PayPal spread among auction buyers and sellers, then carried its checkout relationship into a much broader merchant business.
Barriers to participationInformation asymmetry
Small internet sellers could ask buyers to mail checks or money orders, or arrange card acceptance through a financial institution. Mailing payment slowed fulfillment, while card acceptance brought qualification requirements and transaction costs. Buyers and sellers dealing remotely also faced the risk that the other party would not deliver. PP1
Step 1 of 3 · 1999 to 2002
In its 2002 filing, PayPal estimated that 72.4% of eBay auctions accepted its service, versus 27.2% for eBay’s own payment service, in the first quarter. Buyers needed a way to settle purchases; sellers had a reason to accept the method buyers already used. Signup and referral bonuses added another incentive. PP1
Acquired’s history emphasizes how this auction concentration solved an early distribution problem. The reciprocal acceptance benefit supports a payment-network interpretation: each additional accepting seller increased where a buyer could pay, and more buyers made acceptance useful to sellers. Paid acquisition helped seed that loop; it was not a substitute for repeated commerce. PP4
The acceptance estimates are PayPal’s sampling, not exclusive share or evidence that referral bonuses alone caused adoption.
Rivals eBay Payments had the marketplace owner behind it. PayPal’s filing supplies a same-market acceptance comparison, although sellers could accept both.
Step 2 of 3 · 2000 to 2002
PayPal charged premier and business accounts for receiving payments while allowing several funding methods. Its registration statement treated fraud, disputes and card-network access as material operating risks. This was a payment service that had to settle real money even when a transaction later proved fraudulent. PP1
The move from subsidized signup to recurring merchant fees depended on retaining legitimate transactions and containing losses. Remote sellers benefited from faster settlement than mailed checks, but payment volume only paid for the operation when fees covered processing and fraud costs. Risk management therefore belongs in the explanation of early commercial viability.
The filing explains the economic obligations. It does not isolate the causal contribution of each fraud-control technique.
Rivals Checks were slow but avoided card-processing fees; card-funded payments were convenient but carried network costs and dispute exposure.
Step 3 of 3 · 2015 to 2026
PayPal processed $1.79 trillion in 2025, while transaction counts fell 4%. Its filing linked Braintree’s mix changes to renegotiated merchant relationships and a focus on profitable growth. By July 2026, PayPal was reporting transaction-margin performance alongside volume in its quarterly results. PP2 PP3
Branded checkout and enterprise processing solve different merchant problems. Checkout brings a shopper’s account and payment preference; Braintree helps a large merchant run payments behind its own experience. Growth in the second can add a great deal of volume without the same margin. Repricing was a commercial correction to that tradeoff, even at the cost of transactions.
The narrative separates processing mix from checkout acceptance and does not claim that either has defeated all alternatives.
Rivals Stripe and Adyen compete for enterprise processing; wallets and direct card entry compete at branded checkout. Their economics cannot be inferred from one consolidated volume figure.
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