PayPal - How does the fintech pioneer's technology work?

PayPal is one of the most popular fintech companies in the payment service provider category and is used by more than 300 million people. The payment service operates worldwide and was part of eBay until 2015. However, PayPal has been independent since 2015 and is based in Luxembourg in the form of a subsidiary (PayPal Europe) and has its headquarters in California. The European subsidiary is called PayPal (Europe) S.à r.l. & Cie, S.C.A. and has a banking license. The American parent company does not have such a license. PayPal (Europe) is controlled by the CSSF (Luxembourg Financial Supervisory Authority). In general, PayPal states that it is not a bank. The way PayPal works cannot be compared with a bank account.

PayPal - how does the service work?

PayPal does not issue account numbers, but handles all payment transactions via the customer's stored e-mail address. To be able to use PayPal, however, more than just an e-mail address is required. Bank details or a credit card must also be provided so that payments can be debited. Payments from the stored bank account (bank details) are debited by direct debit authorization.

What technical requirements are necessary for use?
PayPal is used digitally. In addition to an e-mail address, it should also be possible to install the PayPal app or a browser and an Internet connection (or mobile data) should be available. The PayPal app is available for iOS and Android operating systems. If you use PayPal via an internet browser, look out for https pages and other security features. Although the PayPal app is considered secure, a virus scan and malware scan should be carried out regularly on PCs and mobile devices.

Who can use PayPal?

PayPal's offer is aimed at both private customers and merchants. Merchants must pay a fixed amount and one percent of their turnover to PayPal to use the service, for example for bank transfers. For private customers, use of the service is generally free of charge. A merchant may not pass on the fees to be paid to the buyer. The exact terms and conditions of business and use can be viewed at PayPal itself. PayPal is a secure payment service and can also be used in online casinos. The Online Casino with PayPal is no longer possible with most providers. However, there is still a small selection of renowned casinos that accept payments via Paypal.

What are the advantages and disadvantages of PayPal?

PayPal is the payment service provider for purchases in online stores. Whether eBay or another online service where goods can be purchased, purchases can often be processed via PayPal. PayPal also allows you to send money to friends and acquaintances.

PayPal advantages

The advantage of the payment service is obvious. The money is usually credited to the recipient's PayPal account immediately. There is no need to make a bank transfer that takes days, as is usual with many banks. Payments are made via the e-mail address provided. No bank details of the sender are disclosed by the service provider. As a rule, the payee only knows the e-mail address and the name of the sender. The fact that the bank details are not transmitted ensures a certain level of security. Depending on the payment process, private sellers can protect themselves against loss of money and fraud. There is so-called buyer protection, but this is not available if the money is sent to a friend. It can therefore be determined from the outset whether it is a friend or acquaintance or a retailer who receives the money. If the ordered goods do not reach the buyer or differ greatly from the actual order, the buyer can reclaim the money and receive a refund under certain conditions.

PayPal disadvantages

The service collects information about users. The privacy policy states how the data is collected and reveals that it is stored to whom (address) goods were delivered, how much was purchased and who makes a purchase at what time. In addition, location data, hardware data and other device information is transmitted via apps. PayPal can also obtain further information about the respective customer from credit agencies, merchants and data providers. In addition, PayPal may in theory share this data with business groups, financial institutions, merchants and other companies with which it has a partnership. There is talk of "right reserved" and "disclosures to other third parties for business reasons".

What data can theoretically be passed on?

Personal data may be passed on and used for marketing purposes. If PayPal has been set up, consent to the transfer of data has usually also been given. This consent can be withdrawn at a later date.

PayPal as trustee

PayPal acts as a kind of trustee and only handles payment processing. PayPal's services are independent of the services of a seller who can be paid via the PayPal service. There is no account number, only the e-mail address of a PayPal member via which payments are made. PayPal is merely the transfer service provider and has nothing to do with the provision of services by a merchant. With PayPal, there is no bank transit time, which is otherwise required for bank transfers. The exception is the real-time transfer, with which a transfer amount is immediately credited to the recipient's bank. However, fees are charged for a real-time transfer, which are usually borne by the sender of the money (transferor). Not all banks offer real-time transfers. PayPal, on the other hand, can be used free of charge by private sellers. Furthermore, banks do not offer buyer protection. PayPal, on the other hand, offers payment with buyer protection as a service.