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Bitcoin Is The New PayPal


Posted 14 hours ago by Eric M. Jackson and Christopher Grey
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Editor’s note: Eric M. Jackson and Christopher Grey are the co-founders of CapLinked, a secure collaboration and workflow solution for managing complex business deals and projects. Jackson was PayPal’s first senior director of U.S. marketing and wrote the book The PayPal Wars.

It’s been a bad month for Bitcoin.

On February 7, Mt.Gox — the once-popular exchange that hosted 80 percent of the world’s Bitcoin trades — informed users that they were temporarily halting withdrawals of the popular electronic currency from their service due to a technical problem called transaction malleability. This technical flaw allowed fraudsters to manipulate the unique ID of a Bitcoin transaction. They could make it appear as if the withdrawal never happened even though they would still receive the funds.

The news was followed by reports from Coindesk of a “massive and concerted attack” on Bitcoin exchanges. The DDoS attack exploited the transaction malleability flaw and temporarily caused Bitstamp, a Mt.Gox competitor, to also cut off withdrawals. While Bitstamp and the other exchanges have since started letting customers withdraw funds again, as of this writing Mt.Gox still has not.

How this eventually plays out for Mt. Gox in particular and Bitcoin exchanges in general remains to be seen. But if the experiences of the Web 1.0 online payments service PayPal have any bearing on the future of Bitcoin, fraud is an issue that won’t go away any time soon.

The early days of PayPal (which Eric witnessed as the company’s first senior director of marketing and later chronicled in his book The PayPal Wars) certainly suggest that fraud is going to remain a significant issue for Bitcoin. We think the PayPal experience may also provide some guidance on the types of fraud that could be in store for the Bitcoin ecosystem.

When PayPal launched in late 1999, the site was branded around “beaming money” to friends and even briefly employed Star Trek’s “Scotty” as a spokesman before pivoting to focus on e-commerce payments. The shift led to rapid growth as eBay users flocked to the service. As the site grew to 1 million users in just six months, the floodgates were also opened to a host of fraudulent activities.

Credit card chargebacks soared as buyers disputed transactions that went bad for a host of reasons, such as failure to ship or items showing up not as described. Even though third-party marketplaces like eBay were ostensibly facilitating the transactions, PayPal was left holding the bag if it couldn’t recover the funds from the seller.

Foreign organized crime rings began to leverage PayPal to cash in on stolen credit numbers obtained from the black market. They set up automated scripts that used the stolen cards to fund PayPal payments to accounts that they controlled, and then transferred the funds out of PayPal to a bank account.

Account theft surged in the early 2000s as sophisticated “phishing” attacks caught users unaware. In one early case, fraudsters registered the domain “PayPai.com” and sent around links asking PayPal users to submit their confidential information in order to resolve an account problem.

The ramifications for PayPal were severe. As the fraud rate on payment volume soared above 100 basis points, the credit card associations threatened restrictions and loss of access. PayPal’s first business model was built around the recirculation of payments within the system, meaning that initially it wasn’t equipped to deal with this kind of fraud. By the fall of 2000, the company’s monthly burn rate hit $10 million.

Salvation didn’t come overnight, and it didn’t come in the form of a silver bullet. Peter Thiel, Max Levchin, and the rest of the executive team took a multifaceted approach to tackle the problem using a mix of technological, financial and operational initiatives.

For example, Levchin and engineer David Gausebeck built one of the first commercial applications of CAPTCHA technology (dubbed the Gausebeck-Levchin test) to block automated account creation. The engineering and fraud teams built a complex analytics system named IGOR to help dedicated employees identify fraudulent behavior patterns. The product team tied withdrawal limits to account verification levels so only users “known” to us could make large withdrawals.

Cumulatively the efforts worked. Over the following year, PayPal’s fraud rates tumbled down into the 20-30 basis-point range. This improved the company’s financial performance, playing a large role in its IPO in February 2002 and acquisition by eBay later that year. As PayPal “hardened the target,” it drove fraud away to other competing payment services. By the end of 2002, Citibank, Bank One, and Yahoo had all either closed their payment services or were on their way to doing so.

We think PayPal’s experience contains several important lessons for Mt.Gox and the other Bitcoin exchanges.

Fraud can emerge on many fronts. Just as there were multiple types of “fraud” targeting PayPal, expect criminals to emerge with a variety of schemes aimed at Bitcoin services and their users.

Bitcoin services should look for multifaceted solutions, not silver bullets. Combatting fraud requires a company to leverage its technology, processes, and personnel across multiple fronts rather than just looking for a quick coding fix.

