How PayPal could leverage Bitcoin

[amincd]

Many have said that Bitcoin is of no use to PayPal, and only threatens it, because Bitcoin's payment system solves the problem of online transactions better than the PayPal model. I disagree. I think Bitcoin poses the biggest business threat to Visa, not PayPal, and that the latter, being a technology company, can leverage Bitcoin to expand its market reach.

Expanding merchant base

The main problem with PayPal is that it's not merchant friendly. Consumers love it, because they can chargeback a payment if they don't receive a product from a merchant, and fees are reasonably low, but merchants have to worry about fraudulent chargebacks. If the product that the merchant provides is one that is not shipped, because it's digital or a service, then it is difficult, if not impossible, to prove delivery to the customer, meaning the customer will almost always win the dispute.

Due to this limitation, there are many merchants that cannot accept PayPal. Those who sell bitcoin are a case in point.

PayPal could get around this by offering its customers a new option: to pay with bitcoin. By allowing PayPal users to make standard Bitcoin payments, PayPal would immediately be able to reach every merchant in the world, regardless of the risk of fraud and chargeback in their industry or region.

How it could work is that when a PayPal user wants to pay with bitcoin, national currency in their account would automatically be converted to BTC, and sent to the merchant. PayPal could charge a 1% conversion fee, and make money from the process in this way.

PayPal buyers would gain from being able to hold their money in more stable national currencies, and purchase BTC only when they need it. PayPal already has tens, if not hundreds of millions of people who have connected their bank accounts to their PayPal accounts, positioning them to make conversion from fiat -> BTC extremely easy for a large number of people.

This would make PayPal accounts more useful to buyers, give PayPal a new source of revenue, and greatly expand the number of merchants that can easily accept online payments.

[dhenson]

You have a good point and that is a valid use case for Paypal/Bitcoin.  The problem is that effectively each and every Paypal => Bitcoin => Merchant purchase will almost immediately be converted to fiat.  That conversion to fiat will tank the USD exchange rate of bitcoin as each sale is effectively a market sell order.

I'm all for wider adoption, but our exchanges don't have the liquidity to handle this without killing the price of bitcoin.  Unless I'm missing something.

[amincd]

The problem is that effectively each and every Paypal => Bitcoin => Merchant purchase will almost immediately be converted to fiat.

Why would it be converted to fiat? The merchant can do what they want with the bitcoin. I'm not suggesting that PayPal become a Bitcoin payment processor that converts BTC received by merchants to fiat. The conversion only happens at one end: the fiat in the buyer's PayPal account is converted to BTC and then transferred to a merchant's bitcoin address.

[glub0x]

You have a good point and that is a valid use case for Paypal/Bitcoin.  The problem is that effectively each and every Paypal => Bitcoin => Merchant purchase will almost immediately be converted to fiat.  That conversion to fiat will tank the USD exchange rate of bitcoin as each sale is effectively a market sell order.

I'm all for wider adoption, but our exchanges don't have the liquidity to handle this without killing the price of bitcoin.  Unless I'm missing something.

I'm not so sure of that.
Loads of poeple would see bitcoin and probably buy to try (at least)
And paypal would have a buying mechanism, it would be simple for them to set up. easy income for them.
anyway won't happen...

[berrycorp]

essentially you are saying paypal should do what bitpay and coinbase are doing.

Honestly I would love to see that happen BUT the problem is paypal is owned by ebay and that means all the bureaucracy that exists in big companies exist there. Had that not been the case paypal would have launched a square competitor YEARS ago!

I'd rather have the square guys start accepting bitcoin. I expect innovation from them a lot more than paypal and they are as big!

[tclo]

Paypal will never help Bitcoin gain more widespread acceptance.  Bitcoin is their competition and even if they publicly say they are considering using it in their system (which many gullible people believed and took at face value), it just won't happen.

Paypal has a near monopoly in their market and has monopolistic pricing and they are going to protect that however they need to.  They sure aren't going to help Bitcoin, which could hurt them in the long run.

[IIOII]

Paypal will never help Bitcoin gain more widespread acceptance.  Bitcoin is their competition and even if they publicly say they are considering using it in their system (which many gullible people believed and took at face value), it just won't happen.

Paypal has a near monopoly in their market and has monopolistic pricing and they are going to protect that however they need to.  They sure aren't going to help Bitcoin, which could hurt them in the long run.

This.

Bitcoin is here to replace PayPal.

[LiteCoinGuy]

its a nice idea and i guess it would help bitcoin alot. maybe in the future we will see that paypal accepts bitcoin like you wrote. they are already watching it.

[yaffare]

The best thing would be, if paypal introduces anonymous, non-chargeback accounts.

Everybody can create such accounts and fill them with up to 500$ per account with bitcoin.
Merchants could then decide to only accept "Paypal anon", to be on the safe side with no chargeback.

[TippingPoint]

Paypal will never help Bitcoin gain more widespread acceptance.  Bitcoin is their competition and even if they publicly say they are considering using it in their system (which many gullible people believed and took at face value), it just won't happen.

Paypal has a near monopoly in their market and has monopolistic pricing and they are going to protect that however they need to.  They sure aren't going to help Bitcoin, which could hurt them in the long run.

This.

Bitcoin is here to replace PayPal.

Yes.  As Bitcoin grows, PayPal dies.  They know this.

And PayPal is the reason that Wikipedia does not accept Bitcoin.

[lunarboy]

Paypal will never help Bitcoin gain more widespread acceptance.  Bitcoin is their competition and even if they publicly say they are considering using it in their system (which many gullible people believed and took at face value), it just won't happen.

