World domination by PayPal?
PayPal's ambitions are clearly impressive.
One of their goals is to become such an accepted everyday form of payment that instead of offering up your Visa card or Mastercard at a till, you will opt to use your PayPal account. And most likely you will do it by swiping your phone across a reader.
This plan to grab a share of the reported $2.4 trillion market dominated by credit card companies, surely underlines the self confident air of a company that has already changed the way people pay for things over the internet in its 12 short years.
Its big success was of course helping buyers and sellers on eBay conduct financial transactions easily and securely.
"We started on eBay and ventured into off eBay businesses but it was all e-commerce and that was where our focus was," said PayPal president Scott Thompson, who formerly worked for Visa.
"Now the focus is not just e-commerce, it is online transactions. What fits into that that wasn't in there before is everything from payments to not for profits, charities and government agencies and even, in my case, my son's school accepts PayPal. Those are just some useful cases for you as a consumer and it just keeps going and going."
Mr Thompson believes as more and more devices become connected to the internet, they also become payment vehicles. This includes everything from the TV to the cellphone and from a dvd player to a car.
"These new point of sale devices are about being at the end of a network and you being able to connect and any payments occasions in there are best suited for us. Eventually we [PayPal] will be everywhere that is online.
"If you are a customer of ours you should be able to use us anywhere on the internet and around the world."
More specifically, Mr Thompson said PayPal's future strategy going forward is simple.
"Where are we going next is anything that is mobile, anything that is digital and lots and lots of e-commerce online payments."
When Mr Thompson says "lots and lots" he means hundreds of millions. At the moment PayPal has 87m active customers and 8m active merchants. He noted that while there are over 1bn people online, there is something like 5bn cell phones in the world.
The new offerings include smartphone applications, partnerships with Facebook and Google, micropayment solutions and a number of third parties that have integrated PayPal into their applications. Reports abound that the firm is also in talks to embed its payments platform on Android, Google's mobile operating system.
A major priority is to turn phones and connected devices into "digital wallets" that can be used by shoppers to buy merchandise, collect coupons, and store loyalty program information using electronic funds. The software is to be introduced by PayPal at their developer conference in October.
Another big play for the company is micro-payments. All those 25 cents and $1 transactions add up to lots of profit.
"This is going to be big, really big for us," said Mr Thompson.
"I believe what is happening here is the subscription based economy where I want to pay for it when I use it. I want to pay for it when I consume it. And I only want to pay for what I use, not pay for 100 of something and use 10.
"This is going to lower the overall transaction size but there are going to be millions and millions more transactions. And if we are the most convenient and most secure way of doing that, you won't do tens of transactions with us over the course of the year, you will do thousands of transactions but they will be much smaller."
One example of that "pay for what you use scenario" is easily illustrated when you think of parking said Mr Thompson.
"At the moment you pull up to a parking meter and put all this money in and worry about 'Oh I put in too much and I don't use it or get the value or I didn't put in enough and I get a traffic violation'.
"Why not when the car pulls up to the meter, because it is a connected device, it clocks in and when you pull it out it knows how much you owe. You have that money exchange with the automobile through your PayPal account embedded and capable of paying that transaction. Think of all the useful cases where that will happen, all those small transactions."
Visa also agrees micropayments offer a lucrative future. At a recent technology conference called Techonomy Visa's North America president Bill Sheedy was understated in his assessment.
"When we look at micro transactions, we see that as a growth area."
PayPal's Mr Thompson believes the company's ability to grab market share from established players is down to their approach which puts technology at the heart of everything.
"The secret sauce of PayPal? Strip it all away and what do we do that no-one else does is risk and fraud management and its completely proprietary and it is all tech based.
"If you wandered around to a lot of legacy companies or those that have been around for a long time. When you talk about technology, they view it as a cost to the business. 'Yeah we have a few of those tech guys around and they cost us a lot of money' or they outsource it.
"We would never do that. This is the life blood of what we do. Every great disruptive innovation that we have seen and done has been through the use of software and technology."
Mr Thompson asserts technology has enabled the company to remain flexible and nimble to customer demands and it is what will ensure its future as it continues to take on the established players in the game and perhaps even change the rules of the game:
"We are big today but I would tell you that we are more innovative today than in the last five years. It is through innovation we will be more disruptive moving forward.
"Where we are in the growth of this business is we are just getting started. This is year one again."
~RS~q~RS~~RS~z~RS~57~RS~)
Comments
If only PayPal service was better. It all works until it goes wrong and then its hopeless.
