Sunday, September 19, 2010

Interview with Blueshift Research on PayPal, Again

In July 2010, I was interviewed by Dann Anthony Maurno of Blueshift Research for a strategy piece that he was compiling on PayPal. Below is my excerpt from that study, "PayPal Still Dominates Online Payment Industry":


Alternative Payment Experts - All five alternative payment experts said PayPal is the U.S. market leader and will continue to dominate the space. Mobile payments and non-­U.S. opportunities represent areas of growth. One source said PayPal will enjoy significant growth opportunities, especially from its Facebook agreement. Source reported high levels of competition. MasterCard’s API could be a game changer while Visa’s CyberSource purchase could open up a large merchant network to its services.

Jon Matonis, a digital currency consultant and author of The Monetary Future blog, said MasterCard and Visa are not yet significant challenges to PayPal. Still, they could eliminate the need for PayPal if they can match it in offering easy online transactions. Significant opportunities await PayPal, such as moving into direct deposits and, outside of the United States, virtual currency in online gaming and serving the unbanked in developing countries.

1. “With PayPal, you really have to talk about domestic and international, where there are far more challenges. They can maintain their market share domestically, but on the international side, PayPal is not the de facto standard. If you look in the UK, there are companies like Neteller, Moneybookers and Ukash.”

2. “These [developments for Visa and MasterCard] will only have the effect of extending the establishment leaders. They don’t much change anything.”

3. “The credit cards feed in and fund PayPal. But I do think PayPal is threatened by that. They’ve made their market by filling the void left by [Visa and MasterCard]. If they fill the void themselves, that eliminates PayPal’s raison d’être.”

4. “The arrangement Facebook made with PayPal was far better for PayPal than Facebook; it opened up the entire Facebook user base to PayPal, which Facebook didn’t need to do. It’s probably going to double PayPal’s user base.”

5. “What PayPal has to do to increase its market share is to look into its own unit of accounts rather than push through other ones. If PayPal adopted something like paychecks or direct deposits into PayPal, they’d address a major problem of getting cash into the system, which is not coming through a bank or Visa or MasterCard.”

6. “Canada’s doing direct deposits for workers’ paychecks into PayPal. If you got paid that way, how much more would you use PayPal?”

7. “I don’t think you can talk about PayPal’s future without mentioning the virtual currency platform people. gWallet [Inc.] and [Jambool Inc.’s] Social Gold are the two big ones, and SponsorPay [GmbH] in Germany. They allow you to make a spontaneous purchase during a game so you can continue playing. Facebook Credits are coming out as a step toward obliterating that business platform for providers.”

8. “Internationally, Moneybookers and Neteller gained market share in the last two years, not necessarily at the expense of PayPal. One of the reasons they’re gaining is they get into merchant transactions that Visa and MasterCard and PayPal won’t even touch [including online gambling and adult entertainment].”

9. “There’s a split between the developed and undeveloped world [in terms of mobile payments]. Kenya is probably five or 10 years ahead of the U.S. because the need in that country is to serve the unbanked. Mobile payment is preferred in parts of Africa. It’s happening in the U.S., just not as quickly as in other parts of the world.”

Also, see the April 2010 Blueshift Research interview excerpt here.

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