Founding

• Online security specialist Max Levchin and hedge fund manager Peter Thiel came together in 1998 to develop a system for transferring money via cell phones and Palm Pilots. With $3 million from the Nokia Foundation, the men opened Field Link in Palo Alto, Calif., to produce encryption software for those handheld wireless devices. When that enterprise met with little enthusiasm, Levchin and Thiel renamed the company Confinity. With it, they relaunched their money-transferring application. They named it PayPal.
  
  

Growth

• As e-commerce grew rapidly, so did the need for faster, more efficient ways of making financial exchanges over the Internet. Sites like auctioneer eBay were still relying on checks and money orders. Other sites came up with electronic payment systems, only to scrap them amid consumer unwillingness to trust currency specifically invented for online transactions.
  
  Levchin and Thiel decided to develop a system that enabled people to send and receive money via e-mail. After the merger of Confinity with online financial services company X.com in 2000, PayPal was adopted for the company name, and marketing plans were made for account sign-ups. By the end of the year, the number of PayPal accounts skyrocketed from 12,000 to 2.7 million.
  
  

eBay Purchase

• PayPal's success caught the attention of eBay, whose customers had made the service hugely popular. A major element of PayPal's success was the relatively smooth transaction process. Anyone with an e-mail address could receive money, although the person would have to open a PayPal account to claim the funds. No longer did consumers need a credit card for online purchases, and the PayPal service was free. Eventually, in October 2002, eBay purchased PayPal for $1.5 billion.
  
  

Worries

• PayPal was without opposition and hiccups, though. The initial ability to anonymously send money left lots of room for fraud. Some banking regulators accused PayPal of acting illegally as a bank because it accepted deposits for paying bills. And people feared that the eBay deal would narrow PayPal's operations to an auction-based service.
  
  

Today

• PayPal is now the premier e-commerce payment service, having eclipsed or vanquishing its competitors -- one of which was actually a subsidiary of eBay, Billpoint. PayPal operates in 190 markets, managing more than 184 million accounts, with 73 million of them active. PayPal permits customers to send, receive and hold funds in 19 currencies throughout the world.