Alexis Ternoy
Alexis Ternoy 14 July 2015

Why Aren't You Afraid Of PayPal Yet?

2015 is turning out to be a huge year for PayPal. And that's saying a lot for a company which saw an 18% bump in its total payment volume in the first quarter.

2015 is turning out to be a huge year for PayPal.  And that’s saying a lot for a company which saw an 18%  bump in its total payment volume in the first quarter, which has seen rising payment volume every year (but one) since 2001, and which now processes a mind-boggling 12.5 million payments (or close to it) each day.

But what’s big can always get bigger, and this seems to be the mantra for PayPal.  The company’s drive for expansion and change have landed them in the news a lot this year so far.  From their scolding for aggressive and shady business tactics to the grand visions of their new CEO, there’s a lot going on over at PayPal HQ, and some are more than just a little wary of all that’s taking place.


Big Fines and a New CEO for PayPal in 2015

Last month, the Consumer Financial Protection Bureau (CFPB) announced it was taking action against PayPal.  What did this governmental consumer protection agency have against PayPal?  Deception, for starters.  Then throw in a little fraud and a touch of trickery and what could be called actual theft, and you’ve got the mix about right.

Paypal tricked consumers into signing up for its credit program, called PayPal Credit (ever heard of Bill me Later?  this is the reincarnation of that service).  The button for singing up for this credit service appears when customers are checking out during online purchase transactions. Next to the button, customers are promised $10 back and “more time to pay”.

The deception is that this button doesn’t make it clear that what you’re signing up for is a credit line.  Customers think they are simply clicking to use PayPal.

But it gets worse: the deception is followed by PayPal’s unforgivable failure to respond to customer complaints when they finally figure out they’ve been hoodwinked into applying for a line of credit with PayPal, which they never intended to do in the first place.  Some customers even received collection notices.  Interest charges, late fees, and other charges mounted for many, while they were completely unaware they’d even signed up with PayPal Credit.

In the end, the CFPB ordered PayPal to return $15 million to its customers and to pay a $10 million fine.  Some say this is merely a drop in the bucket for the enormously profitable company.  Others say it’s just the price you pay for leading the pack and having grand vision.

Beware Fantastically “Visionary” CEOs…

It’s one thing for a company like PayPal to dominate its industry…but quite another when it gets so big that it has designs on changing that industry completely.  It’s clear that the new CEO of PayPal, Dan Schulman, is planning to take PayPal in this direction.  In his words during an interview with USA TODAY last month he stated…

We’re fortunate in that we’re a financial services company that’s also heavy into technology, which means we can re-imagine how to provide services that really matter to people.Dan Schulman, CEO of Paypal

What can this mean, and what does this remind you of?  Google’s Larry Page, who now acts as CEO but is really the co-founder of the Google juggernaut.  Mr. Page has been described as something beyond ambitious, as existing in a world beyond most CEOs could imagine, as far as reach goes.  From search engine domination to the development of edible nanoparticles which would search the human body for disease, he’s got the universe covered.

I mention Larry Page not to highlight the undeniable market reach and unavoidable product lineup Google has put forth, but to demonstrate where I think Dan Schulman is going with PayPal.  He’s definitely got revolution on the brain. His vision is to become an all-encompassing “customer champion for consumers and merchants” where every financial need is covered. In the words of Sir Richard Branson, his former boss at Virgin and who serves as both mentor and friend to Mr. Shulman,

Dan Schulman too believed in business as a force for good, and I very much look forward to seeing how he uses PayPal to change the world for the better.Sir Richard Branson, founder of Virgin Group

Now if that doesn’t sound a little Orwellian, what does?

PayPal has the Means to Become Like Google: Ubiquitous in Our Lives

Like Google, PayPal aims to rule the world.  Right now, they are pursuing this goal  in the following ways:

  • breaking into the China market (China Connect)
  • breaking into the in-store purchase arena (Paydiant)
  • dominating the mobile platform (OneTouch)
  • expanding their credit services (PayPal Credit, Easy Payments)

But why should we be afraid of PayPal?  Just ask the late Senator John Sherman, author of the Sherman Antitrust Act of 1890.  Ever heard of unfair competition?  That’s bad for consumers and it’s exactly why people eye Google (read Google Troubles on my blog) and other industry behemoths with suspicion and distrust.

Google is currently the focus of an antitrust lawsuit in the European Union (the lawsuit claims Google uses its search engine domination to feature its Google Shopping results, creating an unfair environment where merchants must be part of Google Shopping in order to get their products seen).  That’s just the beginning of course.  Judging from what they’ve done so far, they aim to control not just search and shopping, but all facets of the internet, mobile, and perhaps even beyond.

And as you can see, PayPal is following in Google’s footsteps.

It will be interesting to note where PayPal finds itself in five years.  If Dan Schulman has anything to do with it (and he does), we’ll be seeing some major societal changes at the hands of PayPal.  Sends shivers down my free market spine.


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