Web Trader 3

If you use eBay it is a safe assumption that you are familiar with Paypal. Paypal.com is the online payment method of choice for most eBay users. If you are in the minority of people still skeptical about sending and receiving online payments, you can feel secure when using Paypal. It is as safe or safer than writing a check. Payments won’t get lost or stolen and they arrive instantly. In fact, Paypal accounted for more than 10% of all online payments last year.

Paypal was created in 1998 to allow any individual or business with an email address to securely send and receive virtual cash via bank transfer or credit card payment. In 2002, more than 50 percent of eBay users chose Paypal to make payments. This wave of use prompted eBay to phase out its own payment service Billpoint, and purchase Paypal for $1.5 billion, maybe eBay’s best business move ever. Paypal showed 40 percent growth last year, with a 51 percent increase the previous year. Last year PayPal’s revenue exceeded $1 billion, just under a quarter of eBay’s total overall revenue. EBay’s marketing forecasters say we should expect to see the already gigantic Paypal keep growing larger, safer, and more powerful.

It is rare to see an eBay seller who does not accept Paypal. It has become par for the course to use Paypal when buying or selling on eBay. I rarely bid on an item if the seller doesn’t accept Paypal; sending a check or even a money order by snail mail is too slow and lengthens the time it takes to receive the item. An electronic payment is received instantly, so the seller can mail his product immediately. One could compare it to using a dial-up internet connection; once you switch to high speed service, you don’t want to go back because it’s so slow. So listen up, sellers on eBay: If you have been in the dark about Paypal it’s now necessary for you to accept it as a form of payment.
As a response to Paypal’s huge fiscal growth, large corporations like starbucks.com, petsmart.com, buy.com, sharperimage.com, esurance.com, sportsillustrated.com and many others now accept Paypal. Two of the largest computer companies, dell.com and Apple’s Itunes, now accept Paypal. Yahoo, the second largest internet search engine, has made Paypal the exclusive third-party provider for online payments, allowing customers to pay for Yahoo services.

Internet search engine, Google, isn’t on the list of sites accepting Paypal. As predicted late last month, Google launched the first demo test run version of gBuy, their very own competing online payment service. This has caused quite a stir in the online community, as well as the stock market, because the battle to become the king of online payments has begun. Before now, Paypal hadn’t had a worthy opponent, so they could charge unchallenged fees and set policies with no competitive market. Of course, this new competition can only mean a good thing for all of us – lower prices – but it means a dilemma for Paypal as Google tries to tap into the profits of online payments.

Currently, Google accepts credit cards for purchases but remains open to other payment vehicles such as electronic fund transfers from bank accounts. This method leads Google to assert that their service is not a Paypal competitor. The law of supply and demand naturally means lowering prices to win over customers; Google is already implementing some price discounts for anyone who advertises with them.

Many feel that in the long-term, gBuy could be very threatening to Paypal. EBay must feel the same, snubbing Google by not allowing gBuy to be accepted on their web site. This creates a conflict, because eBay is one of Google’s largest advertisers on their site. It is not expected that all of Paypal’s affiliates will jump ship but already two of their larger brand names, starbucks.com and buy.com, have signed up to also accept Google’s gBuy.
Google has a long, uphill battle ahead of them. In the end the consumer will win, because the battle can only help lower prices and give more options. For now, it sounds like eBay won’t be allow gBuy to be accepted on their web site, but if Google plays its cards right, eventually eBay will be forced into it. I feel many sellers will be accepting gBuy, but because of eBay’s “no gBuy” policy they will not be advertising it.

Once eBay realizes that they are being superceded and that their monopoly has been infiltrated by gBuy, they may have to allow the use of it on their web site to keep their customers happy. The other solution for eBay would be to buy gBuy as they did Billpay and Paypal. If eBay goes this route it will cost a hefty sum of money; even in the adolescent stage gBuy is in right now, eBay would have to offer a very significant value for Google to halt their attempt to enter the online payment arena.

Google has also set their sights very high, aiming to challenge a prominent company who has developed a system close to perfection. Paypal does most things right when it comes to this online payment market. Paypal is very secure and safe, and whenever there is a problem they have a solid resolution center. Paypal allows money to be transferred directly from a bank account or credit card. They have developed a debit card system that allows instant access to your Paypal balance. They work hand in hand with countries from all over the globe. By integrating with eBay, Paypal is connected directly to the United States Postal Service, making it very user friendly to sell an item on eBay, receive an online payment for it, then mail that package through online shipping all in one seamless operation. (Next month I will speak about the silky smooth click and print method of mailing.)

If you ask me, Paypal has done it right, and if gBuy can mimic every move that Paypal has made they might be able to be a success. But how many new and innovative ideas can Google come up with that Paypal hasn’t already implemented? Although Google has constantly pleased the market with everything they have done thus far, can they keep it up? Does Google have some aces in the hole that can trump Paypal? Paypal has over 100 million users; imagine how long it would take for gBuy to gain the trust of that many people, but Google is a very creative and powerful force on the Internet. The battle to be number one in online payments could become quite interesting.

As for now there is only one king of the hill, and it is Paypal. When the originators of Paypal first developed the service 8 years ago they must have known they had something big. Something like a buried treasure. They even hid it under the X. That’s right – X marks the spot in the online payment world. Visit www.x.com. You will find the number one preferred payment method by eBay users.

If you have any comments about the article or future topic suggestions, e-mail Gabriel Constantine at botman@timelessobjects.com.