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Comments (0) Fintech news, Global trends

The awkward state of PayPal

By David O

And the best platform for online money transfer is …

I must confess this post came out from a personal experience of using PayPal. I wouldn’t talk about that experience here, but I talked circumspectly about it here (it is a locked post). I am not a fan of criticism or trying to destroy other people’s hard work or business, so I try to be as constructive as I can. But whether we like it or not, the future is upon us. It’s either you innovate or you drown. That’s the way the world is right now. Adaptation is not the key to survival anymore, people need new and fresh. This makes it possible for you or whatever wonderful product or service you have created to be forgotten very quickly. It is a fast world, and we are talking about PayPal here.

After PayPal really pissed me off, I began thinking, what edge does PayPal really have on the future of money transfer or online payment? Are they going to be around 10 years from now? Are they positioned to become the king of the industry? What do they have that could mean leadership in the sphere of money movement? In case you don’t know what PayPal does, they basically help you move money “easily” and “across borders” with just your email address. An account with them can be connected to various bank accounts of yours which can help you make purchases online or send money.

In my research, I took to the internet to find out what the advantages of using PayPal are and whether they are still advantages. So, I’ll take the advantages I found and dissect it one after the other. I’ll try as much as possible to stay with facts and away from opinion. However this is a social world, it’s easy to predict where things are headed.

The first advantage is that it is said to be fast. The question that comes to mind immediately is; faster than what? Well, apparently it meant (as I discovered) faster than Western Union or bank payment. I haven’t used Western Union before and I don’t have anyone around me who has used it in recent times. But I can speak of bank transfers. Bank transfers aren’t what they used to be. With the recent strides of debit and credit cards plus the compatibility it has now in online payment, I see no reason to call PayPal faster. It is not any faster than bank transfers as far as I can tell. Also, the fact that payment can be rolled back in 21 days or so (for those receiving) meaning the money is really not “collect-able” till then makes it really slow. I think the transaction is not complete until the money is in my hands and I can use it the way I want. Plus, cryptocurrencies are way faster. So, PayPal is fast? I don’t buy that.

Next, they do currency conversions for you. This is a good advantage, but you know what? So does my bank! My bank has a limit for this, but it does it to a large extent. I can buy with my card in another currency and they’ll make the switch for me. Interestingly, PayPal has a limit too. So, is this an advantage? Not for me. If everybody else does it, then it is not an advantage. Cryptocurrencies even makes you hedge against a fiat currency (although very volatile).

Next, they claim to help with recurring payment. How is this even an advantage? My debit card does this so smoothly. Almost every online payment channel has the ability to help with recurring payments. So this is definitely not an advantage.

Now a good one; it is widely accepted. This is like the advantage that really rings home. The acceptability of PayPal has gone so far and so deep. But it is just a result of dedication and diligence in marketing and marketplace adoption. Any other channel with the resources they had could have achieved the same thing. This speaks so well of the people who have handled the company so far. They have done a good job with adoption. However, lots of projects and companies are looking into working hard on adoption. I have the impression that many of them will meet up and surpass PayPal in general acceptance over the next 10 years, especially projects within the crypto ecosystem. But this remains an advantage for now.

Next is credit card security. Here they claim that by using their platform (and not your bank card directly), you are not disclosing your details more than once (when you share it with them). This is definitely an advantage over bank transfers but crypto does that even better. Plus, meticulous people who don’t get scammed (yes, a lot of people have never gotten scammed) don’t see this as an advantage. You have to literarily ignore the bank instructions and do something beyond what you know to get scammed (often). In crypto, you can post your bitcoin address like this (mine); 19N35JL5TE89MoDgmxRMuVQVvYE6fvDtyp and your litecoin wallet address like this (mine); LhSCnTqJQgxxv6gGFeN9G5A3FUvP1xnSLy and be so confident that nothing funny can happen. Only something good.

Next, the fact that PayPal has an app. Everybody has an app nowadays. It’s no big deal. An app, a QR code, life has just been made easy. An app is definitely not an advantage. Also, PayPal is referred to as an online wallet. The words ‘online wallet’ triggers crypto in my mind. I don’t think they really fit into the narrative of online wallets if you consider what is going on in the crypto ecosystem. They are actually a kind of online wallet, but are outclassed by crypto wallets (just because the crypto wallets hold cryptocurrencies).

Another advantage that still sounds strong is the use case for online auctions on eBay. Of course, eBay is deeply connected to PayPal. This explains a lot about PayPal’s wide acceptance. Actually, PayPal was formerly owned by eBay. Right now, I think eBay is starting to embrace other payment channels. So it is uncertain how long this will remain an edge. Also, there are discounts at a number of retail stores when using PayPal. This too is a kind of advantage and it basically contributes (like the previous point) to the wide acceptance.

Finally on the advantages, it is said that PayPal is free to use. Actually, sending money is free (to the best of what I can find out) but receiving money has a cost. This may be an advantage over bank transfers (in some places) but crypto does it better. If you don’t like your bitcoin’s tx fees (which is really nonexistent if you are on LN), use litecoin or ether or any other suitable coin.

Having seen the supposed advantages, let us consider the supposed disadvantages too. The supposed disadvantages are much more serious and concerning than the supposed advantages. Could only substantiate only one real advantage of the many that surfaced, let us see how many disadvantages we would find. First, someone mentioned the fact that it is not connected to any ATM. This is startling though. They would probably say that PayPal is basically an online wallet and does not need to be ATM compatible. But then it leads to the other point that another person raised; PayPal is an unnecessary middleman. There is a point here. Since all of what it offers (in function) the banks can carry it out themselves, why use the platform? The only reason remains because a channel of payment you want to connect with is using it or asking you to use it. If I’m allowed to take a guess, I’d say they are not adding new users at the rate they used to.

The major disadvantage for people who use the channel to receive money is that buyers or customers can rip off sellers. They can receive a product or service and then cancel the payment. I have heard a lot of complains about this from both far and near. It is really pissing people off and I just wonder what PayPal is doing about this. The annoying thing is that when PayPal revokes the payment, they don’t follow up on any exchange that has previously occurred between the two parties. You know how frustrating it is for you to think you have made a sale only to find it rolled back and your product is gone for good. God bless Satoshi; once payment is made, it is irreversible. That may be scary to some, but it is comfortable for me and a lot of other people.

Another big disadvantage is that PayPal can freeze your account indefinitely without giving you any concrete explanations in time as to why. This is an instant turn off. I don’t ever want to be in that position. No warnings, nothing and your money is frozen for a period of time. What if your life depended on it? For someone to write that in a review, it means it happens quite frequently. That is far worse than any security they claim to give.

This is all I could find but what happened to me is not in any of what is mentioned already. Apparently, you cannot receive payment into your PayPal account in certain countries. I happened to be in one of those countries and I couldn’t receive money sent to me. Interestingly, they didn’t make it clear unless you ask them specifically. Also, they continue to run their services that allow people from these countries to pay for things online. So, they can send but they can’t receive. I consider this very unfair. If the service is to be cancelled, then it should be totally cancelled in those countries. How can you allow people to send money without the ability to receive money (when everybody knows the full package of the service you run in other places)? I expressed my grievance with some striking thoughts about this in the post I linked in the first paragraph.

Now you have seen the present state of PayPal, the question now is this; where do you see them in the next 10 years?

Photo by rawpixel on Unsplash

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