
Ask HN: Why does Paypal still exist? - netham91
They nearly charge 5% of the transaction on an average. Sometimes it&#x27;s more than the wire transfer charges. There has been always this promise of low cost international transactions but no one seems to  dethrone Paypal (or is it just my bias? ).<p>Extra: What goes into building a international payments service like Paypal?
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feistypharit
Because nobody else has a "buy now" button that is so simple to be plopped
onto a static site and doesn't have a monthly fee. Stripe requires a back end
and a fee. Shopify has a monthly fee. If you're doing low volume, that fee
adds up.

~~~
itake
there are a few "buy me a coffee" websites that basically act as a middle man
for stripe that take 2-3% fee.

~~~
feistypharit
On top of stripes 2.9 percent fee?

~~~
itake
These guys charge 5%, which I think includes the stripe fee, but no monthly
fees.

[https://www.buymeacoffee.com/faq](https://www.buymeacoffee.com/faq)

I have seen other people post similar products with lower fees.

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chris2brooks
Because in the "Third World" countries, PayPal may and sometimes is the only
way to get foreign payments OR it's the only supported integration in many
SAAS and apps. Many WordPress integrations has Stripe and PayPal as the only
options. I'd love to pay less than 5% but in a cruel world I'd also rather pay
5% and get global income than to settle for less and no global option.

For instance here in South Africa, Stripe is not supported. As much as I would
love to rather use Stripe it's just not an option for me unless I incorporated
my business in the US with Atlas, which brings other headaches.

As CyberFonic has mentioned, building relationships with banks and credit card
providers is a big undertaking. Which is probably why companies like Stripe
opted for an Atlas-powered alternative for unsupported countries.

~~~
muzani
In Malaysia, can confirm we use PayPal and Braintree, just because Stripe
hasn't entered. There are local startups that do payments better and cheaper,
but they're limited to the country and can't take international payment.

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geezerjay
Paypal provides an effective dispute resolution process and enables customers
to pay for stuff by explicitly authorizing a payment and without giving away
their payment info to unknown third-parties.

~~~
thcsa
I once saw a pdf which listed all the third parties that PayPal shares its
information with. It was more than 30 pages.

~~~
CharlesColeman
>> Paypal provides an effective dispute resolution process and enables
customers to pay for stuff by explicitly authorizing a payment and without
giving away their payment info to unknown third-parties.

> I once saw a pdf which listed all the third parties that PayPal shares its
> information with. It was more than 30 pages.

What kind of info do they share with those third parties?

I think the GP's point stands, since the "unknown third-part[y]" that
customers are usually _most_ concerned about is _the merchant_ , which Paypal
definitely doesn't share payment info with (like CC numbers).

~~~
n_ary
Offtopic: PayPal shares more than we think it does. I've had issues where
certain merchants asked me to confirm identity by sending copy of utility bill
for address I had on PayPal account. I thought my address is private so sent a
bill for my siblings house where I also paid the bills for internet, but they
reported that address is not same with PayPal, so I argued a bit but
eventually had to send one for correct address. I think that, PayPal doesn't
share CVV but merchants can view all personal info attached to my PayPal
account.

~~~
CharlesColeman
That doesn't seem too weird to me. Wouldn't most merchants necessarily have
your address in order to provide services to you (shipping would definitely
require it, for instance).

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CyberFonic
PayPal are enjoying the "first mover" advantage. A lot of sites allow you to
use PayPal so it becomes convenient. Personally, I am rather wary of providing
my credit card details to any random site's shopping cart.

Having said that, I don't use PayPal when transacting with parties that I
trust. In financial terms PayPal only captures about 15% or my business.

To answer your last question: It is a very large workload to establish
relationships with banks and credit card companies in order to create a viable
alternative to PayPal and then you still need to build up the user base. It
can be done, but will take considerable resources and time to accomplish.

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marssaxman
As a paypal user, the problem you describe is not my problem. Paypal is useful
for settling up among friends by transferring small amounts of money around
with minimal friction, enabling us to coordinate group activities without
needing to waste a bunch of time meeting up physically and collecting cash. I
believe that Paypal simply eats the transaction cost for such interactions in
order to keep us involved with their service, which seems fair. Additionally,
Paypal is useful for making occasional purchases from small vendors I don't
trust to maintain effective information security. The more places I enter my
billing credentials, the more likely they are to get leaked and exploited, and
then I have a hassle to deal with. I'd prefer to avoid that. I use paypal
instead so that managing these risks is their problem. They charge the vendor
a percentage, which is again reasonable because paypal's service is making it
more likely that I will be comfortable doing business with the vendor in the
first place. If paypal were not an option, a good fraction of the time I would
just choose not to make the purchase or to buy locally; taking a 5% cut on the
transaction is not unreasonable if the transaction would not otherwise be
happening and all the other parties are getting their needs met.

