Paypal Hbr Case Summary

Paypal is the world’s first person-to-person electronic payment network. With 28 million active accounts, Paypal has a great competitive advantage of being the first on the market. In the given case from 2006, the search engine giant Google is planning to launch its own payment system. Although Google says its product is not a direct competitor to Paypal, it is still the most serious challenge the Paypal has faced in the business thus far. Even though some of Google’s recent products have not been resounding successes, the vast potential customer base at Google’s disposal means that Paypal must taken strategic steps to counter this challenge in a timely manner.

To highlight the potential solutions to this case, here are the answers to the most important questions raised in the case itself.

Q1 . Should they accelerate investments in Merchant Services’ efforts? How would credit card companies react if Paypal pushed more aggresively for off-eBay business?

A . Yes. Investments in merchant services’ efforts should be accelerated because the sector is growing. With more and more people arriving on the cyber-scene to earn money through transactions, advertisement etc. Paypal has a huge opportunity of investing in off-eBay merchant services.

Credit card companies would have no option but to tie up with Paypal. With a large population avoiding the use of credit cards online due to the threat of fraud, tying up with a secure and trusted service like Paypal is a win-win for Mastercard/Visa.

Q2 . How should investments be allocated to promoting growth on the two sides of PayPal’s network i.e. consumers vs merchants?

A . Both consumers and merchants are an equally important demographic for Paypal as customers. An equal allocation of investment should be made by the company in these two spheres.

Q3 . Which customer segmetns should PayPal target? What product changes should be done?

A . For off-eBay merchant services, Paypal should target both existing as well as new customers. Many small companies, bloggers, etc., earn money through their websites and advertisements. Paypal is an ideal portal through which they can manage their online transactions in a safe and secure manner.

In terms of product changes, Paypal should consider the model of some credit card companies who offer initial periods of use without any interests or fees. This should attract a large customer base who would like to try out the service without having to pay anything at the beginning.

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