So PayPal are going to start utilising Crypto?
In a post I wrote a few months ago I almost anticipated this happening when I argued that Crypto would be a serious threat to PayPal’s business model and it appears that PayPal now have come to an if you can’t beat them join them kind of understanding.
Many people in the community have picked up on this story and there are quite a number of posts floating around on the subject so I have deliberately not read any of them yet as I want my thoughts to be as uncontaminated and original as possible and want to reference my own thoughts on this from the aforementioned post of a few months ago. This is not a technical analysis, rather it is a business perspective.
For a long time PayPal held sway over internet trade. The alliance of Ebay with them was formidable and for a long time seemed to be the only model, which others have mimicked and followed. However, this is a bit like when banks offer international transactions for which until recent times they held the monopoly. Fees were high, but you can’t say uncompetitive because there was no competition. Ironically it was innovators like PayPal that challenged this and now through such agencies as TransferGo and TransferWise PayPal’s model has come under threat.
Please note I am not reviewing, endorsing or commenting in any way shape or form on the services offered by TransferGo and TransferWise.
In my original article I proposed that DAI should become the go to currency for international transactions and I have also, in fairly advanced negotiations with a client, developed a roadmap (which I am currently keeping under wraps as I may be able to monetise it later 😉 ). The solution works for both parties in terms of receiving the money and saving costs
The basic reason why PayPal’s model needs challenging is because it is so expensive. Citing the data provided in the previous article I regularly receive a payment from a client for £180 less PayPal which leaves me with approximately £171 with PayPal taking the other £9.00. This does not even seem to fit their declared charges and amounts to a whopping 5%. Here is a sample transaction with personal data redacted:
Putting it very simply this could all be replaced with a wallet to wallet transfer of a stablecoin; and it would have to be a stablecoin, because one time the client may find themselves paying £50 and the next time £300 when loading their wallet. My personal preference has always been DAI rather than another like USDT or Tether for reasons previously outlined.
I haven’t read around the subject for the reasons I described above – as I wanted a purity of thought to come across in my perspective - so I am not sure exactly what PayPal’s plan is. Of course it may just be possible that they intend to introduce their own native token so they can use it for wallet to wallet transfers and thus reduces costs (allowing for gas fees of course).
Whatever it does mean, whether PayPal has to reduce its fees or is supplanted by such a coin as DAI, it has to be good news for the end user – and at the end of the day that is all that really matters.
Personally I would love to see DAI emerge, the only possible issue it really faces with it being an Ethereum based token is to avoid gas fees such as those experienced by Ethereum in the late summer of 2020. Whatever the situation I am confident that the fees will still remain lower than those fees offered by PayPal’s current operating model.
I find it very interesting that I had already anticipated this while very much at the beginning of my learning cycle and now it is beginning to happen. Such was my knowledge at the time that I originally mistakenly thought too that BAT was a stablecoin. I have left the original article unchanged as it is a good indicator of my evolution and increasing knowledge of the crypto world.
Stay safe and stay well and have a fantastic weekend