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ryanmercer
>They nearly charge 5% of the transaction on an average.

It's great for small business owners that aren't doing a lot of volume,
especially if you aren't running a cart system and just want to sell things on
a basic website, sell stuff like art, sell stuff in person, buy stuff from
people on reddit, ebay etc.

If you go a more traditional route you are going to have to have to apply to a
credit card merchant, cough up an up-front fee that's probably 100$ or more,
an annual fee, a per transaction set rate and then pay 2-5% of each
transaction, end up getting slammed with 25-75$ (or more) chargeback fee and
risk your rates going up if someone does a chargeback (instead of PayPal's
dispute process) etc.

PayPal friends & family gets used like crazy in my office, we're far removed
from Silicon Valley and I don't think anyone has ever even heard of Venmo
here. We use it all the time to pay each other for lunch runs.

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dirktheman
Ease of use for the end users? If you have auto login enabled in your browser
you can pay without even typing your password. After checkout you get
redirected through Paypal, you are logged in automatically, you click 'OK' and
get redirected to the 'thank you'-page. It's seamless.

Secure? That can be debated. But it is the fastest way to pay for your online
purchases. I know you're coming from a different standpoint ('Why do
e-commerce businesses still use Paypal?' would have been a better title in
that case) but a lot of end users probably won't switch because it's easy to
use.

~~~
kruczek
Ease of use goes a bit against security. For example in Poland there's a
popular intermediary przelewy24.pl, but it is just that - an intermediary. You
do not create any additional account there, instead when you make a payment
they redirect you to your bank's webpage, so you need to authorize directly
against your own bank. Much better IMO than having the intermediary interact
with my bank all by themselves.

~~~
dirktheman
Ease of use and security seldom go hand in hand...

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Strom
The fee is paid by businesses, not the end-user customers who use PayPal. Thus
it doesn't even enter the equation when users choose PayPal.

I personally like PayPal because then I only have to update my card info in
one place as opposed to 50 different websites. Also when some random website
gets hacked, I can be sure that my card info isn't getting leaked.

In addition, some sites only accept cards that have been issued in a certain
country, usually the US. When they also support PayPal, I can usually bypass
this restriction.

~~~
shitgoose
guess, to whom the business is passing these 5%?

~~~
Strom
Paying with a card may cut down the fees for the business, but it won't cut
down the amount that the end user has to pay.

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acesubido
> What goes into building a international payments service like Paypal?

A LOT of bizdev and treasury work, a.k.a. doing things that's hard to scale.
Let's take for example: paying out USD to NGN or IDR.

To be able to pay out in Nigeria/Indonesia in a reasonable time, you'd have to
buy a lot NGN/IDR and keep that money in a bank account somewhere. You can't
expect to keep wiring out USD to Nigeria because if you do, you're at the
mercy of Wire Transfers and fees, it wouldn't be sustainable.

Now depending on the payout, what if they wanted to pay out on a different
bank? You have to maintain balance on that different bank too. The money stuck
in a country is called "float". If you're lucky, their banks are
interconnected and you transfer easily, but if not, you're going to have a
harder time.

That's why there's always a "3-5 banking days on withdrawal", it's not because
of wiring out your actual cash, companies like Paypal are trying to manage
their "float".

Here's what actually happens when someone issues a NGN Withdrawal on your app:
depending on the bank on the said country, if they have online banking, you'll
have to actually login on your bank account and transfer manually. Believe me,
there are only a handful of banks that has Transfer APIs. For some, to even
access them, you'd have to be licensed, regulated and have a good
relationship.

What if the NGN withdrawal on your app was a cash pickup location? You'd be
pressed to also maintain a relationship or talk with local payout providers.
Not every popular bank or cash pickup company has an API. Sometimes you'll
have to email them a spreadsheet of the "Withdrawals". They'll reply back and
you'd have to update the "Withdrawal" status manually or build something that
parses emails/CSV to update them.

Now you might be wondering 'I want to lessen stuck capital so that I can offer
lower fees'. Depending on the country; you'd have to look for local providers
called "Aggregators". These guys can be remittance, money transfer companies
that handle local payouts for you. Bonus points: they're usually tech savvy
and might provide an API. You maintain balance with them and they take care of
the 'Last Mile' of paying out and are fully licensed (hopefully). They charge
a fee, and depending on Paypal, they pass it unto you or bake it in with their
margins. A side note USDNGN has a black market rate that's way better than the
banks, maintaining balance with a bank might be less competitive vs finding an
aggregator that can offer you USDNGN black market rates.

