[Dave Birch] I remember thinking, when Skype announced that it would provide a a money transfer system using PayPal, that the connection between a payment mechanism and its “medium” could deliver sustainable competitive advantage. Hence for eBay, the combination of PayPal and Skype might well be a genuinely disruptive innovation. But is this true globally? As the commentator here wrote:

My ‘Internet friends’ are located in some far off places and tiny towns which do not appear on any tourist map! Their little known banks, different currencies and jurisdictional regulations often make it often impossible to quickly send or receive local funds. Consequently, we use digital money. PayPal is sometimes used but not often. Due to the different rules in each jurisdiction most of my friends don’t use PayPal.

As an aside, the article notes that Moneybookers, 1MDC, e-gold and Webmoney (which we looked at here recently) are all viable alternatives but it strikes me that they are each quite different — must look into this more in the future. Nevertheless, in the U.K. and other less far-flung places, the synergy between talking to (for example) a merchant via Skype and paying them (especially if pseudonymity is the natural choice) is real. There’s a “Send File” menu in my Skype but still no “Send Money” menu, so I don’t know what they’re doing about it: I would have expected an e-mail by now letting me know that I could log in to PayPal and link my PayPal account to my Skype username.

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It’s interesting see how this new breed of payment solution is evolving. Earlier this year, PayPal became a bank in Europe. With more than 35 million accounts and 100,000+ accepting web sites in Europe (and $8+ billion volume last year), it’s doing well. According to Forrester Research, almost a quarter of European web shoppers prefer PayPal (I do, because I’m very lazy: when I pay with PayPal all I have to type in is my password).

PayPal has competition, as well all know, in the form of Amazon FPS and Google Checkout (which is now accepted by 100+ of the top 500 U.S. online merchants). As Mary Monahan notes for Javelin, while Google presently (note that word) provides a wrapper for “traditional” card transactions, about 40% of PayPal transactions are direct from bank accounts via ACH (and are therefore much cheaper). One might imagine, therefore, that Google will be thinking about adding either its own or someone else’s non-card payment mechanism in the future: I promise to pay the bearer on demand one Google Adword, or something like that? PayPal also offers more in the security space as well, with the Verisign token (free for business customers, $5 for consumers). PayPal also allows payment to merchants who don’t have a PayPal option because of its “virtual credit card” (basically, a one-use MasterCard PAN). Getting merchants on board is only part of the battle though, because the checkout is not only the long-term goal: as Mary says,

While today PayPal and Checkout compete with each other, tomorrow the fight will turn against the traditional payment processors.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


  1. You’re not using a recent version of Skype. The “Send Money…” option is under the Tools menu and does, in fact, let you PayPal money between Skype contacts. (It’s been there since version 3.x of Skype which came out 4-6 months ago as I recall…)

  2. Well hmm… It isn’t there on my MacOS X version, but it’s there on my Windows one. I’d imagine that’d it’d show up under the Contacts menu when they add it to the MacOS X version.
    It must be Windows only at this point.
    [Dave Birch] Further experiment reveals it to be Windows-only, so I’m sure it will arrive in the Mac version soon.

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