Paypal Case Study

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Technology Evolution
Case Analysis

The case is intended to be used as a basis for class
discussion. It is not intended to serve as endorsement, source of primary data, or illustrations of effective or ineffective management. Copyright © 2010 SOM, AIT, P.O.Box 4, Klong Luang, Pathumthani 12120, Thailand.

PayPal -Technology Evolution - Case Analysis

Technology in PayPal
The digital wallet, firstly introduced by Peter Thiel and Max Levchin, might not be a success in the first introduction but it disrupted the payment service in the world. Some trial and error and finally integrate its service with eBay, the technology was accepted by the market. The digital wallet was such a radical technology turning a new face of payment process. It took benefit of being component technology by integrating its service to other technologies, such as PDA, eBay system, e-commerce, etc.

Later the success of PayPal payment in early stage, computer security and fraud management technologies introduced by PayPal strengthen its core product. CAPTCHAS is a simple look technology but it could resolve the difficult problem in computer bot proof in very creative way. It simply the problem by using gap between human's capability and computer's one and combine some simple things together. Not only simple technology invented by PayPal, but complicated architectural technology was also invented in the PayPal lab. PayPal web service is one wise step of PayPal. It proved the creativity of PayPal for gathering simple technology and modifies the process of technology usage to turn into a new face of payment service. PayPal web service enhanced the competitiveness of e-commerce technology when eBay became unpopular and independent e-commerce website became rapidly popular in the faster internet network world. PayPal web service was considered as one of catalysts of e-commerce market. So far, PayPal invented incremental technology to its service to increase it values such as PayPal donate, PayPal student, etc. Its innovations can be classified as the below table. Table 1 Characteristic of PayPal Innovation and Product

Degree of
Innovation

Modular

Output

Competence
Enhance

Competence
Destroy

Digital Wallet

Radical

-

Product

e-commerce

-

CAPTCHAS

Year of Innovation

Technology / Product

Radical

Fraud Management

PayPal Web service
PayPal X (third party
interface)

Independent
commerce
Incremental

Component

Process

e-

-

Online Payment

PayPal text service

Online Payment

PayPal Beam (in Send
Money, mobile
application)

P2P Payment

Square & PayPal Here

Radical

Architectural

Product

Mobile Payment /
Credit card

Traditional Credit
card terminal

Even though PayPal's products and services are widely accepted in the mainstream market, new entries and new technologies are introduced in its decade. PayPal needed to catch up the new technology and created a radical innovation to compete with its competitors. When the Near Field

Page 1

PayPal -Technology Evolution - Case Analysis
Communication (NFC) was adopted in the smart phone for peer-to-peer communication, PayPal quickly developed PayPal Beam and integrated it with PayPal Send Money, its mobile application, even the NFC was not widely installed in smart phones. The quick move prevented its competitor's product - Google wallet and steal advanced technology competitiveness. Square is another case of creative destruction that might be harmful to PayPal and caused it destruction in the future. Square invented the radical high-competitive destructive technology Square Register, a smartphone-plugin credit card reader. It changed not only the way of swiping a credit card, but it also moved the digital wallet to smart phone completely. PayPal needed to react with this destruction to cope with the decline stage of its existing technology and emerge to new market.

Technology Life-cycle
As general...
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