That's the basic gist for the treasury work. Legal work mainly is to actually
open a bank account and keeping in line with a country's AMLA and KYC
regulations are another cost. Otherwise they'll shutdown your bank accounts.
Depending on the speed/red-tape of the government processes, you'd have to
bake in legal fees and months of back and forth with government agencies.

I have just described Withdrawals. I haven't even begun to describe the
hardship of "Deposits", because you're actually in-line with being a quasi-
bank, which has another set of licenses, permits and fees.

This is just for 1 country. Every country has it's own quirks, what you did
for Nigeria cannot be replicated to say, paying out in KRW or IDR. They will
have different licenses, legal fees, aggregators and banks, cash pickups, bank
account limits/thresholds, that you'll have to sort and scope out. Not to
mention the amount of local competition. You'll also have to keep tabs of
changes in regulation, national holidays or changes in a bank/aggregator's
policies.

Hopefully this outlines why Paypal cannot be dethroned easily. Stripe is
getting there, but otherwise you'd have to embed yourself and have enough
float in 100+ countries to even match them or Western Union.

Source: I work as a senior engineer at a remittance startup.

~~~
CyberFonic
A huge thank-you! Your detailed explanation is an excellent example of how a
simple concept gets bogged down by the reality of the implementation, aka
"non-functional requirements".

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SilasX
Because every time a viable competitor arises (e.g. Braintree), Paypal buys
them.

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basseq
It might be interesting to split out Paypal the company from Paypal the
product. Here's some armchair quarterbacking:

Paypal the company (PayPal Holdings, Inc., NYSE: PYPL) has done well in recent
years, where I think they've executed well on their inorganic growth strategy,
where they've acquired 19 companies in the last 10 years, probably valued
north of $10B. Venmo, Xoom, iZettle, and others are strong businesses in their
own right, and Paypal hasn't done much to mess with them.

It would be interesting to see the growth of their primary "Paypal" product.
From their 2017 Annual Report[1]:

 _> PayPal continues to drive the majority of our total P2P volumes, enabling
both domestic and international P2P transfers across our Payments Platform.
Our Venmo app in the U.S. is a leading mobile application used to move money
between friends and family. Xoom is an international money transfer service
that enables our customers to send money to, pay bills for and send prepaid
mobile phone reloads for family and friends around the world in a secure, fast
and cost-effective way, using their mobile device or personal computers._

They don't offer detailed financials, but it may well be that "PayPal
continues to drive the majority of our total P2P volumes" because it started
out so large. This is the "first-mover advantage" mentioned elsewhere in this
comment chain.

I'm surprised as a consumer that Paypal hasn't done more to leverage the
strength of their component brands (e.g., Venmo) with the strength of their
network.

[1] [https://investor.paypal-corp.com/node/8556/html](https://investor.paypal-
corp.com/node/8556/html)

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j45
PayPal let's people pay directly with their bank accounts and also exists in
way more countries, so it can be a firm of cheap or easy writing. This
advantage may not last forever, but for now they allow exchanging money in s
few more ways or a few more places depending on the use case.

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jermaustin1
I use PayPal for subscriptions only. It has a nice dashboard that lets me see,
monitor, and cancel subscriptions with the click of a button. No dark
patterns. I dont have to find the email I used. I don't have to answer any
questions. It just works.

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dangrossman
PayPal charges the same 2.9% + $0.30 as Stripe, and 2.7% flat for swiped in-
person transactions. They support more countries than any other online payment
service. Why would anyone want PayPal to not exist? As for why nobody
"dethrones" PayPal, it's because being licensed and regulated in over 200
separate territories, having to become a chartered and fully regulated -bank-
in some of them to process payments, is beyond daunting. It requires big
backers, big money, a HUGE regulatory compliance staff, and work and processes
that take many years to establish.

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vonseel
As a buyer, it cost the same whether I pay with PayPal or directly to the
vendors website, and having been a user of PayPal for 15-20 years now, I would
actually congratulate them on their recent UI and UX improvements. The new
PayPal is fantastic.

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paulddraper
Not sure about your first question, but the second involves your typical very
difficult marketplace building.

You need merchants that use the service; you need customers that use the
service. Paypal was the first to build those.

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codinger
It's a trusted name and the user doesn't see any of the fees.

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oaf357
Because it still does a lot of things small businesses want for free.
Invoicing for example that is usually a cost add-on service elsewhere.

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chdaniel
I'm really really hoping TransferWise will take over all this stuff PayPal
does

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ivanstame
Stripe is not supported in my country.

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arisAlexis
people don't wanna hear this on HN but...Bitcoin

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buboard
regulations

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l24ztj
I don't know. I trust PayPal. I am a client and I know if there's a problem
they will always have my back even if I'm in the wrong.

