PayPal's first five years in Australia has been a rollercoaster ride of commercial growth, a big challenge from scheme debit, a love/hate relationship with customers and regular run-ins with Australian regulators.The company initially traded under an interim agreement with APRA before becoming the first Australian company authorised to operate as an ADI in the new regulatory category of "purchased payment facilities provider".PayPal incorporated in Australia in 2004 and began to accept Australian dollar transactions in January 2005. By April 2005 it had signed up one million Australian account holders.PayPal accounts could be linked to a bank account from November 2005, opening up the product to people without a credit card.As phishing scams became rampant in 2006, PayPal Australia's own URL and website was used to fool customers into handing over personal details.The attack was quickly shut down but Banking Day (then known as The Sheet) revealed PayPal's relatively high fraudulent transaction rate of 0.35 per cent.That high number effectively killed off eBay's "PayPal only" project in 2008 that attracted widespread criticism from merchants, buyers, other payment providers, banks and industry groups.The competition regulator, the ACCC, conducted a third line forcing investigation and rejected eBay's "PayPal only" project, which was widely assumed to be a trial run for a global plan to make all eBay transactions pass through PayPal.The failed project (which was known internally as "The Project") is believed to have originated in discussions between eBay Australia's Trust and Safety executive Alistair MacGibbon and PayPal Australia's founding managing director Andrew Pipolo.Just one month later, the collapse of big eBay merchant EBS highlighted serious holes in PayPal's buyer protection program.  To save face, PayPal established a special fund to compensate 2500 buyers who had paid for items they didn't receive.A year later PayPal was forced to make an enforceable undertaking to Austrac to improve its risk assessment systems to comply with the new AML/CTF laws.Also in 2009, PayPal Australia lost its initial two Australian employees, Andrew Pipolo, who is now in Japan, and the dynamic Dinuke Ranasinghe, who has moved up the corporate chain to run PayPal in Singapore.The rise and rise of scheme debit seemed to put a dent in PayPal's growth rates in 2008 and 2009.The new managing director, Frerk Malte Feller, claims that PayPal is Australia's most preferred method of buying and selling online, but the company does not report country-specific data.The overwhelming majority of payments processed by PayPal are Visa, Mastercard or American Express card payments, with a minority debiting money from the buyer's linked bank account. A very small number of PayPal transactions use cash stored in an online PayPal account.PayPal Australia has stopped claiming that it has more than five million Australian accounts and is now boasting three million active customers.