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PayPal

PayPal is an Internet business which allows the transfer of money between email users and merchants, avoiding traditional paper methods such as checks/cheques and money orders. PayPal also performs payment processing for e-commerce vendors, auction sites, and other corporate users, for which they charge a fee. Corporate headquarters are in San Jose, California; it is now an eBay company.

History

Beginnings

PayPal was founded in December 1998 by Peter Thiel and Max Levchin. One of its first premises was the 165 University Avenue office in Palo Alto, California, home of a number of other noted Silicon Valley startups. On the business side, many of its initial recruits were alumni of The Stanford Review, which was also founded by Peter Thiel. Most of the early engineers hailed from the University of Illinois at Urbana-Champaign, recruited by Max Levchin. In its initial incarnation, PayPal was a service for users to send money via PDAs, with actor James Doohan, Star Trek's "Scotty," as its spokesman. The PDA software was later discarded in favor of a web-based system that became popular with eBay's millions of buyers and sellers. Coupled with aggressive marketing campaigns offering $10 (and later $5) for new users to sign up, the firm grew at a meteoric rate of 7–10 percent per day between January and March 2000.

Unknown to many people is the fact that PayPal is one of the few Internet companies which has a single letter domain name, (http://www.x.com) in use. As of Jan 2006, this URL still resolves to the PayPal home page. This name was acquired by PayPal in early 2000, when x.com merged with PayPal. [1]

Though growing rapidly, PayPal was losing $10 million a month and was fraught with internal turmoil that led to three CEO changes in its first year of operations. Foreign Mafia rings found ways to steal millions from the young company. And worst of all, eBay launched a payments service named Billpoint to compete with PayPal. Yet the company was able to turn the corner and become the first dot-com to IPO after the September 11 attacks — an accomplishment that ironically backfired when PayPal's new high profile status helped prompt a slew of class action lawsuits and regulatory probes, including one by NY Attorney General Eliot Spitzer. This paved the way for the company to eventually reconcile with its former rival, eBay. [2] [3]

Acquisition by eBay

In October 2002 PayPal was acquired by eBay. (See GAMEY) PayPal had previously been the payment method of choice by over fifty percent of eBay users, and the service competed with eBay's subsidiary BillPoint. eBay has phased out its BillPoint service in favor of retaining the PayPal brand. PayPal's only substantially similar competitor is now BidPay, after Citibank's c2it service closed in late 2003 and Yahoo!'s PayDirect service closed in late 2004. BidPay itself ceased payment operations on the 31st December 2005 but the site remains to carry out any remaining customer service issues .

In 2004, the total value of transactions through the PayPal system was $18.9 billion, up 55% year over year. In January of 2005 PayPal announced plans to pursue the Merchant Services opportunity, the online payments business 'off of eBay'.

Today

As of the end of Q2 2005, PayPal operates in 57 countries (including China) and it manages over 86.6 million accounts. Every second PayPal processes an average of $823 in total payment volume. PayPal supports payments in U.S. Dollars, Canadian Dollars, Australian Dollars, Euros, Pounds Sterling and Japanese Yen.

PayPal operates locally in 13 markets, including: the United Kingdom, Canada, Australia, Austria, Belgium, France, Germany, Italy, Spain, Ireland, the Netherlands, Switzerland and China.

PayPal also operates a large customer-service center in La Vista, Nebraska, just outside Omaha.

Bank status

Due to the manner in which it operates, PayPal is not considered a bank. Therefore it is not required to abide by the legislation that governs banks. Like Western Union, PayPal is considered a money transmitter in many states in the United States and is licensed as such where required. PayPal's European subsidiary PayPal (Europe) is licensed as an electronic money institution and regulated by the UK Financial Services Authority.

Safety

PayPal's business model involves providing safety to buyers and merchants/sellers. Buyers are ensured that they recieve the item they buy as it is described. If this doesn't happen, PayPal will try to take the money back from the seller and refund the buyer. If the buyer used a credit card, they are ensured a refund via chargeback.

PayPal also protects sellers by offering the Seller Protection Policy. As long as seller provides confirmation of delivery available online, they are protected from chargebacks and fraudulent item-not-recieved claims.

Criticism

PayPal is not subject to regular banking regulations. Because it considers itself to be an 'electronic money transmitter', user rights and safeguards vary.

Controversial aspects of PayPal include the terms of its User Agreement; particularly, for limiting account access and user access to funds. According to the PayPal user agreement, users agree to give PayPal the power to limit access to funds in the account for 180 days. This policy appears to protect PayPal from financial loss in the event of chargebacks or disputes. Banks and financial institutions provide chargeback rights for a specified period of time that varies by the institution. PayPal's account access limitations prevent the movement of funds until discrepencies, or terms of the limitation, are resolved.

