In the world of online money transfer, Paypal certainly dominates...does the company have too much power?
It seems like this company has dominated in the world of online money transfer for many years, and to my knowledge no serious competitor has emerged. Few people seem to have a problem with that, though .... seems like most people are okay with thinking of Paypal as being THE online bank.
Do you think Paypal has too much power? And if so, do you see any particular aspects of the way Paypal does business as exploiting their control and dominance in the online marketplace?
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M$3 Answers
PayPal's growth is an outcome of the convenience they provide, as well as their well-thought-out fee structure, which includes free accounts that are sufficient for most users.
Having said all that, they are not a bank, and as such, they are not FDIC insured. They place user monies in unaffiliated banks, which are FDIC-insured so that your accounts are protected against the failure of that 3rd party bank, but not PayPal's hypothetical failure. However, you are not required to maintain a balance with PayPal to use their service, and can use them as a conduit to transfer funds from your bank account to someone else's PayPal account, without providing the recipient with your original bank account information.
- quote (see https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/UserAgreement/general/FDIC-outside )-
FDIC Pass-Through Insurance
You do not need to keep funds with PayPal in order to use our service. If you do hold a balance, you can do so in two ways: (1) PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage; or (2) you can elect to earn a return on your funds by enrolling to invest all funds that you receive into the PayPal Money Market Fund. The PayPal Money Market Fund is not FDIC insured, not guaranteed by any bank and may lose value. PayPal keeps a record of the amount of your balances, which you can check by logging in to your account through the PayPal Web site at any time. Balances held in currencies other than U.S. Dollars are not FDIC-insured.
If you do not enroll in the Money Market Fund, then in the unlikely event that an FDIC-insured bank in which we place your money fails, your balance placed at the bank would be subject to FDIC pass-through deposit insurance coverage, along with any other deposits you hold at that bank, up to a total of $100,000.00 USD. Pass-through deposit coverage is contingent upon PayPal maintaining accurate records and on determinations of the FDIC as receiver at the time of a future receivership of any bank at which we place your funds. FDIC pass-through deposit insurance protects you only against the failure of the bank at which PayPal places your funds, and does NOT protect you against PayPal's insolvency. Through the terms of our User Agreement, we believe that your funds will also be protected from any claims of PayPal's creditors and will be returned to you even in the unlikely event of a PayPal insolvency.
- end quote -
So, the point is that holding large sums of money in a PayPal account is probably not wise. One can keep enough there for the amount you expect to spend during the coming month, and top it off periodically as needed. If you use your PayPal account mostly to accept payments, you should "drain" the account periodically by transferring the funds to your bank account.
Doing the above side-steps most problems people are concerned about with PayPal, such as the risk that they might freeze your account for no good reason for an indeterminate length of time. If you do as suggested, PayPal no longer has "too much power" over your funds.
As for their having too much power due to not having serious competitors, the field is open for others to provide better services if PayPal starts misbehaving too badly, plus, you can almost always use your bank's online bill-payment services, or your credit/debit cards, to make e-commerce payments, which limits how much power PayPal can concentrate in their hands.
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M$
The customer service at Paypal, has really changed in the last 7 years. the last two issues I had, I noticed, you can talk to someone live on the phone immediately, and they are extremely helpful and pleasant.
Personal thoughts
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M$You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
Agree very much with you re: putting freezes on funds due to less than stellar eBay feedback ( or other eBay issues). It's total BS and very abusive. I was disgusted when I heard they were going to start doing that ... can't believe they're still getting away with it.
eBay DEFINITELY abuses the power it has via it's ownership of Paypal.
Easy to get mixed up with the alphabet soup - you were probably trying to think of FDIC.
At a max, they should only be able to have freeze capabilities on the eBay-related monies (in the case presented). Even that is worrisome, though
Yeah, I don't know why I said FCC. I'm referring to federal banking regulations. It is subject to some rules and regulations, but not the same as a regular bank.
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