October 1999 saw the modest launch of a simple home page that would grow into one of the Internet's major success stories - a person-to-person payment (P2P) network called PayPal. As with many success stories, the growth of this good idea started with a slightly different and less successful proposition, and within a few months of its launch, had begun its heady rise in attracting millions of customers at amazing rates. Peter Theil and fellow co-founder Max Levchin had teamed up in 1998 (aged 30 and 26 respectively) to start a company called Field Link that specialized in providing encryption software for wireless devices. The technology had nurtured the concept of moving money using devices such as palm-pilots. Theil (CEO of PayPal) was a chessloving intense libertarian that had studied law at Stamford University. When approached by Levchin (CTO of Paypal), he was running a hedge fund. Demand for their initial concept was sparse and the company changed direction to other areas as well as renaming itself Confinity. It was at that point that an application called PayPal was born; allowing users of handheld devices to beam money to each other. The company had a strong start with a capital investment of $3 million from Nokia. Despite this initial success, the original idea did not blossom and in 1999, both increasingly realized that there was not an easy way of making a payment on the Internet. Additionally, not everyone had a wireless device such as a palm-pilot, but almost all net users did have an e-mail address. From these modest beginnings, a Web version of the PayPal application followed and started trading using established networks - e-mail and a universal currency, the US Dollar whilst building a new person-to-person network platform. Without a doubt, one of the key observations

and drivers were online auctions, such as eBay, which PayPal launched its service on in early 2000.Thiel had noted that as late as 1998, almost 90% of eBay's transactions were settled with checks or money orders. The concept was simple. Money would be exchanged via cyberspace - all users needed was an e-mail address, a credit card or bank account number and an Internet connection. Recipients of funds would receive money in a new account (if they did not already have one) and PayPal would debit the sender's account (credit card or bank account) respectively. Anyone who received money therefore automatically became a new PayPal client. The viral growth of PayPal was breathtaking. By end of 1999 there were 10,000 users. Two months later, that number was 100,000. By using confidence pricing techniques (the service was effectively free initially, with revenues being garnered from the cash locked into the PayPal system) new users were attracted to the service. Even when pricing models were introduced, these were much more attractive than those levied by the credit card companies. In March 2000, X.com merged with PayPal electing to ditch its banking business and its brand name in favour of the PayPal service. At the time security was a continual area of focus, however Paypal was one of the propositions that forged ahead without the authentication of sellers. Although this afforded first mover advantages, the company had to work hard on enhancing risk management techniques and providing greater focus on authenticating sellers at the site. Although eBay continued to be one of PayPals largest partner sites (generating approx 60% of revenues), it was already connected to over 2.6 million merchants and continued to grow at a fast pace. 15th February 2002 was also a significant day for PayPal as it went public, raising another $90 million with its shares surging 54% on the first day of trading, despite the downturn in the dotcom boom. (Total marks 40) 1.All questions carry equal marks. 2. Justify the document properly before submission. 3. Use the diagrams, images wherever necessary. 4. Provide the references in the description in IEEE format 5. Word limit is 1000 words. Q1. Discuss the risk factors involved while launching the PayPal. Q2. How PayPal solved the problem of user identification? Which method they used for the user identification? Q3. Discuss in details various merchant services provided by PayPal. Q4. Open your PayPal account and upload the screen.