In March 2002, two PayPal account holders separately sued the company for alleged violations of the Electronic Funds Transfer Act (EFTA) and California law. Most of the allegations concerned PayPal's dispute resolution procedures. The two lawsuits were merged into one class action lawsuit (In re PayPal litigation). An informal settlement was reached in November 2003, and a formal settlement was signed on June 11, 2004. The settlement requires that PayPal change its business practices (including changing its dispute resolution procedures to make them EFTA-compliant), as well as making a $9.25 million USD payment to members of the class. PayPal denies any wrongdoing.

In September 2005, PayPal suspended an account (opened by Something Awful owner Richard Kyanka) used to collect donations for the American Red Cross to help Hurricane Katrina victims. After receiving over $30,000 USD in donations in 9 hours, PayPal locked-down the account. To re-activate the account, PayPal demanded "proof of delivery", even though no products were being sold. Kyanka asked PayPal to transfer the funds to the Red Cross; PayPal said they couldn't do this, but could give the money to United Way (a rival charity collecting for the same cause, that had an undisclosed agreement with PayPal). Kyanka originally agreed to this, but after learning of the United Way's prior legal troubles, he asked PayPal to refund all the donations. It's unclear whether simply waiting for PayPal to reach a decision in regards to the account would have resulted in PayPal allowing the money to eventually reach the Red Cross. [4] [5] [6]

PayPal's Seller Protection policies do not cover intangible goods or goods that are "not as described".

PayPal does not allow people from certain countries to use its services, and in some occasions where it does, it only allows the participants to send and not receive. This has brought criticism from people from within these countries.[7]

Warnings

In August 2005 eBay required that sellers who accept PayPal not refuse credit card payments, which result in transaction fees. [8] Beginning in January 2006, eBay now prohibits any online payment system other than Paypal, as stated here[9]. This is due to the wide numbers of fraudulant online payment methods.

EBay lists Bidpay.com as the only alternative, but that company's demise predates this policy. Questions of illegality and antitrust have been raised over this new rule, mostly by merchants who believe they shouldn't have to pay for a legitmate service and abused the personal account status on PayPal. EBay specifically prohibits E-gold, a PayPal competitor with high fraud history. Ebay's new policy states that accepting a non-PayPal online payment system could result in the user's account being banned. Since PayPal only works in certain countries, Ebay's policy limits participation to the countries that PayPal supports.

In the news

  • PayPal Releases Direct Payment API
  • PayPal Acquires Verisign's Payment Gateway

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Since PayPal only works in certain countries, Ebay's policy limits participation to the countries that PayPal supports. There are now at least ten different versions of Numa Numa video, listed below. Ebay's new policy states that accepting a non-PayPal online payment system could result in the user's account being banned. It is very popular even with many teenagers and is often sung by children at schools. EBay specifically prohibits E-gold, a PayPal competitor with high fraud history. Gary Brolsma continues this style of word-play in his "Numa Numa" video, in which someone super-imposed several pictures onto his dance routine, among them pictures of "feta cheese" during the lyric "fericirea" ("happiness") and a LEGO representation of Bob Ross during the singer's words: "sunt eu Picasso" ("it's me, Picasso"). Questions of illegality and antitrust have been raised over this new rule, mostly by merchants who believe they shouldn't have to pay for a legitmate service and abused the personal account status on PayPal. In an interview, in answer to the question "What is the song in the video?" Gary responds: "The song was pretty random, I found it in another (I believe it was Japanese) flash animation with cartoon cats or something." The 2channel version may seem completely random, but the images and text are a series of puns based on interpreting the lyrics of the song as English or Japanese words that they sound like (for instance, in the first line, Alo = Arrow/Alone/Arlong(A character of One Piece) (or Hello, ), salut = saru [monkey], sunt eu = sugee [incredible], un = un [yes], haiduc = haidoku [to read], şi te rog = ji bero [tongue characters]), and "fericirea" = panchira (upskirt).

EBay lists Bidpay.com as the only alternative, but that company's demise predates this policy. It was one of, if not the original. This is due to the wide numbers of fraudulant online payment methods. The Japanese 2channel version actually preceded Gary Brolsma's video. [8] Beginning in January 2006, eBay now prohibits any online payment system other than Paypal, as stated here[9]. One version even includes a sim from the computer game The Sims 2 dancing to the song, but none have ever come close to the international cult-like following of Gary Brolsma's. In August 2005 eBay required that sellers who accept PayPal not refuse credit card payments, which result in transaction fees. There are a number of other videos using the song, including several Japanese cartoons based on 2channel Shift JIS art and a LEGO dancing video.