An example to me was when I opened my account to find that PayPal had just taken £1500 from my account. No communication, just happened. When I queried it I was told "This is to rebalance my account", duh why does my account need to be rebalanced? Then it became clear, apparently they had had a problem so my account had been credited with twice the amount for each transaction. So there had been a problem, they had fixed it but the level of customer service was appalling.
So I am loath to link my PayPal account to a bank account. Its just too dangerous.
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PayPal, rather cleverly, give the impression of being a safe way to shop online. But they're not as safe as your credit card.
For example, a credit card will reimburse you for any fraud and also offer automatic insurance when paying for holidays, and a guaranteed refund for purchases if something goes wrong or you don't get a product or service.
PayPal do not. They do offer a refund for eBay purchases that go wrong but this does not apply to other payments, even on shopping sites. Yes, it means you don't have to keep entering your card number. But so what - your card company protects you if someone steals the number.
PayPal offer no advantages and several disadvantages when buying online. Their only selling point would be in micro-payments, which I'm sure Visa will catch up with anyway.
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Electroweb: you may not have seen that PayPal recently significantly extended buyer protection in the UK when you buy from non eBay websites, essentially bringing it into line with cover for eBay purchases. This includes cover for goods that don't arrive or don't match their description. Check out the safety advice section at www.PayPal.co.uk for more information and for the terms and conditions.
Disclosure: I work for PayPal UK.
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I wish PayPal would allow the default funds source to be my registered credit card. It gets boring having to select the card rather than my bank account for every single transaction.
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This could be a kick up the backside for the card companies or just another ripoff hope it brings charges down ???
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I don't like Paypal and I can't see the point of this "blog" entry which is another bit of recycled press information.
A massive area full of astonishing new innovation and this is the best Maggie can do - I despair, I really do.
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I absolutely Hate Paypal and their extortionate charges. I used to sell a lot of items on ebay, but I am now finding that the transaction charges are ridiculous!
I have also been less than impressed with their dispute resolution service. I sold an item to someone in Spain who paid for the item to be sent via normal airmail. He did not select or pay for international signed for. An entire month after sending the item, he filed a dispute with paypal stating that he hadn't received the item and wished to be reinbursed the full amount. Paypal clearly did not look at anything I wrote and awarded in favour of the buyer. This was despite the fact that the buyer did not pay for the item to be signed for/insured. I also had a proof of postage receipt, but Paypal weren't interested.
I am still forced to use paypal, because there are some items which can only be purchased on ebay (paying for small items via cheque is not practical). However, I never use the service for paying for non-ebay transactions and have significantly curbed my buying and selling on ebay as a result of their poor service (in my opinion).
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I wish paypal the best of luck, but they will do well to break the cartel that is Visa and MasterCard.
These two have the retailers in their back pockets and will charge them higher fees to use their terminals / network if retails start prefering other providers.
MasterCard and Visa will be rolling out contactless payment in the next 12 months and shops won't want the cost of training staff in taking payment via phones aswell.
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Paypal deserve to succeed in breaking the duopoly of Visa and Mastercard. However, with poor customer service focus and relatively poor service delivery they really have to up their game.
That said the real potential in in delivering a mobile payments service for mobile phones. This is an area were Africa is ahead of Europe. However, given the truly appalling customer service of mobile phone providers would you trust any of them with your money?
There is a huge gap in the market here which someone like Nokia or other HW vendor could fill via their various Apps stores imagine Apple Bank or Nokia finance, it may even offer Google a way to monetorise their Android platform.
Remember if they do it I thought of it first guys.
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Draft Media Release re PayPal
“It is with great sadness that eBay’s Chief Headless Turkey, John Donahoe, announces the probable demise of eBay’s most ugly daughter, PayPal. PayPal is about to be stricken by particularly virulent strains of Visa+CyberSource and Mastercard Open Platform; these afflictions are aggravated by PayPal’s insurmountable lack of direct financial institutions support and a great deal of PayPal user dissatisfaction, particularly with respect to PayPal’s grossly unfair, “all responsibility avoiding” user agreement, totally primitive risk management processes, and grossly unprofessional, usually buyer-biased, fraud-facilitating (indeed, non existent) transactions mediation, to name just a few of the “inconveniences” that PayPal merchants have to endure.
“PayPal’s health may therefore be expected to deteriorate and, if ultimately not completely incapacitated, will most likely be eventually confined to its mandatory offering on what little there will, by then, be left of the Donahoe-devastated eBay marketplaces. There is no cure for this condition, and the “eBafia Don” is particularly saddened by the inevitable presumption that it is unlikely that PayPal, will be able to continue to underpin eBay’s sagging bottom line too far into the future.”
