Books written by Ray Sullivan

Friday, 24 May 2013

Google Targets PayPal

PayPal is probably the most inspired half hour's work anyone has ever done on the internet.  Of course, without its older sibling, eBay, it would never have happened, or if it had it would have been in serious competition.  But it grew out of a need to service the burgeoning eBay as it grew from a niche website into a global phenomenon and the users needed a safe way to pay each other.  What the PayPal team come up with is what is called an escrow account, a neutral place where the buyer can lodge a sum of money pending receipt of goods bought.  The seller only gets his or her money once the transaction is complete.

It grew quickly because nobody else thought to build a system like it at the time.  The big banks were making lots of money on dodgy deals that eventually turned sour and they had to be bailed out by their local governments, or you and me as I like to think of them.  Not all banks needed bailing out - quite a few managed to limp through the credit crunch and some just rolled over.  I don't think I ever heard any suggestion that the bank that calls itself PayPal had to rattle a cap near a government.

Of course PayPal doesn't have conventional current accounts although you can lodge money in there earning zero interest if you want.  If that sounds familiar, it's probably because your present current account pays pretty much the same as PayPal.  However your current account probably provides you with a cheque book to make payments from and I'm not sure PayPal does that.  I'm not sure they'd want to either, given that it's an antiquated payment method put into shadow by PayPal's instant payment methods.  You can pay bills and automate regular payments through your normal bank account and this is probably an area PayPal doesn't compete in - yet.

Because they're solvent, international, uninhibited by national boundaries and have a branch on every laptop, mobile phone and iPad I suspect that many of us find ourselves using PayPal for more than paying for bargains we've won on eBay.  Many do so already as many on-line traders already accept PayPal for what could be considered normal transactions without an eBay presence and I've noticed a plethora of local shops that accept PayPal payments so that kids can convert their paper round wages into internet trading vouchers without the need of involving a national bank.  In fact I wouldn't be surprised to find that some people had their weekly wage paid into PayPal right now and in fact, for those who would struggle to open a conventional bank account, PayPal is probably a good option as it doesn't allow you to overdraw, a reason why some people can't obtain a conventional bank account.

In fact, some of us do have a portion of our wages paid into PayPal already.  Many international authors using Smashwords, which funnels all the payments made into Apple, Sony, Barnes & Noble, Kobo and so on pays us authors via PayPal, or at least most of us. 

Now there is a rule that suggests you can't have a Coca Cola without a Pepsi; it's a rule that market forces insist on eventually but one that PayPal have managed to avoid for some time.  It looks like the challenge is on its way, though.  Obviously the mainstream banks are still a bit tarnished with the credit crunch and will struggle to persuade consumers to move from PayPal and into their arms, but of course the new giants aren't from the financial sector but are the tech companies.

Google, a company that does appear to have the requisite solvency to challenge PayPal, is having a go.  In fact they've been doing this in the US for a while, but they are moving into the UK now with a service called Checkout.  It works much like PayPal - why try to fix something the isn't broke? - and it's for on-line payments.  There's an uphill battle in store for Google - most of us have a PayPal account because we've dabbled in eBay in the past and these accounts already exist.  As PayPal has rolled out more usability then we've moved with them.  We're going to need a compelling reason to sign up for Checkout, and I guess eBay won't be nudging us towards them.

But competition is usually a good thing, so it will be interesting to watch what happens with Google Checkout.  I can't see how they can make the process cheaper or easier, and of course forcing people using Google Play to use their service is commercial suicide, so the only way is up.  Perhaps we can look forward to getting some interest on money lodged in these accounts or maybe they'll move into the mortgage business?  Whatever they do, it's likely to benefit the consumer.


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