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Ask HN: Why does Paypal still exist?
49 points by netham91 on Mar 25, 2019 | hide | past | favorite | 42 comments
They nearly charge 5% of the transaction on an average. Sometimes it'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? ).

Extra: What goes into building a international payments service like Paypal?

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.

At atlasaf.com we solved this by creating a P2P infra - and we settle every transaction with DAI in the background. You enter a title and description and you get a payment link and/or a button. Zero commissions.

If anyone is looking to make a bid to buy us, since we're in the middle of selling this (due to a lack of funds), my email is francesco at atlasaf dot com

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

On top of stripes 2.9 percent fee?

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


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

I am curious, Any example of those site?

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.

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.

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.

>> 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).

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.

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).

In the interest of giving PayPal some potential benefit of doubt, it could be that they're simply returns a match/no-match on the address as a fraud-reduction step or something.

> I once saw a pdf which listed all the third parties that PayPal shares its information with.

It's immatetial how much data paypal shares around. What's important is that I can share my CC with paypal and use paypal to buy stuff from any store that accepts it, and the risk of my CC data ending up in the private stash of any random CC fraudster is so low that such a thing is practically unthinkable.

how does that compare with a typical credit card company?

When my mom’s small business would receive a chargeback from her merchant bank, they would send her the ENTIRE customer’s card statement for the month in question. By email.

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.

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.

>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.

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.

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.

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

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.

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

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.

> 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.

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".

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

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

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.

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.

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.

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.

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.

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

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.

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

Stripe is not supported in my country.

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


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.

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