By Dan Ilett, 15 September 2005 14:25
NEWS
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Avivah Litan, a research director at Gartner, writes that retailers should embrace PayPal services rather than use "outdated" payment methods.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."
Comments
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1. anonymous too
What rubbish: How do you think PayPal gets the money into your PayPal account? It takes it from your credit card. Then PayPal charges you a transaction fee every time you spend the money - remember this is your money that you have effectively given PayPal as an interest free loan - so it does exactly what a CC or bank does. In fact it's worse, you may even get an additional charge if you buy internationally (oh those PayPal exchange rates).
The only way to save money would be to allow PayPal to have access to your bank account (which they want)- what fool would do that? Who would give another company carte blanche to DD their current account. Remember, PayPal isn’t governed by any code of banking practice, and it’s disclaimers and liabilities are well worth read if you wish to learn how not to be accountable for anything.
Hmm, I wonder who commissioned Gartner for that piece of PR?
2. Geoffrey Darnton
...economics will prevail ..... PayPal charges are high .... just look at the large number of complaints about it on eBay and the number of sellers unwilling to accept PayPal because of it.... and at the moment PayPal can enjoy excessive profits nearing monopoly profits - but transaction costs are now incredibly small ... so those profits will get competed away ... now online payment costs should be approaching mobile phone transaction costs which are incredibly low. The market needs competition here. Anybody know if a company like PayPal needs a special regulatory licence to trade here by keeping deposited money, and if so do they have one? - and to operate a banking service what about implementation of the anti-money laundering regulations before an account can be set up?
3. anonymous
PayPal does not understand the concept of customer service. They have records to show that they "accidentally" paid twice from my account for one of my online purchases and they refuse to correct their error, leaving my account negative and having the gall to demand that I pay and report ME for bad credit for THEIR error!
They will be hearing from an attorney on my behalf soon.
I sincerely hope PayPal doesn't become a one-world money system. We're lost at their tender mercies.
4. karlheinz
In the UK at least PayPal is regulated by the FSA. I can speak from personal experience that they do investigate potential money laundering.