It's Levchin who worries most about keeping the site secure and fraud free. So he created Igor, a software system that graphically visualizes PayPal's usage and helps Levchin's staff spot abnormal patterns. "I am one of the most paranoid people. It's a constant arms race," Levchin says of keeping up with hackers.
Another of PayPal's salvos is bank-account verification, which involves sending small deposits to an account holder. Even so, Levchin says that he remains paranoid about fraud -- sometimes waking up his team at 4 in the morning to work on a problem immediately. "The day we come out of panic mode is the day we aren't doing something right," he says.
Meanwhile, PayPal potentially faces even tougher competition. Wells Fargo and eBay teamed up last year to develop Billpoint, a direct rival. AOL and Yahoo are doing something similar, allying with big banks Citibank and HSBC Group, respectively. Some leading portals are now offering their own gigantic databases of users many, if not all, of the services that PayPal does.
For its part, PayPal is trying to parlay its simple send-money-via-email business into a full-fledged online-payment system. But in acting more like a bank -- it already has a debit card from Bank One in partnership with MasterCard, a credit card from Providian, and a money-market fund administered by Barclays -- PayPal may find itself the acquisition target of a bank.
Along with BillPay, Thiel is betting that international payments could be a solid business. But unlike his early success -- enabled by a banking system that is robust and easy to use -- he has run into major problems that can't be fixed with a simple Web site and viral marketing.
Regulations have kept even larger banks such as Citibank from solving the riddle of how to move money easily across borders. "Every banking system has to be worked out on a case-by-case basis," Thiel says. "And international fraud is much trickier."
Fara Warner (fwarner@fastcompany.com) is a Fast Company senior writer based in Silicon Valley.
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