eBay acquired PayPal in 2002 to make it the online-payments subsidiary supporting its marketplace.
PayPal had become closely associated with online auctions and person-to-person payments, making it a natural fit for eBay’s users. The acquisition gave eBay control over a payment service that could help buyers and sellers complete transactions without exchanging bank details directly.
PayPal was founded as Confinity in 1998 and later adopted the PayPal name. Before eBay’s acquisition, it competed with eBay’s own Billpoint payment service. The deal therefore joined two major parts of the online-shopping transaction: the marketplace and the payment system.
eBay later separated PayPal into an independent publicly traded company in 2015. PayPal remained a major digital-payments brand, while eBay established a different payments strategy for its marketplace.