In recent advertising campaigns PayPal has been so bold as to declare itself as ‘new money.’ It is a visionary statement fit for the 21st century and especially during this time of pandemic as more people are driven to shop online. For a long time the axis of Ebay and PayPal dominated the world of online shopping and while those days are long gone PayPal is still a massive player.
It worked and that was great for then…
The problem with PayPal is its costs and this is an opportunity for potential competitors. Of course domestic payments have always worked best using BACS (bank to bank transfers), but the moment fees cross borders banks become extortionately expensive and this is the gap that PayPal successfully filled. PayPal has always been expensive. Consider the following recent payment I recently received from an international client, but within the EU (client information redacted, but transaction shared with client’s permission):
That represents just over 5% of the total billing amount. Which somehow doesn’t add up when their stated fees are 3.4% + ?0.30 for EU members. This should lead to the following fees being charged.
Obviously my figures work out differently to PayPal and for this I have no explanation. It might be to do with foreign exchange rates but if I am billing in GBP this should make any difference. It could of course be that since Brexit the UK counts as the rest of the world, but this doesn’t hold water because I have been working with this client for a couple of years now and charging the same fees before we officially left back in January (2020). The whole point is that while PayPal is expensive it often proves to be a bit of a rip off. In this case, not only to do with the fact that their figures appear wrong, but it is also the best part of ?10.00 for processing a transaction and taking SOME profit.
In recent years specialists such as Transferwise and Transfergo who charge potentially high fees (but at least it is a flat rate) have started threatening PayPal’s dominance, but the customer is still paying too much.
In a previous article I discussed how technology is changing the way we do our shopping and how the Coronavirus pandemic has accelerated this with increasing numbers of people using it to do their grocery shopping.
Increasingly crypto is branching out into other financial services. For example there is now a BItCoin credit card and surely it is time for crypto to take over from such systems as PayPal, etc?
If crypto were to take over it would have to be a stablecoin for the obvious reason. If a supermarket were to charge 1 Tez for an item from the supermarket it in the last month it could have cost as little as ?1.78 and as much as ?2.53 (Coinbase prices) and don’t even get me started on what has happened to Chainlink’s price over the last couple of weeks!
Step forward stablecoins..!
Stablecoins are cryptocurrencies that fluctuate very little, hence their name.
There are several stablecoins out there that could be utilised in such a way. While coins like BAT and Tether have a lot going for them my personal choice would be the DAI, an Etherium based token which is tightly tied to the USD and only moves as the USD does in relation to other fiat currencies. This means essentially it behaves like a fiat currency and is superstable.
For me the DAI only has two possible issues. Economies, based on fiat currencies, simply print more cash when they need it (responsibly so not to fuel inflation), but one of the values of crypto currencies is the fact they have a market cap, in other words they are limited to add to their value. Simply is there enough DAI out there and being produced to switch over to a wholesale use of the DAI?
The second issue is technical, but the way I see it is that exchanges just need to extend their current services. Everybody who deals with crypto has at least one exchange account with currency wallets and crypto can be exchanged between wallets. If such providers galvanise themselves and make it easier to send and receive currency for just verification fees this is the way forward and it may even work out as being more efficient than credit cards.
The challenge is simple – do it better and do it cheaper.
What do I mean by easier? Two things.
Improved interfaces to make it more intuitive and easier to use. This is just a question of front end design. As it goes COINBASE is fairly simple and not too bad, but could be improved, but the first time a user switches over to Coinbase.pro it is a truly traumatic experience.
Increased transparency. Have you ever noticed how difficult it is to find fees on these exchanges or suddenly you find a surprise (yes an article on this is forthcoming too!).Atomic wallet seem to suggest they make money from the spread they offer, but closer inspection shows they also charge a fee (this is not what is on the tin!) Another example, Coinbase, has their fees quite well laid out, but when it comes to sending crypto to somebody else’s wallet you can search all day long and go round in circles.
This lack of transparency and lack of regulation is all that is stopping crypto from entering the mainstream and truly becoming the driving force behind the world economy.
I recently posed a question to Treverbalthorp who had written an excellent article on Coinbase fees.
I asked:
One question concerning fees that i have not been able to find the answer to and I have googled the hell out of it. What fees are involved in sending from my Coinbase Wallet to somebody else’s Coinbase Wallet.
The best answer I seem to have found is Coinbase does not charge for sending currencies between wallets.
I don’t know if this means your own wallets eg if you convert ETH to XTZ for example or to another person.
He replied:
Ah yes, that’s a good question!
Coinbase has 3 apps that allow you to send money between people -Coinbase -Coinbase Pro -Coinbase Wallet
Coinbase Wallet could potentially charge a fee like a network fee.
If you and your friend need to convert make sure you convert it first before sending it.
Fees sometimes apply to the regular Coinbase App and you might also be charged a conversion fee.
For instance, if you send your friend ETH from your Coinbase Wallet. It would charge you a Mining Fee or a Network Fee for sending.
If you send something else it “might” not charge anything which can get confusing.
Fees are the worst!
The Coinbase Pro app will allow you to send pretty much any coin to the address you choose ?? Converting coins on Pro involves some trading first though.
Your friend receiving the payment will only need to make sure they are providing you the correct address. So if you send ETH from your Wallet they need to give you their ETH wallet receiving address.
When your friend receives what you have sent it does not matter if they have a Coinbase Wallet or not. As long as the correct address was given/entered then the ETH sent will be the ETH that is received. Your friend will not be charged anything for receiving.
I like to use Coinbase Pro for sending from address to address. I normally already have enough converted so that I can easily exchange without paying any fees for anything.
Do keep in mind that with Coinbase Pro you may need to Whitelist your friend’s receiving address which could take some time for approval before you can send.
With Coinbase app and Coinbase Wallet always expect a fee of some kind unless buying USDC with US Dollar ??
I hope this has helped! Always more than happy to help with more questions or even make a tutorial if needed!
The DAI could be on the verge of ushering in a truly cashless society; a place that futurists have been expecting us to get to for years now.
PayPal is not new money, it is a cash cow for its owner. Crypto is new money and the more real world applications that can be found for it the more its usage will be accepted and grow.
The best time to invest in crypto was 10 years ago and the second best time is today.