Fraudsters go after the weakest link. Regardless of the fate of Mt.Gox, don’t be surprised if other exchanges and Bitcoin services are targeted in the future. The ones that neglect security will be highly vulnerable.

With all the hype, it’s easy to forget that Bitcoin is still a nascent technology. If the issues it faces over the next few years bear any semblance to the ones PayPal experienced, then the discussion around Bitcoin-related fraud is only just beginning.

http://techcrunch.com/2014/02/20/bitcoin-is-the-new-paypal/

PayPal continues its push to be the payment platform app developers build upon.


http://readwrite.com/2014/02/19/paypal-opens-up-mobile-sdk-to-developers-across-the-world#awesm=~owlqVL6BvsxXLd

PayPal continues its push to be the payment platform app developers build upon.

February 19, 2014 Mobile

PayPal is opening up its mobile software developer kit to the global community today, enabling app makers everywhere to more easily integrate the company’s payment solutions.

The PayPal mobile SDK will enable app developers to integrate PayPal in much the same way they already do on the Web. User accounts will be saved so they don’t have to log in every time they want to pay through and app and the interaction flow is simplified so users are not taken to a new page when they want to make a transaction. The new mobile SDK will allow developers to accept both credit card and PayPal accounts for payment.

The first company to integrate the PayPal mobile SDK was Uber last November. The trial must have gone well as PayPal is opening up the SDK today to more than 30 markets across the world.

PayPal has made a big move into making itself not just a plugin service for developers but a platform to build upon in the last year. PayPal acquired payments portal Braintree last year for $800 million and has shifted its developer relations and resources to the Braintree wing of the company. PayPal also acquired mobile backend-as-a-service company StackMob in December to fill out its developer platform and team. PayPal will be shuttering StackMob’s service later this year.

Top image: PayPal’s David Marcus and Braintree’s Bill Ready via David Marcus

http://readwrite.com/2014/02/19/paypal-opens-up-mobile-sdk-to-developers-across-the-world#awesm=~owlqVL6BvsxXLd

Secret to Success: It Starts With Dog Food


Last week PayPal president David Marcus caught some flak for sending out an email to employees at the San Jose headquarters, strongly urging them to use the company’s own products. “[If] you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere,” he wrote in the controversial memo.

After reading in its entirely, I have to say I don’t think he’s totally off the mark.

Like David, I know how important it is to “eat your own dog food” when it comes to business. It’s a key reason why I believe HootSuite has gotten to where it is today.

Eating your own dog food—a phrase popularized in tech circles years ago for using your own tools—is absolutely critical in any startup. It means you don’t just sell your product, you use it too. You trust it with your own livelihood. You know it’s better than anything out there.

HootSuite was our own “dog food” from the start

The whole idea for a social media management tool came about in 2008 because we needed it internally. At the time, the digital media agency I ran had dozens of clients with hundreds of Twitter and Facebook accounts. It just wasn’t practical to be logging into and out of each of these profiles all day long. We needed a tool that would let us manage multiple accounts from one interface.

So we hacked one together. Nothing pretty, but it worked. Before long, our clients were asking us about this new web tool that could handle Twitter, Facebook and LinkedIn all from one screen. We launched an early version as a free app. Within a month, we had thousands and thousands of downloads. It had gone viral.

The benefits of homemade dog food

Over the next several years, our user base grew to the millions. We spent zero on advertising or PR during this phase. Our basic product was free and it turned out there was a huge demand for it. There were a few benefits to this approach. First, lots of these free users eventually became paid ones. But, just as important, our community of free users—who were all eating our dog food along with us—became an invaluable source of feedback. They were just as passionate about HootSuite as we were and helped introduce some of the most critical features of our tool.

All the while, we continued to make sure that all of us were using our own product daily. We also integrated social media across our entire rapidly growing business. If we were going to be selling social media solutions, we knew we had to be the best users of the technology. We had to live and breathe it. Through this process, we discovered something huge: social media can benefit every department across a large organization—from improving customer service to increasing sales leads, amplifying brand awareness and more.

As for PayPal, the response to David’s email rant has so far been mixed, with some praising the president for his passion and others criticizing him for intimidating employees. But one takeaway is clear. PayPal is not some aspiring startup. It’s a global powerhouse, with thousands of employees and billions in revenue. Yet the mantra of “eating your own dog food” is still deeply ingrained. This goes to show how important absolute faith in your product is to success, whether you’re just starting out or—as in PayPal’s case—vying for a share of the $410-billion mobile payments market with behemoths like Apple, Google, Visa and Mastercard.

