For decades now, PayPal has been a staple of the digital payment ecosystem. If you buy goods online or deal with independent digital merchants, they likely use the formerly eBay-owned service. This should come as no surprise, as PayPal sports over 250 million users, located in dozens of countries across the globe.
This hegemony is being challenged, however. The challenger: Bitcoin.
Bitcoin Outpaces Current Payment Systems
Tone Vays, a Wall Street investor turned prominent Bitcoin analyst, recently issued a scathing tweet bashing PayPal. In a tweet that went semi-viral on Crypto Twitter, Vays pointed out that the digital payment solution charged a 4% fee on a foreign exchange between euros and dollars.
What’s more, the payment solution often charges a fee on top of transactions. For some perspective, converting your dollars into euros to send to a merchant may cost you upwards of 5% through PayPal.
While many consumers have come to accept these fees, acknowledging them as the cost needed to make payments efficient, there may be a solution. According to Vays, this solution is Bitcoin, which he claims will “destroy” PayPal in a matter of time.
— Tone Vays [Bali – Financial Summit] (@ToneVays) September 2, 2019
Bitcoin transactions almost always cost less than $0.5, take less than half an hour, cannot be directly traced by a government agency if the proper security methods are used, requires nobody’s permission to send/can’t be censored, and so on and so forth.
These are some of the many reasons why many have claimed that Bitcoin is a successor to PayPal and its ilk. As market research firm DataLight wrote in a report covered by DemandSolutionNews:
“Bitcoin was the first cryptocurrency ever and its code is still imperfect. However, with all of its imperfections, it is still many hundred times faster than the existing wire transfers. Its fees are so small that you can transfer millions of dollars for a dozen cents. This is the reason many financial organizations find it so attractive… Technical improvement of Bitcoin’s network is almost certain to make it the world’s main payment system.”
There is one problem with Bitcoin, however. This is, of course, its volatility. At the moment, it isn’t clear how the cryptocurrency’s price fluctuations will be addressed. But, should that be solved, it would be almost non-sensical to use the current iteration of PayPal over Bitcoin.
PayPal Forays Into Blockchain
With all this in mind, it should come as no surprise that PayPal and its compatriots in traditional finance are looking to foray into cryptocurrency and blockchain technology.
As you are likely aware, the company is looking to become a member of the Libra Association, with PayPal’s logo being featured on all the marketing material for the Facebook-led cryptocurrency project.
It is currently unclear how exactly PayPal will be using Libra — if it all — but its involvement in Libra and decision to spend at least $10 million on the project seems to be a way for the firm to hedge its bets.
In similar news, the firm earlier this year invested millions into Cambridge Blockchain, a startup looking to use ledger technology to share private data.
The company has also been rumored to have tested an in-house cryptocurrency as a pseudo-rewards system.
Despite its involvement in Libra and these other crypto ventures, PayPal — or at least its current executives — have expressed cynicism towards Bitcoin. CEO Dan Schulman stated in an interview with CNBC at Davos that his firm “isn’t seeing many retailers at all accept any of the cryptocurrencies”.
What’s funny is that a large number of former PayPal executives have lauded Bitcoin and cryptocurrency. Peter Thiel, of course, has made investments in the space; Elon Musk has claimed that cryptocurrencies are better than paper money; and David Sacks has made investments into crypto projects.