Why PayPal Will Not Succeed In Crypto Space!
It has been over a year since PayPal has shown interest in getting involved in crypto space. This ambition has been welcomed by many in crypto world. It is always great to see globally recognized brands realizing the power of crypto and taking active steps to participate one way or the other. PayPal made it possible purchases of crypto, sending and receiving crypto on their platform. It even started its own stable coin. Now in the latest news I have read that PayPal applied for NFT marketplace patent for on/off chain asset trading. This pivot in business is interesting, however more I think about it more I realize that PayPal won't be able to succeed in crypto. Let me explain why.
PayPal was revolutionary innovation. It is still a great tool. Something that may seem very simple today, it was revolutionary when they came up with a system of allowing online payment with only using email, without revealing financial information to everybody. It has been simple to use, and it just worked. It still does. PayPal is not a bank, and never wanted to become one. It found it niche and dominated the online payments. It brought merchants and customers together. Many still use it today, and it probably is not going away anytime soon. However, in a long run PayPal may not be around in a five to ten years. Crypto solutions not only offer better payment system, but they are in direct competition with PayPal. Even without the threat of crypto taking away the market share, there are a lot more competition in online payments today. Apple Pay, Google Pay, Venmo, Cash App, soon X-pay, etc. There is plenty of competition in traditional payments already.
I do like when companies realize where the future is heading, keep up-to-date with technological innovations and how they may impact their business in the future. Most importantly it is great to see companies to be able to pivot at the right moment and lead their core businesses into the future. I have no doubt crypto will dominate payments in the future. There are so many solutions that are much better than traditional systems in many ways: speed of transfers, fees, transparency, security, efficiency, etc. But how would a traditional payments platform pivot into crypto? They answer is different for different entities. There is a different answer for banks, different answers for card payments, and also different answer for PayPal. PayPal is not a bank. It partners with banks to make transfers to happen. PayPal's revenue model heavily relies on transfer fees. It charges both merchants and their customers transfer fees. It has revenue in tens of billions, and profits in billions. If any pivot involved lowering transfer fees or removing them completely, PayPal won't be able to generate revenue, and maybe even won't be able to operate. That's the only crypto path I can think of for PayPal may not even work.
There is a crypto path for PayPal. But it involves strong conviction in what crypto truly represents. Embracing the technology and revolution. However, what PayPal seems to be doing is trying to have both traditional payments and offer crypto services. The two complete opposite of each other, and would undermine each other. Let's take a look how crypto could transform PayPal as a superior payments system. The company has developed good relationship with banks and understands how traditional systems work. PayPal's original vision was making online payments effortless, while providing the security. The same model can be implemented utilizing better payments technology, crypto. People would still be able to use USD or local currency for transfers. However, backend technology would utilize decentralized blockchains like bitcoin, litecoin, hive, etc. They can even utilize stablecoins if they choose to. There are many options that offer speedy transfers that doesn't rely on slow motions banks. There are feeless transfer blockchain that Hive that can power the backend tech as well. Utilizing Hive's HBD would probably benefit PayPal the most, as it would easily be able to translate into USD. But it can be anything, it can be low fee lightning network, or low fee litecoin.
PayPal can still charge fees, but they would have to lower their fees significantly. I believe they would be able to lower these fees, because they wouldn't be using banks that often. There is still need for banks, because PayPal users would want to deposit or withdraw fiat. If I am a frequent PayPal user, they can offer me one time fee for depositing few hundred dollars, and super low fees for all transfers afterwards. Once the money is deposited, they would be dealing with the banks. In the backend they can use stablecoin or other crypto for transfers. They can also lower bank deposits and withdrawals too, since it wouldn't cost them much either. As long as they know the user is return customers and has built relationship with the platform, it would present any risks for them either. While bank deposits take days, they can still credit the account for instant use of funds.
Usually merchants are the ones who pay most fees. Lowering transfer fees and even removing them for merchants would help PayPal to continue build strong merchant relations, and retain them on the platform for a very long time. Merchants would be happy to pay lower fees than choosing new alternatives that may offer zero fees. This would also allow merchants lower their prices for their products and services, and make marketplaces that utilize PayPal more attractive. Such pivot would definitely cost PayPal. It would lose revenue in a short term. The only way they would be able to regain current levels of revenue or even more is only with much more transactions. Which is possible, but risky. This is one of the reasons PayPal would never make such changes. Even if they wanted to as a company, stakeholders and board would veto such actions. That's why PayPal will never be able to fully utilize the crypto technology, and transform itself into a viable crypto company.
More and more competition will continue emerging, and PayPal has a lot of work to do to protect its market share. It is trusted payments platform, and globally recognized brand. It will be used for a while. But I think there will come a time, it will be no more. Because there will be newer companies who will be able to embrace PayPal's original vision and implement it is utilizing more sophisticated payments systems like bitcoin, litecoin, ethereum, hive, etc. In the meantime, PayPal can continue generating revenue and experimenting with crypto.
But PayPal crypto transfer fee seems high to me. This can also be a reason. You speak beautifully about this.
