PayPal is one of the most widely used money services worldwide. The big idea is to help people to buy and sell on the Internet, without having to change money into foreign currencies or risk identity theft. Importantly, PayPal is not a bank. It doesn’t work the same way as a bank does and it is not governed by the same laws that a bank would be governed by. Instead, it is legally considered a money service.
So how does PayPal work? By acting as the middle man. Let’s say you are selling something, and I want to buy it. But we live on opposite sides of the world. This means I can’t walk into your store and hand you cash. So how am I going to get the money safely from me to you? If I use my debit or credit card, then my number and personal information is sent to quite a few people. My bank, your bank, and usually a few companies in between process the transaction. There is a lot of risk that my information will be stolen. But if we both have a PayPal account, things work a lot differently.
PayPal has my information with my account, and your information in your account. It takes the money out of my account and moves it to your account without my information having to go along for the ride.