While it is not yet at crisis stage, it is nevertheless the case that blockchain systems and cryptocurrencies have had a significant disruptive effect on the world of digital payments, with the once all-conquering giant PayPal, looking as though it could, in time prove to be the biggest casualty.
As the world of online transactions and payments rapidly evolves, it would seem that PayPal — once the master disruptor itself — has failed to keep pace and so is losing its relevance and preeminent position. This came sharply into view with the news that ebay is dropping PayPal as its first choice payments provider in favour of Adyen, a relative newcomer based in Amsterdam that will offer ebay merchants both lower costs and more control. Just as importantly, this partnership opens the possibility of eBay accepting cryptocurrencies, although it has not yet stared to do so.
Blockchain technology and cryptocurrencies, along with PayPal’s high processing costs for merchants and retailers, are seen as the main reasons not only for the ebay move but also why PayPal is no longer the automatic go-to digital payments solution. In short, its reluctance to engage with blockchain technology and cryptos puts PayPal in danger of being left behind in the wider world of digital payments.
This is not the first time, however, that PayPal has failed to spot the way the online world is moving. In 2003, for instance, it dropped all involvement with online gambling as a result of the greater enforcement of the Wire Act in the US, and so missed out on the huge worldwide growth in this market for a number of years. It has been slowly making its way back into the sector, but is still somewhat reserved about it, with the result that other non-banking payment methods such as Skrill and Neteller have overtaken it.
For instance, many of the casinos that accept PayPal are now taking Bitcoin payments as well as other cryptocurrencies, not to mention the trend of bitcoin only casinos that are popping up every month. For a new generation of online casino players, who are growing up with blockchain technology, PayPal is likely to seem an anachronism.
A failure to engage with blockchain technology is also likely to have ramifications for PayPal beyond the online casino industry, according to some analysts. It has the resources to do so, but has been slow to move towards a full embrace of blockchain, but many believe it will need to do so if they are to remain a major player in the world of intermediary online payments. However, PayPal is not alone in this — Alibaba and Amazon, the worlds biggest online retailers, are also not envisaging accepting cryptocurrencies any time soon, partly because of what is seen as the inherent instability in cryptos.
PayPal CEO Dan Schulman is reported to have said that he considers cryptocurrencies to be “an uncertain investment”, and that the regulation surrounding them is not sufficient. Similar reticence has been expressed by the company’s CFO John Rainey, citing the significant and rapid fluctuations in the value of cryptos as one of the reasons why adopting them would not work under the PayPal business model. These comments by the two top names in the organisation would certainly seem to suggest that there are no imminent moves by the payment giant to become a part of the blockchain revolution.
This seems particularly short-sighted when it is considered how Bitcoin and other cryptocurrencies are gaining more widespread acceptance in Africa and other traditionally underbanked regions of the world. Like its failure to engage fully in the online gambling industry, PayPal’s hesitation over blockchain technology and cryptos could mean that it misses out once more on being at the heart of an economic boom, as the embracing of mobile and other non-bank payment methods means the potential growth across Africa, and the rest of the world is enormous.
A recent report suggests that the global digital remittance market could be worth as much USD$8.6 billion by 2025, and that an ever-growing number of new fintech companies who are utilising blockchain technology are set to grab an ever-increasing slice of the market. PayPal is therefore in serious danger of finding itself left behind unless it decides quickly to get in the blockchain game.
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