This has brought criticism from people from within these countries.[7]. Brolsma has stopped taking phone calls from the media; he canceled an appearance on NBC's Today Show on February 17, 2005, and he did not cooperate with The New York Times for their February 26, 2005 article about him. PayPal does not allow people from certain countries to use its services, and in some occasions where it does, it only allows the participants to send and not receive. According to The New York Times, Brolsma has become an "unwilling and embarrassed Web celebrity". PayPal's Seller Protection policies do not cover intangible goods or goods that are "not as described". Reportedly, he was not happy with his fame, although he happily created tweaked versions of the video after it became popular (see below). [4] [5] [6]. Brolsma lives in Saddle Brook, New Jersey.

It's unclear whether simply waiting for PayPal to reach a decision in regards to the account would have resulted in PayPal allowing the money to eventually reach the Red Cross. Since then it has popped up on hundreds of other websites and blogs, and he has made appearances on ABC's Good Morning America, NBC's The Tonight Show and VH1's Best Week Ever. Kyanka originally agreed to this, but after learning of the United Way's prior legal troubles, he asked PayPal to refund all the donations. Gary Brolsma first published his "Numa Numa Dance" on the Newgrounds site on December 12, 2004. Kyanka asked PayPal to transfer the funds to the Red Cross; PayPal said they couldn't do this, but could give the money to United Way (a rival charity collecting for the same cause, that had an undisclosed agreement with PayPal).
The phrase "Numa Numa" comes from the words from a refrain of the song, "nu mǎ, nu mă, nu mă iei", meaning, roughly, "(you) won't take, won't take me". To re-activate the account, PayPal demanded "proof of delivery", even though no products were being sold. .

After receiving over $30,000 USD in donations in 9 hours, PayPal locked-down the account. Specifically, it refers to a Flash-based video of 19-year-old American Gary Brolsma (born July 7, 1986) lip-synching the song energetically on his webcam. In September 2005, PayPal suspended an account (opened by Something Awful owner Richard Kyanka) used to collect donations for the American Red Cross to help Hurricane Katrina victims. Numa Numa is an Internet phenomenon based on the Moldovan Romanian pop song "Dragostea Din Tei" by O-Zone. PayPal denies any wrongdoing. According to the description, it was created by two brothers who were "bored and had nothing to do.". The settlement requires that PayPal change its business practices (including changing its dispute resolution procedures to make them EFTA-compliant), as well as making a $9.25 million USD payment to members of the class. Sock Puppet Numa Numa: This flash video shows a sock puppet singing the Numa Numa.

An informal settlement was reached in November 2003, and a formal settlement was signed on June 11, 2004. HII!!!: This flash video shows Mario and Luigi fighting for the honor of dancing to the Numa Numa. The two lawsuits were merged into one class action lawsuit (In re PayPal litigation). Numa Gone Wild: This is an interesting Flash movie of a man who detests the Numa Numa, which is shown with comical results. Most of the allegations concerned PayPal's dispute resolution procedures. Numa Numa PopoZão: Kevin Federline's obnoxious PopoZão video remixed to Numa Numa [[2]]. In March 2002, two PayPal account holders separately sued the company for alleged violations of the Electronic Funds Transfer Act (EFTA) and California law. It can be viewed at [[1]].

PayPal's account access limitations prevent the movement of funds until discrepencies, or terms of the limitation, are resolved. Hebrew Numa: This version became VERY popular in Israel when it was used as the theme song of a children's song contest. Banks and financial institutions provide chargeback rights for a specified period of time that varies by the institution. Red Vs Blue Numa Numa: The members of the Red vs Blue Community have also created a version of this video, as a tribute to the original using footage from various members of the site, as well as pieces of the original. This policy appears to protect PayPal from financial loss in the event of chargebacks or disputes. It can be found at newgrounds.com. According to the PayPal user agreement, users agree to give PayPal the power to limit access to funds in the account for 180 days. Napoleon Dynamite Numa Numa Dance: This version was made by fans of the flash video and shows a clip from the popular movie Napoleon Dynamite where he is shown dancing to the hit song.

Controversial aspects of PayPal include the terms of its User Agreement; particularly, for limiting account access and user access to funds. Brolsma is introduced last and performs on the stage with his trademark skyward arm thrusts. Because it considers itself to be an 'electronic money transmitter', user rights and safeguards vary. It does feature a longer runtime as it introduces all of the 2005 American Idol finalists, and the judges complete with caricatures. PayPal is not subject to regular banking regulations. Done in Flash animation, it parodies the original nicely. As long as seller provides confirmation of delivery available online, they are protected from chargebacks and fraudulent item-not-recieved claims. American Idle: This may not be so much a version, but a tribute.

