In PayPal We Trust?

Posted on 27. Jun, 2007 by in Saving & Investing

I’m a big fan of the online payment processor PayPal. Even after having my account hijacked and thousands of dollars worth of computer equipment shipped to somewhere in the Philippines, I continue to use the service. It’s fast, easy, and cheap. Reasons thousands upon thousands have also relied upon the payment processor to handle everything from eBay payments to reimbursing Frank for lunch this afternoon.

paypalsecuritykey.jpgHowever, many of eBay’s top executives used their keynote speeches during the recent eBay Live! conference to announce new PayPal security initiatives, including a service for eBay sellers that will alert them to potentially risky buyers. PayPal has, admittedly, done a vigilant job of trying to prevent online theft and identity theft. One of my favorite new features is PayPal’s new Security Key. The key is similar to corporate products from companies like RSA but is targeted at helping consumers prevent fraud. The key generates a unique six-digit security code about every 30 seconds. You enter that code when you log in to your PayPal or eBay account with your regular user name and password. Then the code expires – so no one else can use it.

Feeling comfortable within the digital world, but not content to simply help you pay for your winning bids, PayPal has begun to spread its wings. With an admirable 143 million user accounts, PayPal still pales in comparison to the likes of Visa or Mastercard who have over than a billion accounts. So, to compete among the “big boys,” PayPal is becoming more like a bank.

For the past year, PayPal has tested a virtual debit card enabling users to make purchases with PayPal on Web sites that do not offer it as a payment option. The service, which PayPal plans to launch broadly before the holiday shopping season, provides a one-time MasterCard number for a given purchase. The money is then debited from the user’s PayPal account.

Also like a bank, PayPal has long doled out interest on balances left in PayPal accounts. The rate, often more than 4%, is typically higher than that offered by brick-and-mortar banks. It also offers actual plastic credit cards, through a partnership with GE Consumer Finance (GE), for which it gives buyers 1% back on transactions. In addition, PayPal allows users to wire money through eBay’s Skype online phone service. There also are plans to give users the ability to view receipts for past transactions online, says Thompson.

So the question is, how much do you trust PayPal? Do you trust it enough to use it as your main banking account? Or have the security issues of the past tainted its image so much that it will never become the great online bank it wants to be?

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4 Responses to “In PayPal We Trust?”

  1. Mark Herpel

    28. Jun, 2007

    Great post, I know a lot of people who DO use PayPal as their saving account with no fear of a loss. Forget about banks, that is correct, -In PayPal They Trust-

    I would like to know, when your account got hacked and someone used it to purchase goods, was it fast and easy to get your funds back? How long did it take and did you get hassled going for that refund?

    The security key is an excellent idea especially at that price, do you have one?

    Mark

    DigitalMoneyWorld

  2. Jason Guthrie

    28. Jun, 2007

    Actually, the process for gaining access to my account again was a nightmare. There were all sorts of hoops to jump through to prove my identity, file reports, etc. But the worst part was how long it took for PayPal to review the information I gave them and get back to me. I’ve heard the process is a little better now, but needless to say I DID purchase a security key… just so I wouldn’t have to go through that again!

  3. Adam Long

    16. Jul, 2007

    I use Paypal frequently for online purchases (eBay and otherwise); however, I certainly don’t trust them enough to use instead of my traditional credit cards.

    Having been through several frivilous disputes as a result of selling on eBay, I can vouch for the fact that Paypal is not necessarily on your side–in the end, any dispute comes down to who can send the most convincing email to the Paypal dispute team.

    Another complaint of mine–Paypal is against any firearms-related purchases. Put “gun parts ” in your payment subject line and your account will be closed. My Visa doesn’t try to push any such agendas…

  4. Greg

    23. Sep, 2007

    I also use Paypal for both buying and selling online. For the most part, I find the dispute process pretty fair — although Adam makes a good point about the power of a convincing email.

    Paypal as my bank? No way. Contrary to popular opinion, banking is a complex business. The recent demise of NetBank is a reminder that the online bank business model is inherently flawed.

    It would take a lot more than FDIC coverage to induce me to move my money from a traditional bank.

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