PayPal is a Bank?
“PayPal was granted a bank license with the Luxembourg bank authority.”
This is all nonsense and it is for PayPal’s benefit, not for the benefit of PayPal’s customers. The statements contained on this web page are typical of those made by eBay and usually mean the exact opposite of what the words say. Luxembourg is one of those tax haven countries that will deal with anyone as long as there is a dollar in it for them; this licence has no effect anywhere else and PayPal is otherwise not a “bank” anywhere else; indeed PayPal does all its actual banking through another gouging organization, Citibank. Notice how all the snakes seem to gather together.
PayPal is an unregulated, unprincipled, systemically dysfunctional, amateur organization (just like its ugly mother, eBay).
PayPal and Bill Me Later are not a bank, are not regulated as banks are and yet offer banking-type services, services that would be more appropriately and more competently carried out under the auspices of the banking community (via their credit card company partners).
The simple fact is that without the bankers’ knowledge of the entities involved in the transactions, PayPal, or any other non-bank provider, will always be handicapped. Non-bank providers will never guarantee anything for the buyer or seller because they simply don’t have the bankers’ knowledge of the entities involved.
The head turkey at eBay, ‘Noise’ Donahoe, has talked of the possibility of offloading PayPal because he is just barely smart enough to know that when the major credit card companies do get off their butts and introduce a like card/terminal-less payments system to complement their credit card system, they will do it properly, and the dysfunctional PayPal will then sink like a stone—other than, possibly, on what is by then left of the Donahoe-shrinking eBay marketplace. Possibly, the banks may let PayPal keep those ‘no hoper’ customers that the banks, who will always better ‘know’ the entities involved, might not likely allow a merchant-type facility.
If Donahoe has any brain at all he will be actively trying to sell PayPal to the banks to complement their credit card system; but I doubt the banks would want to lower their image any further by associating themselves with the likes of PayPal; not even for a peppercorn consideration would the banks touch such an incompetent amateur operation as PayPal, I suspect.
Does anyone then think that ‘all the banks’ are not watching this market segment with interest, and is it possible that PayPal could be having some negative effect on their credit card business? Why then would ‘the banks’ not be considering a like system to complement their existing card systems? The simple fact is that anything that PayPal can do ‘the banks’ can do so much better and, after all, every internet banking user is already set up to receive such a service directly, efficiently and securely, from their bank.
Do we then need to offer the banks and the major credit card companies another such monopoly-type situation? Ideally not. But, having said that, within the credit card system the individual banks do compete with each other on terms, interest rates, etc.
Regardless, it would be nice to have a card/terminal-less system that worked efficiently and effectively—as does the banks’ credit card system. Regrettably (or thankfully, some say), PayPal does not have such a partnership with ‘all the banks’ and so PayPal can never offer that same effectiveness.
My only surprise is that ‘all the banks’, via their credit card partners, have not yet offered their own system. When they do, I suspect that it will be bye, bye, PayPal—you most ugly of daughters. And, more importantly, we will then have a system that works effectively, just like our credit cards do!
In support of the above comment I offer an introduction to the full sad/ugly story of eBay/PayPal at
eBay/PayPal: Dead Men Walking