Paypal has a near monopoly in their market and has monopolistic pricing and they are going to protect that however they need to.  They sure aren't going to help Bitcoin, which could hurt them in the long run.

Offering zero risk of chargeback fraud to services and people who previously were not eligible to use paypal, thus massively increasing their userbase, is hardly damaging their business model. This action would only go to improve their market share and hedge against further (and inevitable) use of digital currencies.

Paypal have one and only one chance to win from the bitcoin competition, and that is to adapt and intertwine it alongside their current system before it is too late and one of their competitors does it first.

End of story 

[monbux]

The main problem with PayPal is that it's not merchant friendly. Consumers love it, because they can chargeback a payment if they don't receive a product from a merchant, and fees are reasonably low, but merchants have to worry about fraudulent chargebacks. If the product that the merchant provides is one that is not shipped, because it's digital or a service, then it is difficult, if not impossible, to prove delivery to the customer, meaning the customer will almost always win the dispute.

So true, I've lost hundreds of dollars with chargebacks.  This is a great feature, but I don't know if buyers appreciate sending the payment and with no possibility of getting it back   Unless paypal was to add a whole new level of bitcoin payments...

[Jace]

And PayPal is the reason that Wikipedia does not accept Bitcoin.

How is that?

[biggie]

The problem with paypal is that they always want to play "safe", especially for being a u.s company. Just take for example the donations to Wikileaks or others where instead of simply doing their job by getting a donation from A to B they get involved in politics.

[QuantPlus]

PayPal does 5,000,000 transactions/day for average fee $3.50...
Bitcoin does 1% of that with mostly junk transactions like retarded dice games.

Do the math.

[amincd]

PayPal is essentially an online bank. It farms out the actual holding of deposits to registered banks, but, like a bank, its main asset is the funds which it controls on behalf of its users. These deposits allow it to guarantee payment to merchants without effecting an inter-bank transfer. Internal transfers are cheaper than and not subject to the geographical limitations of transfers that occur through the banking system, giving PayPal an advantage in ecommerce payments.

Bitcoin could allow PayPal to expand its role as an online bank. By giving its users even more parties they can make payments to, the value of depositing funds to a PayPal account increases. More funds in PayPal accounts means a greater number of transactions, which means more revenues and a more valuable payment network for PayPal, so it's a win-win.

I don't doubt that they see it as competition, but they might also see a potential opportunity to grow their revenues by reaching more buyers and sellers. Also, if they conclude that peer-to-peer digital currency is inevitable, they may prefer to take the lead in integrating Bitcoin into their site, rather than waiting for a competitor to do so first and gain a market advantage over them.

Anyway, this is just food for thought. No one knows what PayPal will do or what their management is really thinking, but it doesn't hurt to share thoughts on how they could integrate it into their service.

Offering zero risk of chargeback fraud to services and people who previously were not eligible to use paypal, thus massively increasing their userbase, is hardly damaging their business model. This action would only go to improve their market share and hedge against further (and inevitable) use of digital currencies.

Paypal have one and only one chance to win from the bitcoin competition, and that is to adapt and intertwine it alongside their current system before it is too late and one of their competitors does it first.

End of story  

+1

The problem with paypal is that they always want to play "safe", especially for being a u.s company. Just take for example the donations to Wikileaks or others where instead of simply doing their job by getting a donation from A to B they get involved in politics.

Good point.

[Epicurus]

Paypal will never help Bitcoin gain more widespread acceptance.  Bitcoin is their competition and even if they publicly say they are considering using it in their system (which many gullible people believed and took at face value), it just won't happen.

Paypal has a near monopoly in their market and has monopolistic pricing and they are going to protect that however they need to.  They sure aren't going to help Bitcoin, which could hurt them in the long run.

This.

Bitcoin is here to replace PayPal.

Then you don't understand what Paypal does very well.

Paypal is a layer on top of the fiat currencies of the world, to help people transfer those currencies to each other. Paypal is not a currency.

Bitcoin is just another type of currency, and if gets to the point where there's any kind of mass adoption of it, Paypal will certainly be happy to help people transfer bitcoin with fraud protection for consumers layered on top.

[Zangelbert Bingledack]

I find it basically indisputable that PayPal could streamline its business in quite a few ways by adopting Bitcoin. The only question in my mind is how much that corporate meme of adopting new technology "threats" rather than trying to squash them has really taken root.

The fact that PayPal has mentioned Bitcoin and talked about using it makes me think they are considering it through the former lens. Probably the bottleneck at this point is that there's no guarantee from their perspective that Bitcoin will last and not fail somehow. That possibility brings the business proposition toward the more tenuous "let's do this as a learning experience because we'd like to be at the forefront of cryptocurrency when it fully arrives." I'd like to believe that PayPal is that forward-thinking, but who knows. Maybe next year when Bitcoin is more established.

I also think Western Union might get there first.

[data_teks]

I don't think it's a money thing in regards to bitcoin for Paypal at the moment.  Probably more of a PR move not to deal with Bitcoin at the moment because of all the bad press that comes out about bitcoin and illegal activities.

Paypal is well established and it's just better to keep themselves separated from bad press. They could lose corporate accounts that bring in way more money than bitcoin ever would.

[lallali0101]

Actually I came across a very  interesting site which offer the ability  of buying bitcoin via paypal , they also have gift cards  the company is called Prepaid Bitcoin.
Also you could  pay for bitcoin via credit card all those features you  could found theme hear www.prepaidbitco.in .