PayPal’s Missed Opportunities

PayPal was once an up and comer — *the* hot web commodity — a service that users loved and were rightfully excited about. *Remember when it didn’t suck?* You probably don’t because for the past few years it has really been a miserable experience. The service is still the best out there, but that’s not…

PayPal was once an up and comer — *the* hot web commodity — a service that users loved and were rightfully excited about.

*Remember when it didn’t suck?*

You probably don’t because for the past few years it has really been a miserable experience. The service is still the best out there, but that’s not saying much given that it’s only real competitor is Google and Google is only *now* starting to put an effort into it.

I use PayPal for all the banking on TBR and the B&B Podcast, so I am regularly on the site. There are not a ton of transactions being made, but there are enough that I regularly interface with PayPal on both my phone and computer — I rely on it. My experience has been less than great since I started using PayPal again regularly in January, which surprised me because when I was regularly selling on eBay back in college, I remember being quite fond of PayPal.

It’s not that PayPal as an idea or product is bad, but much like with Twitter, PayPal’s management and leadership is questionable at best. Quite honestly there are a lot of missed opportunities that PayPal could have snatched in order to move into a much stronger position than where they are today.

### History

Here is, [according to PayPal’s own website](, a list of the notable moments in PayPal history (my comments added in italics):

##### 1998

– August: It Started at Stanford. *This is not referring to the founding of the company, rather a talk between two people that would later form a company.*
– September: Levchin and Thiel dream up digital wallets. *Actually they founded a company that created a digital wallet on, primarily, Palm Pilots.*
– December: Confinity is founded. *This is the company that actually started to work on money transfers between PDAs. This also marks the start of innovation.*

##### 1999

– July: If you can beam $10, then why can’t you beam $4.5 million? *This is just the company raising funding, but they received the funding via their service. Neat, but hardly note worthy.*
– October: PayPal is born. *Finally they come to realize that emailing payments maybe far easier than sending them between PDAs with IR. Though this is just a demo, it is huge for everyone.*
– November: Get paid for referring pals! *I have no clue why they include this in the company history. No clue. It is just a referral program.*
– November: PayPal develops the Money Market Fund. *Starting to become more like an online bank, stepping the right direction.*

##### 2000

– January: PayPal’s first foray into eBay. *This was the money making moment, when they see that eBayers love the service they embrace it full on and PayPal jumps to 100,000 users. This is the best move on this entire timeline — hands down.*
– March: One million and counting! *Three months later and they are still reaping the rewards of eBay users.*
– March: Confinity becomes *Some background stuff, not that important at this point. Just goes to show that they were a hot company at this point.*
– April: First customer service center. *No comment.*
– August: Palm Pilots can’t beat the Internet. *PayPal has 3 million accounts and the Palm Pilot program has 10,000. The web was a smart move, eBay accelerated growth.*

##### 2001

– March: The war on fraud. *CAPTCHAs!*
– June: PayPal officially takes its name. *Another name change, everything is now officially PayPal. Also I start using the service regularly to buy and sell on eBay.*
– September: Igor. *PayPal gets even more fraud protection. This is a trend we will see for a while.*

##### 2002

– February: PayPal goes public. *Notably it is the first IPO after 9/11 and was a success.*
– June: eBay Live! *eBay users demand that the service integrates with PayPal, nothing but good news for PayPal. May be the last time that people rally for PayPal.*
– October: eBay Inc. acquires PayPal. *The most obvious acquisition ever.*
– October: Bonjour, PayPal. *Paying with Euros and Pounds allowed — why did it take this long?*

##### 2003

*PayPal has literally nothing listed. For an entire year the company did nothing noteworthy. This is amazing to me, and this also marks the slow down of my usage of the service. Wow.*

##### 2004

– May: PayPal Web Services. *PayPal gets into the API game so that people can build off of the service. This is actually big and good.*
– December: The British invasion. *PayPal is integrated with eBay UK and revenue surges by 300%. Good numbers, but it took this long to integrate with your UK parent company? Odd.*

*Notice too that the only major thing PayPal did to outwardly improve and expand the service is to add an API. This most likely is a result of the eBay beast controlling PayPal and the pains of integrating the two companies.*

