PayPal

With four million items on auction at any time, eBay enjoys wild popularity. At the heart of eBay’s success lies a simple principle; eBay is easy to use. In late 1999, conducting business on eBay became even easier. A new service, PayPal, permits buyers to pay via e-mail. It works like this. A buyer goes to the PayPal Web site, logs in with ID (e-mail address) and password. With a few keystrokes, the buyer authorizes the transfer of money from Visa/Master Charge or a bank account to PayPal earmarked for payment to an eBay seller. Within minutes, the seller receives e-mail from PayPal stating a funds transfer. Not only is the method of payment win-win (buyer and seller), the buyer avoids a trip to the post office to mail a check or purchase a money order, while the seller enjoys instant access to the funds. Currently, the service is free to both parties. PayPal expects to make a profit from interest earned (float) on the money left in the account.

PayPal grows like kudzu. Owning the advantage of an early start, over two million users beam money through cyberspace. A February 16 Wall Street Journal article pegs the growth at 9,000 new users daily. Whenever money matters arise, questions of privacy and security enter the discussion. Keep in mind, PayPal is not a bank. Therefore, it lacks the level of protection we associate with banking transactions. The 11-page Terms of Use policy should be read by everyone using this service. Some of the restrictions in the “fine print” may not be to everyone’s liking. Essentially, PayPal works well with small money transfers. The bulk of eBay transactions range from $20 to $50. It comes as no surprise PayPal is the preferred payment of choice for many eBay sellers. All across eBay-land, sites sport the PayPal logo proudly enticing newcomers to sign up with a five dollar enticement. In addition, a five dollar credit is awarded to the party making the offer when someone new signs on for the service.

My Experience

I have used PayPal for several months. All PayPal transactions were trouble-free. On one occasion, I called the helpline: 877/672-9725. (While a toll call for many, the DialPad call was free.) The call was answered promptly by a polite support person who had a ready answer to a routine question.

Success brings imitators and possible deception. In fact a scam artist from South Ural, Russia, registered and constructed a bogus PayPal-look-alike site named www.PayPai.com. Next, the scammer sent e-mails to registered PayPalers stating, “Michael Swenson just sent you money with PayPal. Amount $827.46...” The message contained a link to the bogus site. With an apparent enticement of over $800, the scammer wanted the visitor to click on the hotlink and land at the dummy site. By entering user ID and password, the scammer could harvest information needed to enter the person’s actual account and transfer funds masquerading as the legitimate account owner. Events moved quickly. Word spread rapidly through the eBay community. (I heard about the deception from an eBay users e-list.) Quickly, PayPal was notified and the site shut down. PayPal management gave assurances that no user would lose money because of the scam.

Several parts of this incident hold fascination. MSNBC quickly reported on the incident. In its haste, a correction had to be added as MSNBC incorrectly reported the scam artist could access credit card and bank account information. The eBay community quickly recognized the scam and played an important role in having it shut down. The brazen nature of the incident should serve as a warning to everyone conducting e-commerce transactions: remain vigilant. In spite of this singular incident, confidence in PayPal remains high.

Other Instruments

PayPal has competition. Ebay promotes BillPoint as a method of payment for auction transactions. While it appears that BillPoint offers a greater degree of security than PayPal, transaction fees (the service is free to the buyer) paid by the seller may account for its lesser degree of popularity. On the plus side, BillPoint has greater flexibility in handling overseas transactions. PayPal is essentially a domestic pay service. Canadian service is not available yet.

Achex, Inc., a 1999 consumer-to-consumer online payment service, enables secure payments from existing checking accounts. This no-cost, debit-based system offers payment methods for many people who do not have credit cards and would prefer to pay using bank checks. Achex boasts to be the simplest and most secure consumer-to-consumer solution and provides consumers a complete guarantee against fraud. While this service has not yet captured much interest in the eBay community, the transaction authorization using simple username and password holds the promise of filling the needs of non-credit card bidders. Time will tell.

The convenience of making and receiving payments using online payment represents the next evolutionary step in auction transactions. High feedback (FB) eBay sellers (usually dealers) will broaden payment methods as they strive to get the goods in the hands of buyers faster and with greater convenience. The best tools will rise to the surface and prosper. PayPal, currently the market leader, enjoys an enviable position. However, several promising alternative systems could change the landscape quickly. Stay tuned.

URLs (Uniform Resource Locators) of interest:

www.x.com

www.paybill.com

www.achex.com

(This is the 217th of a series of elementary articles designed for surfing the Internet. Next, “Steven King and the Net” is the subject on tap. Stay Tuned. Until next week, happy travels through cyberspace. Previous issues of Internet Info for Real People can be found: http://www.thebee.com. Please e-mail comments and suggestions: rbrand@JUNO.com or editor@thebee.com.)