bank or stop using it entirely. It will take some time, but it will happen unless PayPal can find a way to change things around.

    1. YES! Absolutely. I think you nailed it with this “PayPal appears to be treading water and living off of inertia.” They’re stagnant…

      And I think you’re right, that the other payment methods are less prevalent in digital spaces where PayPal is, but I think their introduction and the slight traction they’ve been having shows that PayPal no longer has reign over the market like they used to. But, they’re slowly coming in. Square just launched a new piece of hardware that reads the NFC chips and accepts Apple Pay so, we’ll see where that takes them…

      Thanks for the comment!

  2. Definitely agree with you on the lack of innovation for PayPal, but I wonder if it’s still too late to save themselves. PayPal’s inertia, although slowing, is still huge: eBay is still one of the predominate website for online retail, and as long as PayPal is its “official” payment system, people like myself will use it. Unless I’m really missing something here, but I can’t think of an instance where I used something other than my credit card information or PayPal for all of my online transactions. I don’t even know if Venmo can be used for shopping online?

    1. You bring up an excellent point that PayPal is still dominating the online payment world, and it makes me wonder why Venmo or other pay services haven’t tried to innovate in this territory yet. But on the other side of that, I think it’s such a missed opportunity for PayPal not to enter the digital person to person transaction space, especially with such a large user base. And now that other players are coming into the world of Ebay since their “divorce,” perhaps this momentum might start to slow faster. Thanks for the comment!

  3. Great post, Chrisoula! I did not know that PayPal created “PayPal.Me” after acquiring Venmo — makes zero sense.

    I think a lot of users have grown more and more frustrated with PayPal. I’ve recently been incredibly frustrated twice when individuals have sent me money (once for concert tickets and once for rent payment) in the “Goods and Services” versus the “Friends and Family” category when using the app. I learned that hard way that when users send money as “Goods and Services,” not only do I have to login to the platform and “process” the “goods” as “shipped” (when I’m just trying to collect rent, for example), but I also get charged a percentage of that “goods and services” payment. New users of the app (like myself) don’t know the difference (I wouldn’t think to categorize selling a concert ticket to a random person as a “friends and family” revenue stream), and therefore are to some extent scammed by PayPal, as I’m unknowingly charged this fee (it’s not clearly outlined at all). And getting them to reimburse that money without taking the charge is a huge process. Sorry for venting :).

    With that said, it seems people love PayPal because of the trust they have in its security features. However, I think this is more-so the older generation of individuals, as I believe Millennials are becoming more comfortable with financial security features of many apps (i.e., I see users instantly signing up their credit cards on Uber, OpenTable, etc.). It seems to me that PayPal is struggling from the consumer-to-consumer standpoint. Maybe they just need to focus on the B2C market and ensure that they don’t get overthrown there.

    1. Yes! Absolutely! I think they lack the transparency of some of the newer apps that offer much simpler terms of use. They don’t seem to have a grasp on the way that users exchange transactions today, your frustration being a fantastic example of that. Their entire model feels antiquated, and exactly as you said, not really fitting for today’s millennials, but for the older generation that holds on to interface because of the sheer resistance to learn a new one.

      I wonder though if in some time, they’ll become irrelevant though. Currently they operate as a mediator that holds your payment information, and relays it to the website that accepts it, almost like a digital payment messenger. But if there happens to be a shift where you can directly pay a website, or a business directly, the same way you could tag someone in a Slack message, or on Facebook, then their entire value dissipates, and apps like Venmo or Square could possible dominate.

  4. Completely agree with you, Chrisoula! Given the clunky UX and lack of innovation of Paypal’s part, their past partners have now gone ahead and implemented home-grown payments solutions. The facebook friend-to-friend payment button that’s free to use is a good example. Here’s how it looks

    1. Thank you for that reference! Didn’t even realize Facebook decided to implement its own system. Shows the weakness of bad interfaces for sure. Thanks again!

  5. Thank you for the post, Chrisoula. I did not know that PayPal acquired Venmo.

    I am wondering when (and whether) the traditional US banking players will launch a user-friendly interface and drop all the exorbitant fees to be up to speed with these players. There are European innovative banks, such as AirBank, where sending money transfer is a matter of one click as well. The advantage is that you do not need any third-party. And it costs you practically nothing (compared to Venmo which charges 3% if you have to use your card. That’s pretty expensive). Let’s see whether there may be a natural convergence tendency towards payment methods.

    1. Would be an interesting switch if major banks start to adopt these services as mediators. I wonder though if it would make sense for them to have home-grown services though. Chase had Quickpay as a way to pay other Chase members directly, but once Venmo took off, its interoperability allowed anyone to pay anyone. That’s like Verizon customers only being able to call other Verizon carriers. I wonder what the hesitation is for that trans-network transfer.

Leave a comment