Business Models

PayPal Business Model and the Crucial Service It Provides

In this digital age, online payments have been made easy. You can use various apps to complete different transactions. The path to online payments was paved by PayPal when it was founded in 1998. It started out as Confinity in 1998, but then has evolved since then. The PayPal business model has grown robust with passing time. PayPal allows online transfers which makes for easier and electronic transactions.

PayPal processes payments for various online vendors and users. The company charges a fee for all the transactions that are processed for respective users. It used to be extremely cumbersome to send money abroad in pre-PayPal days. Banks used to take at least a week to process money transfers. The inception of PayPal revolutionized the money transfer services. The American outfit coined the term which is now known as ‘online money transfers’.

paypal business model

PayPal and its business model has expanded to about 202 countries worldwide. Moreover, they are currently serving 197 million users from different parts of the world. The number of users are growing with every passing day as outsourcing and freelancing is on the rise.

The ever-increasing customer base has elevated PayPal to 222nd on the Fortune 500 list of 2018. The company is expected to see more growth in future years.

PayPal and Its Many Uses

PayPal started out as a simple online payment tool. However, it has evolved over the years. It is a robust financial tool that offers various monetary services to its users. Here are the services that you can use:

PayPal Business Model and Bank Cards

Save your Debit and Credit cards on PayPal so that you can go around without cards – PayPal allows the users to save the details of their cards on their PayPal account. The users can then process various payments directly through the PayPal app. You no longer need to worry about forgetting your cards at home. Your cards will be with you at all times as long as you have your smartphone with you. The app works as a digital wallet.

One Touch on PayPal

Complete transactions on website with one click – PayPal has baked a new feature in their app which is known as ‘One Touch’. The feature helps to save time for the users as they are no longer required to enter PayPal login details on every website. Your login details are saved on your account and you can check out at any website with one click.

Send and Receive Money through PayPal Business Model

Send and receive money from bank accounts and PayPal accounts – The financial service allows the users to send or receive money in over 202 countries. Furthermore, PayPal allows you to keep the money in your PayPal account in about 25 different currencies.

Payments made Easy

paypal business model

Receive payments – PayPal business model took off when they included it as a payment gateway on eBay. PayPal helped to grow ecommerce.

Introduction of Debit Card in PayPal Business Model

PayPal allows its users to apply for debit cards. These debit cards work the same way as the ones that are issued by different banks.

PayPal Credit (Bill Me Later)

You can take a credit of $99 from PayPal which is interest free if you pay it in full under six months.

PayPal Business Solutions

The app allows you to set up your business online with help of PayPal. Furthermore, you can acquire a working capital loan from them. The loan can be payable daily.

How does PayPal Business Model Make Money?

PayPal is responsible for starting a revolution in fin-tech sector. The financial company may not be a bank, but it offers about all services that you may expect from one.

paypal business model

eBay acquired PayPal in 2002 for a whopping $1.5 billion. The ecommerce giant made a crucial acquisition back in the early days of PayPal. While PayPal is no longer a subsidiary of the American ecommerce giant, but the inclusion of PayPal as a payment option helped in the promotion of PayPal.

PayPal paved the way for the likes of Paytm and other payment banks.

Sources of Revenue for PayPal Business Model

Transaction charges

PayPal has two type of user accounts – personal and business. Personal accounts are levied a transaction fee when they make a payment through PayPal.

Moreover, the business accounts are levied a fee of 2.9% plus $0.3 USD of the total amount of the transaction. This fee is reduced as the value of transaction increases. Users do not pay any withdrawal fees. However, in cases where users need to draw money through a check, they will be charged $1.5 USD.

Payments from Around the World

Users are levied charges when they receive international payments. Moreover, they need to pay conversion charges as well. These charges also increase international payment charge.

PayPal Business Model: Business Account Charges

You can register for a business account on PayPal for free. However, for extra features, you need to pay for a subscription. The Payments Pro business account costs $30 USD monthly and provides extra features such as customized check out pages.

P2P Payments

Users can establish custom links to receive payments. PayPal charges the business account rates in USA when users withdraw money from custom links.

PayPal Business Model: Interest

The users keep their money with PayPal. PayPal invests the balance in liquid investments. These investments incur interest. The company generates revenue from the money deposited by users.

Integration of Payflow in the PayPal Business Model

PayPal was initially used as a payment gateway by eBay. Times have changed and PayPal has developed their own. Users with a business account can integrate it on their websites.

paypal business model

There are two types of plans that users can subscribe to. The free plan has a page hosted by PayPal that allows the consumers to enter their payment details to complete transactions on respective websites. The premium version that comes at $25 monthly subscription allows the users to customize their check out page.

Users pay $0.1 USD to PayPal gateway charge to use this service, regardless of their plan.


