PayPal is a money transfer system that was originally launched for C2C (customer-to-customer) transactions, but recently, X.com, the company behind the service, introduced B2C transactions, by offering accounts for businesses. Paypal acts as a neutral intermediary offering low risk to both seller/receiver and buyer/sender of the money.
PayPal, uses e-mail to inform the receiver that a payment has been made. It accepts money from the purchaser in one of three ways:

Charging the purchaser's credit card for any transactions (payments).
Debiting a checking account for any payments.
The purchaser sends a check to create a positive balance in his account at PayPal, and has any payments deducted from the account.
Payment recipients can use the money in the account for online purchases or payments, can receive the payment from PayPal by check, or can have PayPal directly deposit the money into his checking account.

How It Works
This is truly one of the easiest services for purchasers to use. Setting up an e-mail account at Yahoo takes longer! As a payer, all you have to do is to provide your name, your e-mail address, your credit card information, and your billing address for your credit card.

The newly instituted business and premier accounts permit businesses and consumers who use their accounts frequently to accept payments via PayPal without requiring merchant accounts, and having these amounts moved to their checking accounts daily.

Business and premier accounts get 24/7 customer support by both phone and e-mail. They also have the ability to download Quicken/QuickBooks/Excel-compatible transaction logs. Payments can be accepted directly on their own sites using a Web Accept button. Finally, these account holders can create automated invoices to send to auction winners and others.

For regular PayPal account holders, payments must be made at the PayPal site.

There's one additional service available that's worth its weight in gold. Sites that run affiliate programs, sweepstakes, lotteries, or hold marketing surveys might need to send small value checks to many, many recipients. PayPal's business services let these merchants upload a file with e-mail addresses and amounts, and pay the recipients in bulk. Since checks cost at least $1 each to process, and often have to be reissued, this service, priced at the lesser of $.25 or 2% per payment, is an unbeatable deal.

Payment Terms
For transactions between customers, there's no fee associated with using PayPal, no doubt contributing to its popularity. PayPal makes money on the float - when your money sits in your account, they're collecting interest on it.
For business accounts, the merchants are charged a 2.2% discount rate + 30 cents on the money, which is better than the rate charged by merchant banks for accepting credit cards, in most cases.

www.paypal.com

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