1.0 PURPOSE
PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet. It serves as an electronic alternative to traditional paper methods such as cheques and money orders.
PayPal performs payment processing for online vendors,auction sites, and other users, for which PayPal is not free if you are a seller. Its main purpose facilitates the transfer of money easier.
2.0 FEATURE
PayPal uses email address and phone number to send/receive money to/from family and friends, pay for goods and pay for eBay items. Before commencing any transaction, signing up to be a member of PayPal is required.
By simply entering the payment information, sending money by credit is effortless. Payer attaches details such as payee’s email address and amount to be paid, etc.
The request for money can also be done by PayPal. In situations whereby payer is not able to pay, the payee can send a request for intended transaction to be enabled.
There is no worry about not knowing when money will be received. PayPal disseminates an email alert when payer has transferred funds to payee’s account.
The process demonstrates an electronically-facilitated transaction between consumers through some third party, also known as Consumer-to-Consumer (C2C).
A straightforward method to track all your transactions is by clicking “History” where it lists long history and when unable to find transaction.
Therefore, the above mentioned features are user-friendly and uncomplicated for consumers.
3.0 DESIGN
PayPal, an online payment service that allows individuals and businesses to transfer funds electronically by using encryption software. People can use it to pay for online auctions, purchase goods and services, make donations or send cash to someone.
Funds transferred via PayPal reside in a PayPal account until the holder of the funds retrieves or spends them. If the user has entered and verified their bank account information, then the funds can be transferred directly into their account.
PayPal acts as a middleman between merchants(buyers and sellers) and banks and credit card companies. Credit and debit card transactions travel on different networks.
When a merchant accepts a charge from a card, the merchant pays a small fee ranging from 1.4% to 3.9% of sale amount which is then being paid to all the different companies that have a part in the transaction.
If someone pays by check, a different network is used, one that costs the merchant less but moves more slowly.
PayPal touts their presence as an extra layer as a security feature, because everyone's information, including credit card numbers, bank account numbers and address, stays with PayPal.
With other online transactions, that information is transmitted from the buyer to the merchant to the credit card processor.
4.0 CRITICISMS/PROBLEMS CAUSED AND EVALUATION
PayPal's customer service has been criticized for how they handle customer issues.
Paypal has also been involved in a number of lawsuits.
4.1 PAYPAL IS NOT REGULATED BY BANKING REGULATIONS:
Paypal is not a bank, and thus is not regulated by any banking authorities.
Paypal does not provide consumers with accounts linked directly to their own banks (Real Merchant Accounts).
The money is deposited in the customer's personal account with Paypal, in which Paypal has full control.
Paypal can thus freeze any accounts for any time period without having the need to give an explanation (as stated in their policies).
The account can now only receive money but the money cannot be withdrawn.
Paypal is not obliged to return the merchant the balance in their account (as stated in their policy).
One good example can be seen from a source:
-Start of article-
EBay payments 'not rock-solid'
Source from BBC NEWS (http://news.bbc.co.uk/2/hi/business/3544795.stm)
Paypal, the payment service of internet auction house eBay, has admitted misleading shoppers into believing it offered credit-card-style protection.
Eliot Spitzer, New York State Attorney General, has reached an agreement with the firm to disclose clients' rights and liabilities more accurately.
Customers who buy goods on eBay, which then fail to turn up, are not always due a refund if they pay with Paypal.
Most credit-card issuers, by contrast, offer refunds in such circumstances.
Full disclosure
Paypal has agreed to pay $150,000 to settle the New York case.
The firm is not obliged to begin offering so-called "chargebacks", the technical term for credits or refunds offered in case of fraud by a merchant.
Last year, Discover - the credit-card division of Morgan Stanley - and American Express agreed to start offering chargebacks for eBay transactions.
Paypal, which does not fall under the same regulatory regime as credit-card providers, has agreed to be more open with the exact level of protection it offers its 25 million customers.
Cases to answer
There are still question marks over Paypal, however.
The firm has admitted that it faces investigations in several states, and from the Federal Trade Commission.
No details of these cases are available, but eBay said they related to its "restriction and disclosure practices" - in other words, probably the same areas as the New York case.
PayPal has aroused considerable criticism from eBay's army of users, however.
The main complaint is that the firm is wont to freeze accounts it considers suspicious, often for months on end. Some users allege that this practice gives Paypal unfair use of clients' money.
-End of article-
Source from BBC NEWS (http://news.bbc.co.uk/2/hi/business/3544795.stm)
EVALUATION:
Paypal would have a lot of potential should they be more open and not be “misleading” in issues regarding “chargebacks”. They should try to follow as closely to bank regulatory framework in order to regain the confidence level from their customers, be it corporate or small retail customers.
By being more transparent, customer’s confidence will be boosted, and thus more transactions will be made. Paypal should base their business on customer’s trust (be more open), instead of misleading, complicated security features.
One reason for the lack of confidence of customers is because paypal mainly function over the internet, a virtual reality where transaction takes place without invoices and hardcopies of transactions.
This will make people have doubts on paying via the internet, they will instead, resume to the good old fashion of going to the banks to remit or transfer their money in a safe manner.
4.2 CURRENCIES PROBLEMS:
As of the end of 2006, PayPal operates in 103 markets in 13 countries, and it manages over 133 million accounts.
PayPal allows customers to send, receive, and hold funds in 17 currencies worldwide.
These currencies are the U.S. dollar, Canadian dollar, Australian dollar,Euro,Pound sterling,Japanese yen,Chinese renminbi,Czech Koruna,Danish krone, Hong Kong dollar, Hungarian forint, New Zealand dollar, Norwegian krone, Polish zloty, Singapore dollar,Swedish kron,and Swiss franc.
EVALUATION:
Paypal should allow transactions made available in more currencies, especially Taiwan (NT) since eBay caters to many different auctions from different countries, mostly from Taiwan.
Customers will find it inconvenient if, for example, they would like to transfer money in Taiwan Currencies.
Customers would have to calculate and change the amount payable to USD first before sending it over to the Taiwan Seller. This would incur exchange rate costs (subjected to daily fluctuations).
It is also time consuming to do this additional step as compared to going through Bank credit cards.
4.3 PROTECTION FOR SELLERS AND BUYERS OF EBAY:
The company—by its own admission—uses automated systems to verify tracking numbers (in the case of disputes between sellers and buyers where buyers claim that sellers did not send the ordered goods) in some cases.
If a seller has an item not received claim filed against them, they are required to enter a tracking number for the item.
If they fail to enter a valid tracking number that shows a successful delivery, or even mistype the number by one digit, they may lose the claim automatically without a real person ever adjudicating the claim.
In general, if a valid tracking number is entered which can be accessed online and shows a successful delivery, the seller will automatically win the claim.
EVALUATION:
They can upgrade the automated systems to verify tracking numbers, i.e by showing more leeway by giving more tries for the automated systems to track successful delivery.
In this way, buyers will feel safer when they order on ebay. Paypal can also implement a partly automated technical system (personnel to assist the affected customer) instead of a fully automated system.
In this way, they can also answer to the questions of the merchants and help them in a more personalised manner.
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