Paypal Has Company

1. What is the value proposition that PayPal offers consumers? How about merchants?

The value offered to consumers is an electronic payment system for making online purchases that is free to use, without having to reveal their specific banking information to online sellers. PayPal is giving consumers a more convenient and trusted way to shop, as well as send or receive funds via instant transfer. PayPal offers merchants the ability to accept online payments without having to set up a merchant account, which is cost-effective especially for small businesses. It also gives them a level of fraud protection and security, quick access to funds, and the ability to do international transactions.

2. What are some of the risks of using PayPal when compared to credit cards and debit cards?

Once the funds are withdrawn from the consumer bank account they cannot be recovered which could create a potential loss if they do not receive the good or service from the merchant. Credit cards offer more built-in fraud protection and a $50 maximum liability. “With PayPal, you may or may not receive you: money back, depending on whether PayPal can receive its money back, and a host of other conditions” (Laudon & Traver, 2009, p. 327).

3. What strategies would you recommend that PayPal pursue in order to maintain its growth over the next five years?

PayPal needs to address their security issues if they wish to continue to grow. PayPal became known for buyer protection, and they need to increase that protection by offering consumers a $50 maximum liability similar to credit card companies. In 2007, PayPal’s transaction loss was $139.3 million, 0.29% of the total payment volume. The loss rate was lower than the 2006 loss rate, but the dollars lost increased” (Laudon & Traver, 2009, p. 327). Also, they would need to be competitive with