PayPal was a service provided by a different company, Confinity, founded by Peter Thiel and others.

Musk didn’t really have anything to do with it. He, with others, founded X.com, that was meant to be an online banking system, and sort of became a competitor to PayPal.

Eventually they merged and Musk became CEO and highest shareholder. 6 months later the board of directors replaced him with Thiel while he was out of the country, but Musk still made a fortune with his shares.