I don't like the high fees and I hope they suffer when other options show up. There is a lot of space for competition to happen and I honestly don't like Paypal that much because it is centralized. I have heard a lot of stories where Paypal just canceled people's accounts and issues there.
That is true. They do cancel accounts. That's another anti-crypto habit they have.
There are a lot of reasons, terrible tech support, commissions that are huge compared to other services (even binance beats it nowadays) and above all some of the worst consumer policies I have ever had to put up with, I have had two paypal accounts to receive money from freelance jobs and both times they have been blocked for some stupid reason
Yes, their customer service is not the best.
It's safe to say that they are in it for the money and not the higher principles :/
Aren't they all?
In a capitalistic environment it's the only logical thing to do as a corporation. But there are some exceptions that think of the human side as well. Probably safe to say that freedom etc. is never going to come from the big players and will always be a grass root effort
In my country, no one uses paypal to pay cryptocurency. Fees are quite high
Their transfer fees are always high and reducing that considerably will affect PayPal's bottom line, especially when crypto payments become more frequent or mainstream. PayPal is also an intermediary, which is not really needed in crypto.
You are right, crypto does peer-to-peer best, no need for third parties.
They may in the future review their modus operandi, reshape their weakness and do some collaboration to bounce up
Probably not, but they may try.
Unfortunately, Paypal is banned in my country so I can't use any feature of it.
Why is it banned?
Their licence application was rejected since Paypal couldn't control the money flow as to authorities.
So many restrictions PayPal is dealing with which they really need to overcome if they want to go far
Nice article, deep knowledge, like always. I have a comment. That paypal was adopted by the masses, they only add one extra option of crypto. In the view of user experience this is it, right?
I haven't used their crypto feature, although I have used paypal for a long time.
What I realized is paypal crypto services are only on personal accounts, and not available for business accounts.
In short term, what they are doing may work and reward them and their users. But in long term, I don't think they would survive.
lik say the other paypay has high fees, for example if i get 50 dollars from i client i have 2 ways buy something with the money in the paypay wallet or sell it to another paypay user and get ARS, usually i do the second but that people buy my usd for less than the market value 1usd = 500 ARS when the actual black and international market has 1 usd = 750 ARS, i am losing a lot :( In resume Paypal nees chances but is not benefiting the user
Interesting analysis.
Provider that can offer the least friction (time delays, and transaction fees) will likely percolate to the top. Paypal could offer a low fee seamless crypto exchange with a broader selection of resources - if they wanted to. Their potential volume would mean an immense revenue stream.
Paypal spends approximately a $1,000,000 USD a year on lobbying - expect that to increase. My intuition is that large corporate Payment processors will leverage US Congress to create legislation that will effectively make it difficult to convert some forms of Crypto to Fiat or to spend it via normal means - corporate exchanges will create a walled garden.
You can review Paypal's Financials and SEC filings here:
https://investor.pypl.com/financials/quarterly-results/default.aspx
Compared to their profits, that lobbying expense doesn't seem to be a lot.
In the end decentralized money will win, and there is nothing Congress can really do about it.
Anything they do will just slow it down.
Interesting conclusion, but wasn't PayPal also a bit not so keen on crypto, so to put it? For example, for issuing receipts, some crypto-related terms are not allowed there (or were not allowed in the past at least, I don't know what's the situation anymore). Do you happen to know more about this? All the best and plenty of success here on HIVE!
No, I don't remember PayPal making any anti-crypto statements or actions.
I wouldn't be surprised though.
That's why I got to experience in terms of a guest post for example which contained cryptocurrency-based keywords. I later found out that I couldn't send the receipt via PayPal to one of my former clients because PayPal was not so keen about those keywords and wouldn't let me send the receipt because of the keywords inserted in the description. But perhaps things have changed now... All the best and plenty of success here on HIVE!
PayPal has provided a considerable financial service to the masses. Though the fees are high, most times the stressless policy they employ makes people keep going with them.
At the same time, crypto has just pop up and the huge financial benefits it carries are just beaming in. Maybe when many people flog into the crypto space, things might be difficult for PayPal and even banks. Decentralization offers transparency and minimal fees in transactions. Will PayPal and banks really be able to fit into this? Let wait for time.
PayPal's entry into the crypto space was a significant move, but its a big challenge in adapting to this new landscape. They must work on great strategies about the fees.
I would have loved PayPal aside from the fact that it is not accepted in my country but another thing is the way they suspend people's accounts
It is sick
Bueno desde mi opinión PayPal es muy complicado, yo aquí en Venezuela casi ni lo uso por las altas comisiones..
I think its not easy to set on new place but struggle is the only key to prove your Self..
PayPal became an unreliable platform for several years because it established a system that it could not monitor and such a system was abused by thieves and it happened that the thief took advantage of the standard user of the PayPal system.
A small player like me can attest to the superiority of the crypto payment system. Yes, I love its speed, low fees, transparency, security, and efficiency. Curious if PayPal will consider such a potential crypto path embracing decentralized blockchains like Hive. Who knows? Once they feel the pain of losing to their competitors, they might reconsider such a path.
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Hi, Paypal may surprise us and find the formula to stay in the race, nice post.👍👍👍