What is PayPal? How to Make Payments with PayPal? PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper methods such as checks and money orders. The company operates as a payment processor for online vendors, auction sites and many other commercial users, for which it charges a fee.
Established in 1998 as Confinity, PayPal went public through an IPO in 2002. It became a wholly owned subsidiary of eBay later that year, valued at $1.5 billion. In 2015 eBay spun off PayPal to its shareholders, and PayPal became an independent company again. The company was ranked 143rd on the 2022 Fortune 500 of the largest United States corporations by revenue.
What is PayPal?
PayPal is a payment platform with a website and a phone app that enables payments between parties through online money transfers. PayPal customers create an account and connect it to a checking account, a credit card, or both.
Once identification and proof of funds are confirmed, users can send or receive payments online or in a store using PayPal as the go-between. Millions of small and large retailers, online and in the real world, accept PayPal payments.
PayPal also offers credit and debit cards branded with the PayPal name.
Who Uses PayPal?
Everyone. PayPal has over 200 million users globally, with 29 million merchant accounts. It’s been established for decades and officially gained popularity as the top digital payment option for eBay.
Now, after decades of service, PayPal is used by virtually every type of corporation and consumer. It has a low barrier of entry, unlike a bank account, so anyone can immediately sign up and start using the service.
How Does PayPal Work?
PayPal works as an intermediary between you and a bank. A user adds a bank account or credit/debit card to the PayPal system, and whenever they’re making an online payment, they can select which account to debit. All transactions are processed through PayPal, instead of your bank.
Any monies received will sit in your PayPal account and can be used for e-commerce, point of sale (with a PayPal card), or transferred to your bank account. Transfers can take a few days or minutes (for an extra fee). Your PayPal account balance can also be topped off with a bank account or assigned card.
For individuals, PayPal offers simple money transfers, debit/credit cards, check cashing, and e-check services. For merchants, PayPal has a variety of services at competitive rates, without long-term contracts. This includes features like PayPal Shipping, Invoicing, Working Capital, and even PayPal Loans.
Setting up a PayPal account is free, but there are various charges for using the service. It’s a slightly different business model if you’re an individual sending money to friends vs. a business facilitating payments. Fully expect PayPal to send 1099 tax forms if you’re invoicing and accepting payments for services/goods rendered.
PayPal can be used via websites, mobile apps, programmatic interfaces, or integrations. It provides tools and services to support POS (point of sale), e-commerce, and subscription-based transactions. It safeguards users by offering seller protection, purchase resolution, and the best digital security in the industry.
To sum it up, PayPal:
- Enables online and in-person payments for goods and services
- Provides a way to send and receive money internationally
- Ensures various levels of digital security and payment protection
- Charges a variable and/or fixed fee for services rendered
PayPal can also be set as a default payment method to be used online in place of a credit or debit card. This is what made it such a popular form of payment on eBay.
How to Make Payments with PayPal
It’s simple to make payments through PayPal if the recipient has a PayPal account. All you have to do is click on “send” and enter the seller’s email address. Then enter the amount and click “send.”
All transactions can be tracked on your account activity page. Everything you send is protected by advanced encryption with 24/7 fraud monitoring.
How to Receive Payments with PayPal
Receiving payments through PayPal is super easy. You can either give out the email address of your account, or log into your PayPal account and click the “request” button on the right-hand side.
Enter the sender’s email and click “next.” Enter the amount, currency type, and a note (optional). Then, click “request now.” That’s it!
You can also request money with PayPal Invoicing. It’s a free service that enables a user to quickly create and send customized invoices via email or a shared link. You can even break up the invoice into partial payments or request a tip for services rendered. From the dashboard, view the billing history to track payments and send reminders on past-due invoices.
PayPal eChecks are used when a buyer doesn’t have a credit card or alternate source of funding attached to their PayPal account. When the buyer sends payment, the funds are transferred from their bank account to the seller’s PayPal account. The electronic payment is essentially funded by the buyer’s bank.
An e-check must clear the bank before it is credited to the recipient’s PayPal account. This can take anywhere from 3 to 6 business days. It all simply depends on the bank involved.
PayPal e-checks are like writing a physical check from your bank, but sending it through digital means. Of course, most people scoff at writing any sort of check these days, but an e-check is a good payment method for those who don’t have a credit card or prefer to pay directly from a bank account to avoid fees.
Before taking any action, the sender should make sure there are enough funds in the bank account to cover the amount they are sending. If you are short, the bank will decline the request and PayPal may follow up with a second request. This can result in more than one overdraft fee for a single charge, and end up a complete mess.
PayPal Instant Payment
An instant transfer differs only slightly from an e-check. It’s a way to facilitate payment from your bank account, through PayPal. In this instance, the seller is credited immediately while the request is processed. All that’s needed for this type of transaction is a confirmed, U.S. bank account, with enough funds to cover the whole payment.
In the case of instant payment, it’s also wise to have an unexpired backup funding source, like a credit or debit card. This is just in case your payment request is declined through the bank. All of this data can be changed immediately before requesting an instant transfer.
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