PayPal also protects sellers by offering the Seller Protection Policy. Also known as "The Talent Show". If the buyer used a credit card, they are ensured a refund via chargeback. This version is still hosted on Newgrounds as of December 15th, 2005. If this doesn't happen, PayPal will try to take the money back from the seller and refund the buyer. Numa Numa Relived: This version has recently become available on Newgrounds, and features a video of what appears to be decent quality video capture of a boy who is only identified as "Dean" at a Cable access or public televison talent show in Ozark, Missouri called "Wednesday Night Live." This version is notable as it shows the full dance, as done on stage. Buyers are ensured that they recieve the item they buy as it is described. Special Edition: This version is available on newgrounds.com and allows viewers to choose to view a cleaned up version without pictures, and with or without subtitles.

PayPal's business model involves providing safety to buyers and merchants/sellers. The version was lost when Brolsma's website was shut down due to bandwidth limitations. PayPal's European subsidiary PayPal (Europe) is licensed as an electronic money institution and regulated by the UK Financial Services Authority. Real High Quality: This version, made by Brolsma himself, is in sync and is of very high quality. Like Western Union, PayPal is considered a money transmitter in many states in the United States and is licensed as such where required. High Quality: This version, made by one of Brolsma's friends, is off-sync, but has noticeably improved video quality. Therefore it is not required to abide by the legislation that governs banks. This one is rarely seen online.

Due to the manner in which it operates, PayPal is not considered a bank. The subtitled version: This version was made by fans of the band who sang the music, who were upset in regard to the song being given no credit. PayPal also operates a large customer-service center in La Vista, Nebraska, just outside Omaha. The movie contains pictures that were popular at the time. PayPal operates locally in 13 markets, including: the United Kingdom, Canada, Australia, Austria, Belgium, France, Germany, Italy, Spain, Ireland, the Netherlands, Switzerland and China. The movie screen was noticeably small and low in quality. Dollars, Canadian Dollars, Australian Dollars, Euros, Pounds Sterling and Japanese Yen. The Original: The original version submitted by Gary Brolsma to Newgrounds.com.

PayPal supports payments in U.S. Every second PayPal processes an average of $823 in total payment volume. As of the end of Q2 2005, PayPal operates in 57 countries (including China) and it manages over 86.6 million accounts. In January of 2005 PayPal announced plans to pursue the Merchant Services opportunity, the online payments business 'off of eBay'.

In 2004, the total value of transactions through the PayPal system was $18.9 billion, up 55% year over year. BidPay itself ceased payment operations on the 31st December 2005 but the site remains to carry out any remaining customer service issues . PayPal's only substantially similar competitor is now BidPay, after Citibank's c2it service closed in late 2003 and Yahoo!'s PayDirect service closed in late 2004. eBay has phased out its BillPoint service in favor of retaining the PayPal brand.

(See GAMEY) PayPal had previously been the payment method of choice by over fifty percent of eBay users, and the service competed with eBay's subsidiary BillPoint. In October 2002 PayPal was acquired by eBay. [2] [3]. This paved the way for the company to eventually reconcile with its former rival, eBay.

Yet the company was able to turn the corner and become the first dot-com to IPO after the September 11 attacks — an accomplishment that ironically backfired when PayPal's new high profile status helped prompt a slew of class action lawsuits and regulatory probes, including one by NY Attorney General Eliot Spitzer. And worst of all, eBay launched a payments service named Billpoint to compete with PayPal. Foreign Mafia rings found ways to steal millions from the young company. Though growing rapidly, PayPal was losing $10 million a month and was fraught with internal turmoil that led to three CEO changes in its first year of operations.

[1]. This name was acquired by PayPal in early 2000, when x.com merged with PayPal. As of Jan 2006, this URL still resolves to the PayPal home page. Unknown to many people is the fact that PayPal is one of the few Internet companies which has a single letter domain name, (http://www.x.com) in use.

Coupled with aggressive marketing campaigns offering $10 (and later $5) for new users to sign up, the firm grew at a meteoric rate of 7–10 percent per day between January and March 2000. The PDA software was later discarded in favor of a web-based system that became popular with eBay's millions of buyers and sellers. In its initial incarnation, PayPal was a service for users to send money via PDAs, with actor James Doohan, Star Trek's "Scotty," as its spokesman. Most of the early engineers hailed from the University of Illinois at Urbana-Champaign, recruited by Max Levchin.

On the business side, many of its initial recruits were alumni of The Stanford Review, which was also founded by Peter Thiel. One of its first premises was the 165 University Avenue office in Palo Alto, California, home of a number of other noted Silicon Valley startups. PayPal was founded in December 1998 by Peter Thiel and Max Levchin. .

Corporate headquarters are in San Jose, California; it is now an eBay company. PayPal also performs payment processing for e-commerce vendors, auction sites, and other corporate users, for which they charge a fee. PayPal is an Internet business which allows the transfer of money between email users and merchants, avoiding traditional paper methods such as checks/cheques and money orders. PayPal Acquires Verisign's Payment Gateway.

PayPal Releases Direct Payment API.