If you are a small online business owner, chances are you would have researched multiple online payment methods for taking or initiating payments for products and services. In the search, you’d have undoubtedly come across PayPal.
We say undoubtedly because according to PayPal.com, the online payment platform has 87 million+ active accounts in over 190 markets working with nearly 24 currencies. With numbers like these, it is impossible for PayPal to remain unheard of.
In spite of its popularity, PayPal is no longer considered to be the perfect solution for small businesses. There are a number of horror stories moving on the internet proving the point. The shortcomings of PayPal – as we would get into in the next three seconds – have started paving the way for blockchain payment system and digital currency – more on that later.
- It could take somewhere around 4 days to withdraw funds into your bank account
- It can be extremely difficult to contact PayPal’s customer executives
- You can wake up one day to find a suspended PayPal profile because the platform decided you have a fraudulent account.
- You should either get comfortable with the idea of following the TnCs to the t or be prepared for accounts getting frozen for months.
These horrific events are leading up to businesses looking for a more secure, answerable, and on many fronts a trustless payment system. Enter cryptocurrency transactions.
Blockchain payments centered around digital currency have been strengthening its position in the Fintech domain for some time now. Although we are still some years behind for an era where blockchain technology will revamp the future of transactions, the year-to-date performance has brought Bitcoin – a major player of blockchain payments – almost neck to neck with PayPal.
Factors That Are Bringing Digital Currency Transactions Face-to-face With PayPal
Although digital payment systems are not inherently fool-proof – there have been instances where the user sent bitcoin to a wrong wallet address and never got the money back – the present-day blockchain features and the promise of getting better is enough to shake the grounds under PayPal.
What establishes this observation further is how Bitcoin payments via the blockchain have already surpassed Western Union Company in terms of average volumes.
The support that Bitcoin is getting in its journey to move up the charts goes deeper than the inherent centralized vs decentralized payment systems difference between bitcoin and PayPal.
Here’s why some businesses, like Cointelegraph, Kik are letting go of any other online payment system for using blockchain payment processing platforms for receiving and sending payments.
1. Cross-border payments
One of the biggest bitcoin vs PayPal difference lies in their geographical reach. PayPal is limited to a few geographical locations. Bitcoin, on the other hand, is independent of the geographical locations. You can receive and send payments from anywhere across the world.
2. Unbreachable security
Like any centralized system, PayPal also doesn’t come free of security breaches and hacks. In February 2020, Cybernews found 6 critical vulnerabilities in PayPal and the latter denied having them. With cryptocurrencies, there are zero instances of funds rollback – meaning once the transaction is initiated in blockchain decentralized ledger technology it stands immutable.
This is a key reason why across industries, blockchain is being incorporated for better mobile app security.
3. Unhindered privacy
Although bitcoin is not entirely anonymous, it still offers a level of anonymity or pseudo-anonymity for the users.
In contrast, it becomes impossible for PayPal users to hide their identities. They have to go through an extensive process of filling out forms providing information about where the money came from and how they intend to use it.
A Reddit user commented that “I am from China, every time, when I withdraw PayPal USD into my China bank account, I need fill a big form to explain where [the] money came from and what they are for. With [Bitcoin], I don’t need to worry about it. I can exchange BTC to CNY in local exchange market directly.”
4. Truly versatile
In order to use PayPal, you must have a bank account and credit/debit card. With over 1.7 billion (and growing) adults operating in the unbanked circle, the fact that Bitcoin can be sent through email or even as an SMS comes as a savior. This ease buries the pillar of open banking in the developing world.
5. Zero cases of frozen funds
The decentralized side of bitcoin ensures that there is no one clearinghouse controlling and monitoring the network. It builds upon the trustless payment system concept and heightens the network security in a way that there is no single point of failure, since no single clearinghouse = no single point of failure.
Moreover, one of the biggest challenges reported by PayPal users – accounts getting frozen is something that can never occur in the case of a decentralized cryptocurrency payment. Under the decentralized network, there is no central clearinghouse or cryptocurrency’s CEO who can lock you out of the blockchain digital wallet.
6. Lower transaction fees
Paypal is notoriously famous for heft transaction fees, which can go up to 30%.
In the case of Bitcoin, the transaction fees ~ USD 0.005 is fixed. So irrespective of whether you are sending 1 cent or 1 billion, the transaction fees would remain the same. In the case of the above image, had bitcoin been used, the fees would have been USD 0.30.
Additionally, while PayPal allows $10,000 per transaction, the maximum transfer amount in the case of bitcoin-based digital payment solutions is nil.
At the back of these advantages, the demand for blockchain development services has skyrocketed, especially in the payment transactions sector.
Noting the growing rise in blockchain inclusion in the Fintech sector and the crypto development services posing to be a competition for the PayPal business model, the latter took a bold move.
Does PayPal’s Entry in to the Crypto World Mean the End of Competition?
PayPal recently confirmed its entry in the crypto-asset sector with an announcement that it would now enable holding, buying, and selling, of cryptocurrencies on the platform. In the coming weeks, PayPal’s US users will be able to start trading in litecoin (LTC), bitcoin (BTC), bitcoin cash (BCH), ether (ETH), through their PayPal accounts. Users would also be able to use the cryptocurrencies to buy goods from around 26 million PayPal merchants.
The move is a win-win situation for Paypal but not so much for Bitcoin. Here’s what we mean by this statement.
While PayPal brings 340 million of its users to the crypto table, their crypto users wouldn’t necessarily become active users, as they won’t have access to their private keys. Moreover, the users won’t be able to transfer the crypto assets holding out of the PayPal account, nor would they be able to send cryptocurrencies to other PayPal users.
Basically, PayPal will dictate what the users are able to do with cryptocurrencies, and can also freeze their accounts when they see fit – something that directly goes against the technology’s ethos of decentralization.
Lastly, when we talk about the usage of virtual coins, PayPal will convert the crypto into the national currency. This way, the company that will be receiving the fund will not get the coins but its dollars or pounds denotation. PayPal mentioned that the system would ensure “certainty of value and no incremental fees”.
To sum it up, it is safe to presume that the inclusion of cryptocurrency in PayPal won’t affect the competitiveness of Bitcoin as a better payment method. If anything, this would bring a rise in the cryptocurrency development services.
Join the trend before it becomes mainstream. Contact the blockchain development company which excels in the end-to-end development of all blockchain sub-technologies.