Paypal is a favorite among many on the internet, especially those who spend money internationally and among freelancers who depend on it for payments. This, in fact, is due to the inefficiencies and high cost incurred while transferring money through banks, especially in the case of international transactions. More than that, wire transfers are infamously hard, the procedures involved are colossal. In Paypal, all one needs is the email address of the recipient. Paypal has hence become a favorite among many as a convenient, cost effect alternative to bank transfer, but with the changes in its terms of use which were recently brought by the company this could soon change.
Refund
On April 7th, 2019, Paypal announced changes to its terms of use which could effectively make Paypal less attractive to users. There were two major changes, the first one deals with the refund policy. As of now, when a customer cancels an order, Paypal refunds most of the funds except a 30 cent flat fee which it charges for every merchant transaction, along with this Paypal also takes 2.9 percent of the total value of the transaction as commission. This commission is given back to the merchant when the customer asks for a refund from the merchant. But due to the recent changes in policies, Paypal will keep this 2.9 percent instead of giving it back to the merchant. This would mean that when a seller has to refund a 500 dollar to its customers, 14.5 dollars will be lost from their own wallet. This will most likely affect customers as merchants probably won’t bear the additional cost, this will result in the cost being passed down to customers, may be in the form of increased price or charging refunds if the customer used Paypal for payment. How it will turn out will be interesting but it is surely going to make a lot of people angry and this is where many see an opportunity for crypto to replace Paypal. Crypto could turn out to be a fundamental threat to Paypal’s business model in the long run if the company chooses such self-serving policies.
International payments
The second policy change was in regard to international payments, the company also makes money in this type of transactions by charging a flat fee. But due to the recent changes in terms and conditions, Paypal has announced that it will now charge a variable fee of five percent. This intentional transaction fee will be capped at a maximum of $4.99 and a minimum of 99c. This many have warned will disproportionately affect people who send a lower amount of money with 5 percent and sometimes even higher fee, while big transaction will enjoy a fixed fee of 5 dollars. What is the reason behind such a move is unknown.
These could drive people towards crypto as there is no fee for international transactions while using crypto, and as it can be spent anywhere in the world. Also, there is no middle man in crypto, hence it could eliminate fees that are charged for fund transfer. But we always have to remember that in order for a new technology to replace already existing technology, it is not just enough to be as good as the existing technology or slightly better but has to offer a substantial improvement in order to attract users. Also one of the points of conflict in the new policy of Paypal is the refund. While it is true that it is unfair there is no option for a refund at all when one is using crypto. It is true that such policies by existing companies can push for adoption of crypto upwards. This recent policy by Paypal is not going to be that significant but rather goes to show people why it would be a good idea to think about adopting crypto.
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