Yes, it’s a send-up but, still, it accurately describes PayPal’s “clunky” operation. The fact is, had the developers of the original “bankcard” concept ever behaved the way PayPal behaves towards its payees in particular, credit/debit cards may never have gotten off the ground, and we would probably still be paying for all our purchases with bits of paper and little metal discs.
It appears that there is effectively no PayPal representation at all on behalf of the payee with respect to a payer making a credit card chargeback—for whatever reason. PayPal, apparently, simply accepts the chargeback and passes it back onto the payee. PayPal’s mediation process is so “clunky” that it is effectively an open invitation to unscrupulous buyers to defraud sellers, and PayPal’s system apparently offers payees absolutely no protection against this form of potential fraud.
Indeed, all those payments processors that do not have the direct underlying support of the financial institutions ultimately involved who actually have some knowledge of the two entities involved in any transaction, as does have the likes of Visa and Mastercard, all have the same insurmountable and, ultimately, potentially fatal deficiencies that PayPal has—no effective, non-disruptive, risk management process.
In Australia, PayPal, unlike all other payments processors, has declined to sign up to the payments processors’ “Code of Conduct”, and the clear message therefrom is “user beware”!
I accept only that from a buyer’s point of view PayPal is more convenient for making a payment online than paying directly by credit card, and PayPal may still have some momentum therefrom. But, from the merchant’s point of view, for the number of material reasons referred to above, PayPal is a most unprofessional, inefficient and clunky system.
When the new banks-supported online payments interfaces offered by the likes of Visa/Mastercard are refined to the point of similar convenience, I have no doubt that PayPal’s appeal to merchants will very quickly dissipate as the obvious superiority and greater professionalism of the banks-supported online systems gather their own momentum with online merchants.
It’s only a matter of time …
Having said that, the banks risk assess their merchant clients before they hand out merchant accounts so that maybe not every small “merchant” (or payee) will be able to obtain one of the banks’ online payee accounts. So, maybe there will always be a place for the likes of PayPal—they could become the “online merchant/payee account provider of last resort”. Can you imagine what PayPal’s level of risk management and transaction mediation will be like by then? The payment holds will likely be generally 180 days for everyone and the transaction mediation will still be non existent.
A detailed examination of and prognosis for PayPal, (including a further link to the “PayPal Horror Tour”) at:
http://forums.auctionbytes.com/vbulletin/showthread.php?t=23309
Shill Bidding on eBay: Case Study #4
This latest study is a measure of eBay’s desperation to replace lost revenue and very effectively demonstrates eBay’s effective aiding and abetting of this criminal shill bidding activity at
http://forums.auctionbytes.com/vbulletin/showthread.php?t=23540
eBay/PayPal/Donahoe: Dead Men Walking.
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This comment was removed because the moderators found it broke the House Rules.
I personally have never had a single problem with PayPal. But I know lots of people who have. Only last week, some friends of mine with a thriving eBay business were closed down by eBay/PayPal, and their account, with several thousands in it, frozen. Their import business is seriously threatened, and yet eBay/PP gave no warning or indication that anything was amiss. My friend's business is perfectly legal and proper, yet PP are acting as judge and jury, and by freezing the cash, will almost certainly be executioner as well.
If they have designs on replacing credit cards as payment method of choice, they really need to sort out their apparently default assumption that anyone transferring money over the internet is automatically a criminal until they can prove themselves innocent.
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I personally cannot wait until there is a real alternative to PayPal.
As somebody who makes a living online, the thought of having only PayPal (and Google Checkout.. feeding the data-hungry google) as the ONLY payment processor that's relatively easy to set up, is disturbing.
Search google for 'paypal nightmares' and read the staggering number of business owner's who's PayPal account were frozen for no apparent reason.
Unlike banks, it's not easy to contact PayPal, and it's even more difficult to try and get your money back from a frozen account.
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There you go skinner. Seeing as you work for paypal maybe you could pass on some of this feedback and work towards improving your company slightly.
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I agree with all of the above criticisms. As a large ebay seller I cannot wait for the day there is a real alternative to Paypal. Paypal customer service is shockingly bad, and they take no responsibility for anything, always passing costs and risks on to their users. As soon as a competitor is able to offer the same services and show a bit of respect for their customers Paypal's demise will be a lot quicker than their 12 years of growth!
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PayPal wants to use phones as a methods to pay, by swiping the till. What will happen to people without mobile phones? Older persons ofetn do not own them, many people I know do not own one. My own phone is an old model, which I doubt would be able to hold the correct information to use PayPal, let alone the internet. What if my phone was lost, broken, or even stolen? All the thief would need to do would to be to swipe my phone, and my money would be stolen, and not returned, as PayPal doesn't offer this service. This idea is ridiculous in everyway. What's wrong with a credit card? I hope this idea is never introduced.
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