[PayPal] PayPal to start charging for what used to be free!

From: Mike Cheponis <mac_at_Wireless.Com>
Date: Wed Oct 11 16:13:17 2000

Well, the Beginning of the End for PayPal, as I see it. I predicted it.
It's happening. Oh well!

Now can you see why I detest this low-life pond scum operation? -Mike

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               PayPal Raises Fees, Looks For New CEO and Profits

By STACY FORSTER
October 10, 2000


PayPal.com delivered a popular solution to a vexing problem -- how to
send and receive money over the Internet. But the bigger challenge for
the two-year-old start-up will be to make money in the process.

With its sights set on profitability and an initial public offering,
PayPal's parent company, closely held X.com, is looking for a new chief
executive officer. On Sunday, Elon Musk, the founder and chief executive
of X.com (www.x.com), said he is stepping down to allow the company to
bring in a leader with more experience.

"Elon has had great start-up experience, but he's never run a major
public company," says Peter Thiel, chairman of X.com. Mr. Thiel says he
expects the company to be profitable by the end of 2001.

And in move that may be controversial, PayPal will begin charging some
consumers fees on Oct. 16 for a service that used to be free. The
company, which had depended largely on interest income on cash in its
customers' accounts, plans to charge a fee of 1.9% plus 25 cents per
transaction for anyone who receives more than $500 in credit-card
payments in a six-month period. Before, only businesses were charged the
fee.

"They're struggling to come up with the business model," says James
VanDyke, an analyst with New York e-commerce research firm Jupiter
Communications.

PayPal, which launched its service in October 1999, merged with X.com in
March. Analysts say the combined company dominates the online
person-to-person payment business, boasting nearly four million customers
and 300,000 business accounts.

Each day, PayPal completes about 130,000 transactions and moves about $6
million. PayPal says it is accepted by more than half the auctions on
eBay, compared with only 10% for its closest competitor, Billpoint
(www.billpoint.com), a joint venture between eBay Inc. and Wells Fargo &
Co.

PayPal's registered users can send payments to anyone with an e-mail
address by writing a dollar amount on a form at the company Web
site. When the e-mail is sent, the payment is charged to the sender's
bank or credit-card account. If the receivers aren't registered, they can
fill out a form attached to the e-payment to receive the money, which is
waiting in a PayPal account in the receiver's name.

PayPal has grown rapidly by encouraging users to recommend the service to
friends and families, offering a $5 reward for opening an account or
referring a new customer.

But all that has been costly. "They now need to create a strategy that
walks the tightrope between maintaining the critical mass of customers
and figuring out a way to make money," says Paul Jamieson, a financial
services analyst for e-commerce research firm Gomez Advisors in Lincoln,
Mass.

And some customers already are angry. Peter Resnik, a financial
consultant from Nokomis, Fla., who conducts about 100 auctions a month
for antique paper items on eBay, says he feels duped by advertisements
promoting PayPal as a free service. He contends those advertisements were
aimed at the auction sellers who helped PayPal develop its large customer
base.

"They led you down the path with the impression that this was a free
service and there were no strings attached," Mr. Resnik says.

PayPal first began charging fees when it introduced business accounts in
June, says X.com spokesman Vincent Sollitto. Mr. Sollitto says they
PayPal is implementing the new policy because some people were using the
personal accounts for business purposes to avoid fees.

Mr. Thiel says the new policy will affect only about 250,000 customers,
or 6%, of its customer base of four million. Users were notified about
the policy change last week in an e-mail.

X.com's competitors vary on their policies for credit-card
transactions. Ecount.com (www.ecount.com), PayMe.com (www.payme.com) and
PayPlace.com (www.payplace.com) do not charge for credit-card
transactions.

For transactions of more than $15, Billpoint charges 1.75% plus 35 cents
a transaction for business accounts and 2.5% plus 35 cents a transaction
for personal accounts. EMoneyMail (www.emoneymail.com), a payment service
offered by BankOne Corp., charges customers $1 to send money, but there
is no cost to receive funds.

 
Received on Wed Oct 11 2000 - 16:13:17 BST