##### 2005

– August: PayPal customers give back. *$2.1 million raised for Hurricane Katrina support.*
– October: PayPal acquires VeriSign’s Payment Gateway. *More security and a smart move.*

*Notice now that it has been well over a year since any type of innovation has taken place. One would have expected some huge consumer facing moves at this point.*

##### 2006

– April: PayPal goes mobile. *Back in the days when ‘mobile’ used to mean texting.*
– October: PayPal expands internationally. *Woah, it took that long to be ’officially’ international?*

##### 2007

– January: Safety first. *More anti-fraud stuff, this time by way of a security key, thus complicating a super secure access process.*
– March: PayPal continues international growth. *…*
– June: Travelers take off with PayPal. *PayPal now a payment method for Northwest Airlines. They also note that PayPal is accepted as a payment means for all top 10 U.S. airlines. Meaning that now, in June of 2011, I am just learning about this. Seriously.*
– August: PayPal debuts new logo. *Yippee.*

##### 2008

– January: PayPal improves its safety features with Fraud Sciences. *They kicked off the year with a security acquisition.*
– October: eBay Inc. acquires Bill Me Later. *eBay made this move, but the service was — from the outset — intended on being combined with PayPal. Right idea, poor service choice. Basically it makes PayPal a credit card company without the actual credit cards.*
– November: PayPal expands globally. *Really? Just now? I thought we just talked about PayPal being international — I guess I don’t know the difference between the two.*
– December: Happy Birthday, PayPal! *10 years old, just as ADD as a human 10 year old.*

##### 2009

– August: The new way to ask Mom and Dad for money. *This was/is and allowance account thing. Truly though how useful is this unless your kid also has the PayPal debit card or something.*
– October: October 2009, eBay and PayPal offer Bill Me Later. *A way to pay interest without having a credit card.*
– November: PayPal now available in 24 currencies. *Again, just now?*
– November: PayPal opens its global payments platform, PayPal X. *I won’t repeat my last. Also, I thought we were already global. Confusing, unless they mean another planet.*

##### 2010

*2010 looks like it was a big year, at least a long list.*

– February: Pay with PayPal on Facebook! *Wonder how long that lasts…*
– March: Magento and PayPal Expand Relationship. *A small-ish partnership for payments. Move along.*
– March: Send Money from your mobile phone! *Wait I thought we had that already back in April 2006? Oh wait, now we mean the iPhone.*
– April: PayPal Mobile iPhone App Hits the One Million Mark! *Meaning 1/3 of the customers that you had in August of 2000 are now using the service on the iPhone. Congrats.*
– April: Introduces Payment with PayPal on AliExpress. *Here is another partnership for payment solutions. Boring.*
– May: PayPal’s Mobile Payments Library Now Available for Android
– July: PayPal Bling. *I honestly don’t even know what this is after reading the blurb about it. Honestly.*
– August: PayPal Mobile App now for Android.
– September: PayPal Expands Purchase Protections
– October: Bill Me Later Comes to More eBay Shoppers
– October: Take a Photo, Transfer a Check! *Finally a feature that truly benefits the end users. Man thought PayPal forgot about us for a minute there.*
– October: PayPal Unveils New Payment Solution for Digital Goods. *Read: A way to pay without being routed through PayPal’s website.*
– November: PayPal’s local Israeli site now available in Hebrew
– December: PayPal and VIVO bring mobile payments to Brazil. *They are still expanding, wow.*

##### 2011

– January: New Customer Support Center Opens in Malaysia. *Fun.*

#### The Point Already

My point is that while PayPal has expanded a lot and partnered with a lot of places, there really was no innovation happening. Look through that list and tell me where they were a first mover, or even where they had a novel idea anytime after oh, 2001.

Everyone was doing an iPhone app when they did theirs. Every bank was offering picture deposits when they enabled it.


### Mobile payments

PayPal was a first mover in online banking and more importantly, in securing eBay transactions. They made eBay what it was 4-6 years ago: a juggernaut. If it weren’t for PayPal, eBayers would still number in the thousands and would be sending checks via snail mail — hey maybe then USPS would be in better shape.