*****

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Image By: BuzzFarmers

Posted by:Ryan Holmes

I Always Forget My PayPal Password


What a week for leaders! As I was writing yesterday’s “Dear Mr. Armstrong” post , I was watching PayPal’s Internet discussion regarding David Marcus. As you may have read, Mr. Marcus sent out an email to San Jose employees about using PayPal products and participating in a merchant referral program for business who do not currently accept PayPal for payment.

I would like to congratulate Mr. Marcus on his passion for the company’s products and services. In my view it is imperative for leaders to be passionate about the objectives of the business. I agree that it is also important for businesses to have employees with a desire to use products and services provided by the company. Everyone should understand the Customer experience and work hard to make it the best it can be.

Beyond these views, we then have a ton of differences in the approach. When employees are not using your products they can serve as the best focus group to improve your products. Instead of chastising them, why not learn from them and celebrate them? We are eager to tell our employees it is our way or the highway instead of simply engaging them to learn from them. We need to do a better job learning from each other, not just in business but in society as a whole.

In the first part of his email to the employees Mr. Marcus discusses the lack of merchant referrals, especially compared to other locations within the company. Are your employees familiar with how to sell the products to merchants? Has the company helped them with this or asked why they are struggling? Have employees tried to solicit referrals and merchants provided negative feedback? Have your leaders worked to bring action to that feedback? As you can see before taking the direction of blaming the employees, it is often best to look at the deeper questions as opposed to the simple metric. I would recommend asking the employees to help you understand, but that is just my personal opinion. There are a number of other pieces within the email that was sent to employees that I would discuss:

“Employees in other offices hack into Coke machines to make them accept PayPal because they feel passionately about using PayPal everywhere.”

  • If PayPal owns the machines then they can do what they want, but if not, I do not think it is advisable to encourage employees to break into equipment owned by another business. Breaking laws are usually not something I would want in the culture of my company.

“I know there are people on our campus in San Jose who are here to make a difference every day. So I’m turning to you passionate PayPals who are here for purpose more than paycheck. We need your help. I need you to make it clear to colleagues, who display these types of behaviors that we won’t tolerate these anymore. My intention is to make San Jose (and every location) a place that retains, and attracts talent that’s passionate, and engaged. We can do it together. By demanding more of each other.”

  • Creating division within your company does not seem to be the best approach to winning people over. Within business or anywhere else, creating an environment where people are coming over holding torches, or tar and feathers, would not be pleasant.

“We have much work to do to reach greatness. We’re not perfect by any stretch of imagination. But passion, and purpose will help us get there faster.”

  • I could not agree more that passion and purpose will help any business move forward much faster. This is not something that starts with an email, but rather the top leadership establishing the mission and culture. The key then is hiring the right people from the start. If you were not hiring for the right culture, then leadership is most likely to blame.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere.”

  • Well I do not work for PayPal, but I can tell you my feedback. I know apps are all the rage, but the reality is I do not want tons of apps on my phone. I want apps that I know I use on a regular basis, preferable daily. I have not tried the PayPal app, but if I do I would be happy to share the feedback with you. I can also tell you the reason I do not use PayPal as much is simple, I forget my password regularly. It is in a format that is different than other password I use. So for speed it is often faster for me to manually enter the information.

Too often we like to blame those around us instead of understanding the shortcomings of our business or listening to those around us who may have deep thoughts. I think it is important for all of us to live the passion we have at work and at home. It is not always possible or feasible, but I would recommend it if you can. I for one am passionate about the Customer, the Customer experience and the employee experience. I strive to live those in everything I do. I think the challenge lately, whether it is the Tim Armstrong example or this one, leaders are taking the easy path, instead of investing in listening to those at all levels in an organization. Leadership starts with listening in all aspects.

As a side note this week is random acts of kindness week, so if you have time, please do something nice for someone around you. Maybe a simple note to say thanks or buy a cup of coffee for someone.

Photo: Twin Design / shutterstock

Posted by:Frank Eliason

Bye-bye, StackMob: Platform shuts down following acquisition by PayPal


44 mins ago

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Samsung Galaxy Smartphones - S, SII, Ace

photo: Samsung
Summary:In a not-very-surprising move, PayPal is shutting down the mobile development platform it bought in December and will focus those resources on — what else? — electronic payments.

It was probably inevitable that things would change after PayPal bought StackMob and its mobile app development platform three months ago. Now that change has arrived. StackMob is shutting down and its people are being pulled into mobile payments, according to a blog post by StackMob co-founder Ty Amell.

Here’s the gist: The platform will stop working on May 11, 2014 and at that time, customers will lose access to their accounts. “This serves as our notice of termination of our agreement with you,” Amell wrote.

