PayPal and the International Credit Card Wars
18 August 2010
PayPal International's interesting times began on January 27th. The date that the Reserve Bank of India asked PayPal "to immediately suspend PayPal payments to and from India as well as transfers to local banks in India."
- "I’m personally committed to working closely and tirelessly with the Reserve Bank of India to get a fast resolution to this issue" Farhad Irani, 14 February 2010
PayPal's India problems marched through February and March.
Then came a PayPal Japan revelation:
- "PayPal recently announced that as of March 31 customers in Japan are no longer able to make personal payments to individuals using the company's 'send money' service and that the facility would remain suspended until further notice."
Unfortunately PayPal's India problems have not gone away.
- 28 July 2010: "This morning, an email was sent to Indian users, notifying them that they would (very) soon be removing the ability to withdraw funds from accounts electronically."
- 31 July 2010: "We’ve received good news. You can continue to enjoy electronic withdrawals just as you did before."
And despite Farhad Irani's declaration, PayPal remains unlicensed in India.
- Certificates of Authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 12 July 2010
But guess what notable United States companies are licensed in India?
- American Express (licensed 2009)
- Diner's Club (licensed 2010)
- MasterCard (licensed 2009)
- Visa (licensed 2009)
When PayPal's intentions come across as "PayPal wants to replace credit cards in stores", how will the larger companies react?
Or more to the point, how are the larger companies reacting?
Consider these numbers.
- In 2009 according to "eBay Inc. President and CEO John Donahoe. “PayPal significantly expanded its presence globally and, for the first time, processed more than $20 billion in total payment volume in a quarter.""
- Discover (established 1985), which owns Diner's Club (established 1950), reported sales volume of $23 billion in the second quarter of 2010.
- American Express (established 1850) reported a 2009 fourth quarter volume of $115 billion.
- Number two MasterCard (established 1966) reported a 2009 fourth quarter purchase volume of $510 billion.
- While number one Visa (established 1958) posts "$4.8 trillion total volume" for a twelve month period. A rough average of $1,200 billion a quarter versus PayPal's $20 billion quarter.
If you were, say Visa, nothing to worry about right?
Yet Visa's international activities indicate they take PayPal's growing international presence seriously. Or 'coincidentally' Visa, as well as MasterCard, etal, are aggressively expanding their international businesses in the same year as PayPal.
- February 11 2010
- Visa and Travelex Launch Visa Money Transfer for Remittances from Australia
- "Visa Inc. (NYSE: V), the world's largest retail payments network, and Travelex, the world's largest international foreign exchange and international payments specialist, today announced the launch of the first Visa Money Transfer service in Australia."
- May 11 2010
- MoneyGram and Visa Introduce Cash-to-Visa Card Money Transfer Program
- "launch of MoneyGram's first cash-to-Visa card program enabling consumers to transfer money from MoneyGram locations in the United States directly to the Visa accounts of recipients outside of the United States"
- May 25 2010
- Visa and Bancomer Transfer Services Launch Visa Money Transfer for remittances from the U.S.
- "launch of a money transfer service that will provide an additional alternative for consumers that send money from the United States to friends and family living abroad. "
- "initial deployment of the service will enable consumers to send funds from the United States to select countries such as El Salvador, Brazil, China and The Philippines, with plans to extend the program to allow remittances from BTS locations to any country within the Visa network."
Visa did not ignore India.
- May 26 2010
- Visa and Monitise to Launch Joint Venture in India
- "formation of a joint venture that will provide a technology platform for financial institutions and mobile network operators in India to offer a range of mobile financial services to consumers."
PayPal remained on the move, entering the South Africa market in March.
Not that Visa was far behind. As they churned this out in a July press release:
- "As a first time sponsor of the FIFA World Cup, we're very happy with what this has done for our business. It has driven business growth - increasing transactions, building our brand and providing business development opportunities for our partners"
Definitely interesting things happening in 2010.
eBay's (PayPal is owned by eBay) CEO John Donahoe said in 2009, "PayPal is a business that will be bigger than eBay." Along with the comment, "Donahoe said we are not that far off from the day where a restaurant beams a bill to your mobile device and you pay via PayPal."
A skirmish is defined as "a minor fight in war usually incidental to larger movements." Did John Donahoe's 2009 PayPal chest thumping get the attention of the major credit card companies? Touching off the 2010 prelude to international payment system skirmishes?
As the owner of PayPal, eBay INC is not immune from the major credit card companies. Remember MasterCard's $510 billion purchase volume? eBay's equivalent statistic, Gross Merchandise Volume (GMV), for the same period was $12.5 billion.
'Coincidentally' MasterCard started their MasterCard MarketPlace in March 2010. The "MasterCard MarketPlace" is initially being trademarked for the United States, European Union, China, Australia, and Canada.
A very sharp one.
19 August 2010
The day after we published the above article, reuters reported:
- UPDATE 4-MasterCard to buy DataCash for $520 million
- "The deal will improve MasterCard's ability to process payments online, especially in Europe and emerging markets, the company said. Its new chief executive, Ajay Banga, is trying to boost the company's profits by developing its online and mobile payments processing business."
- "MasterCard and Visa are trying to compete with PayPal, which is synonymous with online shopping in the minds of many consumers."
- "MasterCard, which gets 55 percent of its revenue from outside the United States, is looking abroad to grow."
- American Express Tells PayPal, Revolution Money Don't Leave Home Without It
- The PayPal India Transaction Holdup
- The PayPal India Transaction Holdup Continues
- The PayPal India Suspended Transaction Services and Farhad Irani
- PayPal India Service Hold Explained: 'We Don't Need No Stinking License'
- PayPal India Farhad Irani Restores Business Bank Withdrawls But Hold On Personal Funds Remain
- PayPal India Personal Accounts Hold and the April 30th RBI Deadline
"Donahoe said, noting that only 5 percent of sales are online as compared to stores."
PayPal will be bigger than eBay.com, CEO says, 23 July 2009
"I fear all we have done is to awaken a sleeping giant and fill him with terrible resolve."
Isoroku Yamamoto, Tora! Tora! Tora! (1970)