PayPal changed that.

When the market changed and it became quite obvious to many that mobile payments was the new hot market, well, PayPal didn’t do much. You can most certainly pay back your friends and receive money from anyone for very low fees, but doing so on your mobile device is anything but fun and only works well when all parties involved have a PayPal account.

Perhaps you disagree, but which would you rather use to buy a chair at a garage sale: PayPal or Square? If you know what Square is, then Square will be your choice hands down. Let me just say that Square wouldn’t require *you* to be a user of the service, just a passive payer as you are at most all stores.

NFC? PayPal could have been, and should have been, the go to payment system for everything — yet their ambitions stopped at freelancers and eBayers. ((A nice market, but not as robust as what they should have at this point.)) If you think about it, iTunes probably handles more transactions than PayPal does in a year.

### Expanding Outside the Internet

All of this is leading me to say that PayPal should have pushed to be people’s one and only bank — not just their online bank.

You accomplish this much in the same way that USAA has done. By creating top notch customer service and making it easy for your customers to get money into their account (free deposit mailing envelopes for checks, mobile “scanning” of checks, and so on).

You further establish yourself in such a position by ridding your customers of one of the most frustrating charges they face: ATM fees. Again, USAA, will reimburse you for ATM fees monthly up to about $15 with some other restrictions, even with restrictions that is a great deal, should have been a PayPal move.

#### Brick & Mortar

What really baffles me though is that PayPal never sought to expand into tech savvy retail locations to make themselves a payment option. Retailers already pay fees to Visa/AMEX and others for processing, one would think that with the rise in ‘self-checkout’ lanes at big box retailers — PayPal would be a natural payment option for customers. Login to your account using a secure pin, your member perks card is stored there and added to the transaction — receipt emailed to you. Done.

I can’t be the only one thinking this…

#### Customer Fears

The biggest hurdle to becoming a full time, one stop banking solution is to reduce fear. The thing that scares me the most about PayPal is not someone breaking into my account, but PayPal freezing my account to sort out a dispute.

Simply put, this should not happen. If a customer complains about a transaction (or vice versa), the entire balance of an account should not be frozen. Freeze the disputed amount and call it good until it is resolved — don’t screw over your customers because you are slow to act. ((Not sure what the laws are on freezing just a portion of a bank account, but I do believe it can be done given what I have seen in ‘traditional’ banking.))

Hacking, simply put, should never happen to PayPal. If accounts get hacked because of weak passwords, stop allowing weak passwords. Fix the hole in the ship, don’t try to make it back to dock faster.

### Customer care

Of course a large part of all of this is the customer service and care that PayPal shows towards its users — of which most of us see very little of.

Here are some suggestions:

– Better, top notch, fast dispute resolution tools for buyers **and** sellers.
– Stop assuming that buyers are always right and instead take the approach that everyone is wrong and move from there. It seems that PayPal is biased towards protecting buyers and not sellers.
– Escrow. Why PayPal isn’t heavy into the escrow game I don’t know — it could have been the leading way people to facilitate the sale of cars online and the transfer of things like domain names. Makes so much sense.

### Business Friendly

Each month I get a ton of checks for all the properties that I manage, we also send out a ton of checks to different contractors and vendors. A lot of companies are trying to move to ACH payment methods to reduce the cost of stamps and administrative time (among other things). This is great, but presents some legal challenges for landlords (like me), of which we don’t need to get into.

I have always wondered what PayPal could have done to solve these issues if they had made a stronger push into the business to business sector. What if all invoices just came via PayPal and you paid them with PayPal each time. Thus eliminating a ton of paper waste, stamps, and time for all parties involved… what indeed.

### Story of the Wrong Leaders

Once again this is another case of poor, to little, leadership. There is no doubt that PayPal did well for itself, but it *could* have been so much more that it should make the top brass at PayPal cry.

There were a ton of wasted opportunities and short-sighted strategies.

PayPal became content with what they had and rested on that.

They had one great first mover idea and stopped thinking.

Too bad.


**Check please.**

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