He continued:

“To ease the transition, we are launching a data exporter to help you get all your data out of StackMob in CSV format. If you would like the data you have stored in StackMob, please ensure you export your data before May 11th (the data will not be available for export after this date). If you have any specific questions about your apps or any requests about extracting your data, please email stackmob@paypal.com.”

Developers use these server-side platforms – typically known by the awful term “Mobile Backend as a Service,” or MBaaS — to speed development of mobile apps that hook into various cloud back-end subsystems. And that world is both narrowing and expanding: Facebook bought Parse last April and Amazon Web Services is gearing up its mobile development push, as is Salesforce.com. A handful of enterprise-focused MBaaS players — Kinvey, AnyPresence and FeedHenry – remain independent.

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http://gigaom.com/2014/02/12/bye-bye-stackmob/

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PayPal chief reams employees: Use our app or quit


Original URL ARTICLE: http://venturebeat.com/2014/02/11/paypal-chief-reams-employees-use-our-app-or-quit/

The president of PayPal has had it with employees who don’t enthusiastically use the company’s products.

David Marcus sent a memo to employees working at PayPal’s San Jose, Calif., headquarters yesterday, scolding them for not installing the company’s app and forgetting their PayPal passwords.

“It’s been brought to my attention that when testing paying with mobile at Cafe 17 last week, some of you refused to install the PayPal app (!!?!?!!), and others didn’t even remember their PayPal password. That’s unacceptable to me, and the rest of my team, everyone at PayPal should use our products where available. That’s the only way we can make them better, and better,” he wrote in the email.


Update: Read the full memo from David Marcus to PayPal employees, along with Silicon Valley’s reaction.


In the email, Marcus also berated the San Jose PayPal employees for not keeping up with other PayPal offices with the volume of leads they submit for businesses that don’t support PayPal as a form of payment.

“PayPal It, our program enabling you to refer businesses that don’t accept PayPal has seen the least amount of leads in *absolute* and relative terms vis-a-vis ALL other locations. Offices with under 100 employees beat us by an order of magnitude (total PayPal it leads to date: 126,862, San Jose leads: 984…),” Marcus wrote.

Oh, and the San Jose PayPal employees aren’t hacking enough for Marcus.

“Employees in other offices hack into Coke machines to make them accept PayPal because they feel passionately about using PayPal everywhere. I don’t see these behaviors here in San Jose,” he wrote.

It’s a bit ironic considering that yesterday Marcus took to Twitter to say his credit card was hacked. So clearly not all hacking is acceptable in Marcus’ book — only hacking that supports the company’s business objectives.

When VentureBeat reached out to PayPal for comment, a spokesman said Marcus has been saying some of these things for a while. Marcus has been trying to make PayPal go in a totally different direction since he became president almost two years ago, the spokesman said, citing a shared office environment and faster product development.

“We’re getting back to our technology and innovation roots, and we really want to be driving the best customer experiences that are possible,” the spokesman told VentureBeat. “And part of that is having every employee be the customer and utilize our services wherever you can, and if you see a problem, highlight it and tell people to get it fixed. And that’s something we do a lot.”

Perhaps Marcus is getting a tad frustrated that his message isn’t getting across. His email ends with a stark choice: Get with the program or get out.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere,” he wrote.

http://venturebeat.com/2014/02/11/paypal-chief-reams-employees-use-our-app-or-quit/

The Past, The Future & What This Means For Our Developing World.


Peter Thiel SXSW

There are four quadrants used to organize the past and the future views of the developing world.  These quadrants are optimistic, pessimistic, determinate and indeterminate.

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China is currently thought to be pessimistic/determinate meaning it has a clear view of where it would like to be in twenty years but at the same time China is worried about whether or not they will get there in this modern time frame.  China is more likely to save money, then invest money over the next few decades.

“China will be a somewhat poorer version of the developed world, people will become old before they become rich”  –  Peter Thiel, Co-founder, PayPal.

America is thought to have fell in to a quadrant called indeterminate optimism.  Presently, the United States is believed to have both a low amount of investment and a low amount of saving, this is arguably the most unstable position for a country to be in.

“One of the strange things about indeterminate optimism is that its the quadrant that has low savings and low investment.  Is it possible for the future to be better when no one saves and no one invests? Because no one is thinking and everyone is outsourcing all of the thinking to other people.”  –  Peter Thiel, Co-Founder, PayPal.

Both Japan and Europe are thought to be indeterminate/pessimistic meaning the future does not look bright and no body is sure what to do about it.