PayPal started out as a fin-tech product in 1998 and has grown exponentially over the years. Now, it offers all the financial services that you expect from a bank. Moreover, they use various sources to generate revenue. The biggest sources of revenue are the fees that they charge and the interest they receive from deposited money.

Business Models

eWallet: The Future of Money is Here


It is the dawn of the digital era. We have come across various digital currencies, online banking facilities, and eWallets etc. eWallet is here to stay because of the convenience it offers. Carrying physical money all the time can be a lot of hassle. This is where eWallets come in place. It is an alternate payment method that is slowly, but surely gaining traction.   

Technology has come a long way. Back in the old days, people did not trust online banking facilities due to security lapses. However, times have changed, and we have amazing advancements in banking security and cybersecurity. These advancements have helped to pave way for eWallet.

There are different types of eWallet services available online. We will talk about these services in a while. All of these services have one thing in common: they digitize your money. Digital money means that you no longer have to worry about carrying your wallet everywhere.

Moreover, you no longer have to worry about getting your wallet stolen either. All your money is digitally available on the cloud. This means that you can access your eWallet from literally anywhere from the world as long as you have internet.

eWallet and the Ease of Access


Making payments from your eWallet can be as easy as scanning a QR code. So, there is no learning curve to using eWallets. eWallets can easily be used by anyone. Moreover, they are quicker than using bank accounts to pay for things.

eWallets are online prepaid accounts that you need to top up to continue using them. Apple Pay, Google Pay, PayPal, and Paytm etc. are some of the most famous eWallet services available.

eWallets make transactions easy and more secure. The likes of biometric and other security protocols make this payment method secure.

Types of eWallet

eWallets are used for the same purposes as physical wallets. They are used for completing different transactions. However, the usage of a eWallet can be limited by the type of eWallet you are using.

Companies that provide digtal wallet services have partner banks in respective countries. These partner banks are responsible for all the transactions. Furthermore, partner banks give interest to the companies that help setup the eWallet. For example, if you use Apple Pay, the partner bank pays interest to Apple for the capital that is stored by consumers in their eWallets.

That is how different companies are able to sustain their eWallet services.

There are three kinds of eWallets prevalent around the world:


Closed eWallet

Closed wallets are provided by companies that need to refund the money of a customer. These eWallets have the refunded amount, but the consumer is restricted to using this money on the company’s website. This is the reason why it is called a closed eWallet.

You cannot withdraw the amount to use it as per you like it. Companies such as Uber,, or etc. provide closed wallets. You can deposit money in these wallets, but cannot use it for other transactions except for the one authorized with the company.

Semi-closed eWallet

Semi-closed wallets are the most famous kinds of eWallets in the market. Paytm wallet is a semi-closed wallet. You can learn more about their wallet over here.

To operate semi-closed eWallets, it is necessary to have an approval from the governing body of the region. Semi-closed eWallets allow you to use them online and offline. You can use them to pay for shopping, fees, utility bills, and insurance premiums etc. at merchants which have a contract with the eWallet company and the bank.

According to the law, banks and non-banking financial companies are not allowed to offer semi-closed wallets. Hence, that means only non-banking companies can render this service. These companies are required by the law to have an escrow account with a partner bank.

When you deposit money in your semi-closed wallet, it is stored in the escrow account. The money sits in the escrow account until you use the money. The partner banks give interest to the companies on the amount that is kept in the escrow account. The interest rate depends on the agreement between the two parties.

Open eWallet

Open wallet service is only provided by banks or in partnership with banks. These eWallets have all the capabilities of a semi-closed wallet. Moreover, you can use these wallets to transfer funds or withdraw cash from ATMs and banks.

Most mobile banking apps have open eWallets for their customers.

eWallet and Digital Wallet Are Different

The Paytm wallet is a eWallet. However, services like Apple Pay and Google Pay are digital wallets and not eWallets. You cannot use the term ‘eWallet’ and ‘digital wallet’ interchangeably.

eWallets require you to deposit money in the app before you can use them. They work like a prepaid account. You can only spend the money if you have enough balance. In digital wallets, you save the details of your credit and debit cards. These details are then used by the digital wallets for quicker and easier transactions.

With digital wallets, you no longer have to carry your debit/credit cards with you. Digital wallets bring a lot of ease access, but they have their caveats as well.

eWallets help you to stay cardless as you do not need to enter your card details in these applications. As long as you have money deposited in the wallet, you are good to go.

On the other hand, we have services such as PayPal that provide eWallet and digital wallet services both. The access to two types of services in one app has made them very popular with consumers.

How to use eWallets?

You can refer to the image below to get a better insight on how to use eWallets.



eWallets and digital wallets are the future of money. eWallets and digital wallets are two different concepts and both terms cannot be used interchangeably for each other. With advancements in technology, we have been able to have eWallets.

There are three kinds of eWallets: closed, semi-closed, and open wallets. All of these wallets have their advantages and disadvantages. Open wallets have the most features for customers.