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March 27th, 2000

Paypal: An idea whose time has come

About a month ago, PayPal debuted, and I could tell right away that these guys were onto something that other online payment systems had missed. Here was a way to pay anyone on the Internet in a simple, straightforward way.

Basically, PayPal is an online account (now associated with the online bank X.com) that allows you to instantly wire (or as they call it, “beam”) money to anyone else on the Net. The money you pay is charged to your credit card and the money you receive can be deposited directly into your bank account. This is a great service for several reasons:

  1. Auctions. By paying someone or being paid this way after an online auction, there’s no need to worry about bounced checks or the extra cost of a money order. It’s a fast, free, and secure way to transfer money between individuals. In just a short time, it’s become an incredibly popular way to pay for items purchased on ebay (I myself have used it twice for this purpose).
  2. Micropayments. This doesn’t mean a lot now, but in the future it will — the basic idea is paying 2 or 3 cents to view a particular web page. You can find out more about micropayments at Jakob Neilen’s Useit.com.
  3. Regular person-to-person transfers. Since PayPal allows you to transfer money into your bank account directly, if you need quick cash, you can have someone charge x amount of money to their credit card (an interest free loan for 30-days) and then have it deposited directly to your bank account with no extra fees (like you’d have with Western Union). Note that it does take a couple of days for money to appear in your bank account. Also note that it is illegal (as stated in the Terms and Conditions) to wire YOURSELF money from your credit card.
The best thing about this service is that it’s free all around. Of course, this begs the question, “Well, how do they make money?” Simple: they keep the interest that is earned from unreedemed money in your account (money that sits there waiting for you to deposit it to your bank account).

PayPal looks like a service many of us will be using in the near future and it’s implementation looks to be pretty solid. I can’t wait to see where this site leads us. -ram

Posted in Technology

Ryan March 26, 2008, 2:25 pm

How sad that this service never caught on.

Steve A March 28, 2008, 10:58 am

Yeah. I hear those PayPal folks crying all all the to their own bank accounts.

I use it for my eBay business. Granted, eBay now owns it, but it’s still a damn good system.

I’ve sent my kids “free money” days where all they had to do was annotate their account and dad eBay profits went to their accounts.

Thanks for pulling that one out of the cellar, Ryan.

Ciao,

Ryan March 28, 2008, 1:36 pm

One thing I definitely miss about the early days of PayPal: they never charged any fees. They made their money from the interest people made while money was sitting in their (non-interesting-bearing) Paypal accounts.

Joseph March 28, 2008, 5:23 pm

Yep, the founder was just in web news last week in an article about “Eligible Billionaire Bachelors,” so I guessed it’s worked out well for him.

And, as ebaY grows, so will Paypal. It’s amazing the wealth these sites generate not only for themselves but for others.

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