PayPal's CTO On The Bumpy Road To A Comeback

PayPal took off—then settled for staying the same. Thanks to aggressive engineering innovation, they made a comeback.

As the saying goes, "If it ain’t broke, don’t fix it," but resting on your laurels can backfire in today’s innovation-hungry economy.

Case in point: PayPal. Founded on the campus of Stanford University in 1998, the company was a pioneer in online payment services. The service started as a way to digitally transfer money between Palm Pilots.

By 2000, the company had a million users. Hyper-growth led PayPal to become hyper-conservative. It stopped investing in ground-breaking technology and focused on becoming the most trusted site for sending money over the Internet. Security features were updated, but its checkout and capabilities remained the same since 2000.

In 2008, the company finally got around to revamping their checkout experience. While tech critics suggest the move was due to competition such as Square, Stripe, and Dwolla, PayPal insists it had been consumed with other issues, such as fraud detection.

A new internal platform called Sparta was built, but progress "bumped along for a few years. By the time it was ready to go live, it was an old concept," says James Barrese, PayPal’s chief technology officer. "[Sparta] was conceived when there were just web browsers, and not multiple mobile devices. The world had changed dramatically, and it wasn’t sophisticated enough."

Barrese, who joined PayPal in August 2011 and was named CTO February 2012, was tasked with modernizing the experience using the Sparta platform, but it was easier said than done.

"Things were taking forever to build and forever to work," Barrese says. "The performance wasn’t there. There were all kinds of issues. Our ‘new’ software was out of date."

So Barrese made the decision to toss out the "new" and replace it with newer, starting from the ground up. He brought in a new "band of pirates"—highly accomplished, aggressive engineers, and leaders who could rewrite the entire architecture, system, and experience.

"I had confidence that they were the team that was going to pull it off and I backed them 100%," he says. "Before having that team, I wouldn’t have done it. A few of them even asked me, ‘James, are you serious? Are you going to let us come in and modernize and reengineer.’ That’s when I knew they were the right people."

They immediately hit the ground running, driving results. Barrese says they had just enough time to understand the situation, and come in with a new strategy.

"They put disruptive innovation back into the company," says Barrese. "But that meant doubling down on our risk profile—without putting PayPal’s reputation in jeopardy. As a CTO it’s the kind of thing where you’re the hero or you’re fired."

Barrese’s bet paid off. His team developed a new framework, code-named Kraken, for a more modern experience. Using an "in-context checkout," users are no longer taken to PayPal’s site to complete their transaction; checkout happens on the merchant’s website. PayPal believes this change will boost merchants’ conversion rates. They also built out a number of back-end services, including new portals, reporting, and login flows.

"We’re defining industry standards now," he says. PayPal is unrolling its new system, country by country, throughout 2014. In 2013, it launched 58 products: more than in the past five years combined. And it’s perfect timing; with Target’s credit card breach in the news, more shoppers are concerned about using credit cards.

"They’re telling us, ‘We’d rather have you protect my financial information,’ and we can give them that guarantee," says Barrese. "We’re seeing a lot of positive uptake."

And it came down to returning to its roots: "This is a story about PayPal going back to its Silicon Valley, push-the-envelope days," says Barrese. "It’s about good people making big bets on new technology. We’ve got our ‘mojo’ back."

Correction: A previous version of this article stated that PayPal released 28 new products in 2013. The released a reported 58.

[Image: Flickr user U.S. Navy Seabee Museum]

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1 Comments

  • I hope they stop forcing people to sign in/register to pay. That is the reason why I don't use them more. My clients say that the interface doesn't provide them a way to pay by credit card. Actually in most cases it does but the button is not obvious. Which make me believe that Paypal hopes to sign up more people that way. The problem is that they are doing this at the expense of my customers!!!