It's an odd day when a market sector is so messed up that it seems like a good thing that a credit card company is entering it. I hope their entry somehow improves the behavior of both companies.
(Although I note it seems it will be US only for the moment.)
Well to be fair Visa isn't responsible for some the of the crazy credit card stuff. They provide the network, fraud detection etc. Blame the lenders for the bad terms.
Visa's responsible for most of the reasons people hate PayPal.
- Visa's the reason PayPal holds sellers 100% liable for fraudulent payments.
- Visa's the reason PayPal holds funds for a minimum of 6 months if they freeze an account.
- Visa's the reason for PayPal denying an account to that "sell experiences" startup that complained on HN a week or two ago.
- Visa's the reason PayPal is so quick to freeze an account for anything resembling a risk, because Visa requires its processors stay under a ~1% chargeback ratio (in % of volume, which means far less than 1% of transactions since the fraudulent ones tend to be the bigger ones).
Sure PayPal shares some of the blame for their customer support issues, but the reasons people have to deal with support in the first place usually boil down to Visa operating regulations that PayPal's policies are built around.
Because Paypal's general annoyance factor is (likely) the path of least resistance for compliance with Visa's rules for a person-to-person payment service.
Visa sets the rules PayPal has to work under for credit card payments. Most of these issues are account-wide things, so it doesn't matter that some of the payments you get aren't funded by a credit card. If you look risky, you look risky, and there's the chance some of your future payments will be by credit card, so better shut you down. If you're shut down, some of your payments were paid by credit card, so better to have a single policy that says to hold all the funds for 6 months (the standard period to wait out future chargebacks), rather than split up your balance by payment source, etc.
No paypal isn't a bank under American law meaning they aren't regulated or have to deal with the same rules as banks - this is the reason they can do those things not because of visa.
It's not a bank in America, though it is in other countries. It's a registered money transfer agent in most states, other names in others. Regardless, banks that offer merchant accounts do the exact same things, so how would it be different if PayPal were a bank? They'd be doing the same things, stemming from the same Visa policies.
In this particular case, better late than never. I'm also relatively certain that Visa will be in a strong position to dominate the space, if only because of their brand presence.
I'd much rather get online with my Visa Card (which is hooked up directly to my bank account, as it is for many other PNC customers and, I'm guessing, customers of other banks) to transfer money to my friend than I would write him a check. On the other hand, I don't have a Paypal account, and would be unlikely to want to screw with it.
I think there will be a lot of people who see this like I do.
Well, 10 years ago paypal was 3 years old and the space was very far from proven.
Person-to-person payments still suck. I don't want to use paypal thanks in part to the stories about them freezing funds with no recourse but also because it's yet another account to manage.
Visa on the other hand has a huge established base and if they can make it easy (send x$ to CC No XXXX-XXXX-XXXX-XXXX? and that's it) I would definitely use it.
And since Visa is huge and has partnerships everywhere if this takes off in the slightest Mastercard will jump on board and suddenly nearly everyone with a credit card can accept payments from each other. Paypal's revenue will take a good hit for sure.
Big companies, especially in the financial sector, don't hop into a new market until it's both stable and large enough to make it worth their while. Person-to-person has now been proven to be big and viable by Paypal so the CC companies are right on schedule to try to muscle their way in and eat Paypal's lunch.
I just moved to the UK from the US. The concept of sending people money via PayPal is more or less non-existent within the country. Why? Because you just get someone's bank details and transfer the money. I pay all of my bills via bank transfer. Oh, and it's free. It astounds me how easy it is to do. From Barclay's to HSBC for example (I pay my flatmate this way) it transfers it almost in a few hours.
Why can't the US do this? Too much money in it for the banks?
They can, they just charge an arm and a leg for it and make you go through a big hoop and dance to actually use it. Wire transfers cost $20-$40 for each transaction (And usually are associated with systems with such names as "Large Value Transfer System (LVTS)". ACH is usually only allowed with accounts you can prove ownership with and they charge for pushing money into another external account, but usually not for pulling money. Even then they hold the funds for 3-4 business days. It's cheaper and faster to just order paper checks, write them down, give it to a teller or ABM to take the check to deposit into your account than to use ACH or wire transfers. It's even worse in canada. At least US banks have ACH transfers and wire transfers available on their online banking websites! The closest thing is Interac e-transfer. I think it just comes down to liability and fraud risk exposure. A guy who knows your password can clean you out.
Some banks have had this ability even in credit for a long while. The reason it has taken so long for the likes of VISA to join the crowd is the ironing out of issues like money laundering.
The motto? Seriously, the motto? Man, if only Bill Gates had known this he could have avoided the monopoly trials just by creating a stupid motto. He probably didn't bother because he probably never imagined anyone would be naive enough to buy it...
1. PayPal doesn't have a corporate motto of "Don't be evil"
If you think Google wont do bad stuff because of a good PR-stunt, my personal motto is also "Don't be evil" and boy do I have a bridge to sell you.
You may be affiliated with Google trough some of your former projects and don't want to think you are part of something bad, I don't know.
But as an end-user who only sees Google's complete dominance all over the web, as the company who now anonymizes search/keyword-data for site-owners, unless you deploy Google Analytics and further increases Google's grip on the web, etc etc, I see a big beast who could go monster overnight with the rest of the internet powerless to stop it.
Google may not be evil now, but being OK with the power they wield just because they aren't abusing that power is something I cannot be content with. A silly "Don't be evil" motto isn't going to change that.
I'll welcome good options anywhere I can find them, and I don't use Google's products for anything I can't replace with something else. Having another non-Google option in the Android market would be very much welcomed. Especially considering Google Checkout's extremely poor track-record.
Not to mention the fact that even if, against all odds, Larry and Serge truly are completely benevolent they aren't going to live forever. At some point they'll get bored and leave or get old and die. Then the next guy will step into a company that owns most of the web...
(Although I note it seems it will be US only for the moment.)