Despite rocketing transaction volume to the tune of year-over-year growth of 150% as of the end of last quarter, it can’t be much fun working at PayPal these days. Square, not PayPal, is considered the most interesting play in payments these days. Even PayPal’s founder, Elon Musk, thinks so.

The folks at Square are so emboldened by their position as the darlings not just of financial services startups, but startups period, that they are are more than eager to tar and feather PayPal at any opportunity. Yes, this is turning into quite a nasty fight.

But the PayPal team isn’t taking it lying down. No, even PayPal interim CEO John J. Donahoe is countering the current digiterati view that PayPal is over and done with — or “screwed,” as Musk put it last week. Donahoe:

You can envision a world in the not-too-distant future where you can just frankly snap — take a snapshot of your driver’s license and credit cards to form a PayPal account. So I think one of the pieces of the PayPal play book that I think you’ll see increased focus on is just consumer acquisition, which then again leads to consumer engagement, which leads to — which is supported by the merchant ubiquity. And as you said, we’re growing. We think we’re going 2x to 3x faster than the market. So we’re clearly gaining share in Web. We’re gaining share in mobile, and our aspirations in offline is if we can get a little piece of that offline market, we think that can really add to our business.

That’s faster than the market, not slower, in case you didn’t read that correctly. Is PayPal still a work in progress? Sure, but the company still processed $10 billion — with a B — in the first half of 2012. That’s something.