The “love and hate relationship” of PayPal with cryptocurrencies has been lasting for long. As one of the world’s leading platform to send money online, PayPal, today, faces serious competition with the rise of Bitcoin and other major cryptocurrencies.
Founded in 1998 in California by Peter Thiel and Elon Musk, PayPal is a worldwide organization that supports online money transfers.
Thanks to a solid partnership with the multinational e-commerce company eBay, PayPal rose to stardom since the platform got accepted by most merchants on the Internet. PayPal registered a record number of users in 2018, according to Time with 179 million active accounts.
How can large cryptocurrencies such as Bitcoin compete with PayPal today? What is the plan of PayPal with regards to cryptocurrencies?
Blockchain, cryptocurrencies, lower fees for faster transactions: are such trends worrying PayPal?
Indeed, one of the benefits of blockchain-based cryptocurrencies such as Bitcoin is the possibility to send online payments at a low cost in a fast and timely manner—that is to say, Bitcoin acts as a PayPal’s competitor, and even more: with Blockchain technology, transactions are done transparently, efficiently, and fastly and at a limited fee than traditional banks or alternatives such as PayPal.
Currently, there’s no fee to use PayPal to buy goods or services. Having an account on PayPal is also free. But that stops here. Receiving money on PayPal is charged up to 2.9% of the amount of the transaction plus USD 0.30 of the amount received. These fees may intimidate users in the long-term, even though PayPal benefits from a large user base across the world, as stated above.
PayPal’s founders are well aware of the impact cryptocurrencies may have on PayPal. This is why, today, PayPal’s final direction toward cryptocurrencies is unclear although the company seems to explore cryptocurrency a bit further. Indeed, PayPal recently filed a new patent application for an “expedited virtual currency transaction system” with the US Patent and Trademark Office. Clearly, today PayPal is lurking at the world of cryptocurrencies with eyes large open.
PayPal still boasts a number of benefits to buying online
Even though cryptocurrencies are gaining popularity, they remain a novelty for most people while PayPal has been widely adopted around the world. Furthermore, PayPal offers various advantages when buying online which gathered users’ trust such as credit card security for online transactions. PayPal stores privately credit card information, which means when paying via PayPal, users don’t release their credit card or bank account information anymore.
Acting as an “all in one” digital wallet that stores multiple cards information further provides flexibility to users when paying online. Instant money sending is another great PayPal feature that enables families or organizations from all around the world to send payments without going to a bank or using Western Union. PayPal also provides perks and discounts to users who shop at selected shops online, nurturing its customers.
PayPal and its views on Blockchain and Cryptocurrencies
Nonetheless, PayPal has been looking at cryptocurrencies as a means to beat the future competition. While PayPal’s co-founders and founders are Blockchain enthusiasts, they are still unsure about Bitcoin and other major cryptocurrencies, as stated publicly. Indeed, Max Levchin mentioned his drive for Blockchain technology but reluctance over Bitcoin: “It’s a brilliant mathematical idea, fantastic technology, an interesting commodity to speculate on. TBD on whether it’s a currency or just a way to make money fast. I invest in things that I have a strong, long-term point of view on and Bitcoin I’m still trying to figure out.”
Peter Thiel’s love for cryptocurrencies and Bitcoin has proved PayPal’s failure in becoming a new online currency, regrets the founder. Earlier this year, reports have shown the billionaire bought $15 to $20million worth of Bitcoin through The Funders Funds, a venture capital firm that funded Airbnb in the past. PayPal’s founder mentioned Bitcoin could be compared to gold in the long term as a store value over a digital currency.
Whether Bitcoin and large cryptocurrencies such as Ethereum or LiteCoin may beat PayPal in a near future is still uncertain. However, PayPal’s recent policy changes that may charge users more when sending money, or the recent accusations that the worldwide payment company may be used by money launderers, could damage PayPal’s good image in customer’s mind. In the meantime, Bitcoin adoption and trade is rising all around the world, no matter the crash early this year. With the success of cryptocurrencies, buying for goods or services could change PayPal’s leading position as a digital payment provider sooner than we think.
Also published on Medium.