You are here: silicon.com > Financial Services > News

Gartner: PayPal threatens banking business

Resistance is futile, analyst claims...

Tags: paypal

By Dan Ilett

Published: 15 September 2005 14:25 BST

Banks and vendors should sell PayPal payments to retail customers, instead of trying to compete with the online company, an analyst has claimed.

In a report entitled PayPal's New Micropayment Pricing Will Dominate Market, Gartner said the payment company will outstrip traditional payment methods and online transactions.

Author of the report Avivah Litan, a research director at Gartner, writes that retailers should embrace PayPal services rather than use "outdated" payment methods.

She wrote: "PayPal can beat credit card pricing because it blends credit card, bank account transfer and stored PayPal account value funding on the payer side, lowering PayPal's overall cost of funding any payment. PayPal encourages repeat payer customers to keep money in their PayPal accounts (the company's lowest-cost funding method), and to use credit cards (the most expensive funding option) as a last-option funding method."

The report follows a new pricing strategy from PayPal that makes it cheaper for people to trade goods under $3.

The analyst says PayPal was able to lower prices for a long time but waited until it had a large enough customer base (PayPal claims 78 million accounts) to profit from lower commissions for transactions under $3.

Litan adds: "PayPal's expansion is bad news for countless start-ups around the world that have tried to enter the micropayment market. Although credit [and] debit card companies could enter this market simply by lowering merchant transaction fees, these companies don't have the PayPal advantage of funding payments from PayPal stored accounts, as well as traditional bank accounts."

  1. Zones
  2. Management
  3. Networks
  4. Software
  5. IT Services
  6. Hardware
  1. Verticals
  2. Public Sector
  3. Financial Services
  4. Retail & Leisure

silicon.com Financial Services
Get the latest financial services news straight to your inbox. Sign up for the FS newsletter today!


  • Jobs
Project Manager PCI Compliance PCI DSS - Urgent role

Project Manager required with a knowledge of Payment Card Industry (PCI) Compliance. A retail background highly desirable together with Credit Card ...

Senior Designer / Architect (Authorisations Technology), Financial, E.

In addition to this, you will have; An understanding of Chip and PIN technology Knowledge of account processing systems (ideally TSYS TS2) Broad ...

Credit Risk Business Analyst

Highly proficient in MS Project & MS Powerpoint - Extremely strong communications skills - To produce clear and unambiguous business requirements ...

Peter Fawcett
Regulators cracking down on outsourcers
Comment: How to make sure you're protected

Steve Boyle
Does Obama want the US to be the new India?
Comment: Presidential candidates battle it out on outsourcing

Steve Boyle
Woolly risk analysis is hastening a housing crash
Comment: Lenders need a sane approach to avert a crisis

Carol Wheatcroft
Will consumers always want free banking?
Targeted, bundled services will be the way to profit...

Steve Boyle
Are rogue traders an inevitable evil?
Opinion: Managers must increase diligence to beat fraud

Julian Goldsmith
Profile: Nottingham Building Society head of IT Jack Cutts
'On the wide accountancy'...

Agenda Setters 2008
Welcome to the ninth annual Agenda Setters poll – silicon.com's list of the top 50 most influential individuals in the technology and IT industries, from techies and CIOs to entrepreneurs and business leaders. Find out more in our latest special report.




Quick Sitemap Links: