PayPal

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DEFINITION of 'PayPal'

An electronic commerce (e-commerce) company that facilitates payments between parties through online funds transfers. PayPal allows customers to establish an account on its website, which is connected to a user's credit card or checking account. Once identification and proof of funds have been confirmed, a user may begin sending or receiving payments to and from other PayPal accounts. PayPal attempts to make online purchases safer by providing a form of payment that does not require the payor or payee to disclose credit card or bank account numbers.

INVESTOPEDIA EXPLAINS 'PayPal'

PayPal broke into the mainstream when it appeared as a payment facilitator for eBay auctions. The service became so popular that eBay decided to acquire PayPal in 2002, making it the official transfer service for its website.

Although PayPal is not a bank, it is still subject to many of the same consumer protection regulations by which banks are governed. For example, under banking regulations, the extent of your liability for an unauthorized transaction is determined by how promptly you notify the bank that unauthorized activity has occurred in your account. Notifying PayPal quickly when you have concerns will help to limit your liability, and it is recommended that PayPal users check their accounts regularly.

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