1. Technology
You can opt-out at any time. Please refer to our privacy policy for contact information.

PayPal 101: How PayPal Works, 2014

By

1 of 10

PayPal 101: What exactly is PayPal?
Man holding credit card using laptop in kitchen
Richard Drury/Digital Vision/Getty Images

By guest author, Joanna Gil

May, 2014

Answer: PayPal is the world's most popular "middleman service" for online purchasing. Where moneygrams and wire transfers were the standard in the 20th century, today over 140 million internet users prefer to use PayPal to send money to each other via email. PayPal has become such a convenient and trusted way to transfer money online, 90% of eBay's purchases go through PayPal.

How PayPal Works.

As an online financial transaction broker, PayPal lets people send money to each other's email addresses. At no time will either party see the other's credit card or bank information.

Similar to an escrow service, PayPal acts as the middleman holder of money. Through its policies, practices, and business integrity, PayPal has earned the trust of both parties. With multiple guarantees in place, buyers and sellers entrust PayPal with their credit card and bank information. PayPal keeps that private customer information secret. Then, while "blinded" from the other party's confidential information, strangers safely send money to each other through PayPal and email.

PayPal Requirements

You need no special technology nor a business license to send/receive money through Paypal. The only requirements are:

  1. a valid email address.
  2. a valid credit card or bank account.



Precisely because it is so easy to use, PayPal is the favorite of millions of amateur sellers and buyers around the world.

Next: How Does PayPal Make Money?
Related Video
How to Write an Online Check
How to Start an eBay Business

©2014 About.com. All rights reserved.