PayPal Quietly Took Over the Checkout Button

In late 1999 a young computer scientist named Max Levchin started receiving emails from strangers about a web demo he’d created to illustrate the workings of an app. The app, which he’d also helped create, was an encrypted payments platform for the state-of-the-art mobile device of the day, the Palm Pilot: Two users would agree to the transaction, the sender would enter his credit card number into his device, and once both Palm Pilots were physically plugged into their owners’ computers, the appropriate amount would be debited from one and credited to the other. “It was fairly clunky,” Levchin concedes, “but it was a full-loop way of transferring money.” The app was the fourth or fifth pivot for his startup, and it grew out of conversations with another co-founder, a lawyer and venture capitalist named Peter Thiel, with input from a board member named Reid Hoffman. They decided to call the app PayPal.

Because most people didn’t own a Palm Pilot, Levchin also created an online simulation of the app that allowed someone sitting at a computer to enter financial information and actually send someone else money. “I thought of it as, ‘If you’re deciding whether to get a Palm Pilot, here’s one way of enticing you,’ ” Levchin says.