PayPal is currently the most widely used online payment system in the world with 227 million active users, $7.6 billion in transactions and 17 million merchants accepting PayPal payments, according to 2017 statistics. If you visit any website that accepts payments, whether a software company like Microsoft or an e-commerce site like Amazon, eBay or Alibaba, you will see in 776,572 websites to be precise-the bright golden yellow PayPal button indicating that the site accepts PayPal as a means of payment. However, what exactly is PayPal, how does it work and what can you do with it. Here are insights from an infographic by 16best.net.
PayPal Origins and How it Works
PayPal was started in 1998 by the team of Elon Musk, Peter Thiel, Ken Howery, Luke Nosek and Max Levchin. The company had early success, growing at an almost 10 percent daily rate and reached 5 million users in just two years. At its inception, the company was an e-payments pioneer and in 2002, e-commerce giant eBay eventually came calling; purchasing PayPal for $1.5 billion. PayPal works by allowing two computers to send information to each other in encrypted/coded form and this enables communication to happen between banks and credit card companies with PayPal as the middleman.
To transact through PayPal you only need to open an account using an email address and then connect it to a bank and/or mobile money account like M-Pesa. PayPal has two types of accounts a personal account and a business (merchant) account. The business account allows receipt of credit and debit card payments and recurring payments (subscriptions), which is useful for entrepreneurs and SME owners involved in e-commerce. Currently, PayPal has 17 million merchant accounts registered worldwide and buoyed by the rise of e-commerce, has allowed people from financial institutions in different parts of the world to seamlessly send and receive money to each other via the internet.
What can you do with PayPal?
Making International Payments
PayPal is the third most preferred means of payment after Visa and MasterCard, processing more than Ksh. 800, 000 in payments every second. As internet penetration deepens in Africa and globalisation widens, the need for a secure cross-border payment method like PayPal also grows. For anyone looking to purchase products across e-commerce platforms including Amazon, E-bay, Alibaba, Craigslist, and Jumia; or access subscription services like Netflix, PayPal provides a quick way to pay for those transactions. Locally, Equity Bank and M-Pesa provide avenues for making deposits into PayPal for such payments.
Kenya is currently experiencing widespread movement into freelance online jobs. A sector that has even received a thumb of approval from the government through the Ajira Digital Training Programme, that aims to equip Kenyan youth with the skills to compete for freelance jobs globally. PayPal, in partnership with local financial service providers, has provided an easy means of receiving payment from employers from different parts of the world. Additionally, for businesses in e-commerce- both independent and those with shops in existing platforms like Jumia, the PayPal Merchant account allows you to receive payments from customers.
As a PayPal Merchant, you can either open an account under your own business name (if you desire a more professional image) or as an individual. PayPal deducts charges on every sale at a rate of 2.9 % per transaction plus a flat fee of $0.30. Further, the service allows you to send online receipts, invoices, and reminders to subscribers as well as accept credit card payments on your website or mobile app. If your business targets millennials, then PayPal is a prudent option to have, 87 % of millennials globally use PayPal as a means of payment.
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Here is an infographic that shows you everything you need to know about Paypal.