[thelist] OT: e-commerce PayPal - And another question on top of that :)

Keith cache at dowebscentral.com
Fri May 10 21:22:01 CDT 2002

At 03:16 PM Thursday 5/9/02, Martin wrote:

>PayPal never was a bank. In a way they are reinventing basic banking
>>concepts in web terms, while the banking community hasn't done anything
>>more than bolt the web up to their 1960's banking concepts.
>However, they are conducting banking business, therefore

That's a pretty broad assumption. If you look at PayPal's business model
and practices closely it's arguable whether they could even get a bank
charter under Calif law, they don't qualify as a bank anymore than Discover
Card does. PayPal's business is more similar to the companies that operate
the ATM network than to banking.

If I take money out of an ATM machine and hand it to you to buy a watch and
the watch doesn't work, can I blame the company that operates the ATM
machine? How is PayPal different if I instruct them acquire my funds from
my banking instrument (account or credit card) and deliver the funds to you
for that same watch?

Banks are involved in lots of activities that are not officially banking
activities that are similar to PayPal's. That doesn't make PayPal a bank.
PayPal, on the other hand doesn't engage in any fundament banking
activities - can I get a loan from them, no; can I borrow money from them
that is actually someone else's money on deposit, no; can I deposit money
and earn interest on my balance, no (I can have PayPal deposit my PayPal
account in an account with Barclays Global Investors, but not in PayPal).
They offer a PayPal credit card, so does my church. Where's the basic
banking activity?

The problem is when people think they are handing their money to a
"merchant" rather than an individual. PayPal is not a consumer-to-merchant
transaction, it is a person-to-person transaction. But, to PayPal's credit,
they have stepped in as referee. If you take money from people and don't
deliver what you said you would, PayPal cuts you off and returns the money.
In that respect they do exactly what MasterCard would have done to a
"merchant". But, take a look at Western Union's BidPay or some of the other
person-to-person transfer methods available at eBay. If the seller sends
you nothing, you're screwed, just as screwed as if you'd handed over cash
in person. When I see a seller at eBay that doesn't offer PayPal I know
I've got a seller that doesn't want to be held accountable or fail the
basic test when they were held accountable.


cache at dowebscentral.com

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