PayPal or BECS?

Jonno Downes disagrees with me that PayPal is a threat to Aussie banks as he says we already have  something called BECS. Now I don't know about you, but I haven't even heard of BECS. I'm not going to argue with Jonno, because he seems to know his stuff, but.... okay, I am going to argue with Jonno. He says

let's put this to the test - I just did an ebay search for leaf blowers. There were a total of 9 results. 6 of them accepted payment by direct deposit but not PayPal, 2 took direct deposit AND PayPal, 1 took neither, none took only PayPal. Compare this to the first 5 results from US sellers, ALL of them accepted PayPal, none of them wanted a direct deposit.

but Jonno, I'm not suggesting that PayPal will become a serious threat to Aussie banks in their current form. I'm suggesting that they will evolve and add new services - like the PayPal credit card. Available globally. I'm suggesting PayPal will allow SWIFT payments. I'm suggesting PayPal will have a range of financial services. Here's a test - which company do you think is more in tune with me as a consumer - The Commonwealth Bank or eBay? Which company has a stronger brand in my eyes - the ANZ or eBay? Coles Myer or eBay?

I already do thousands of dollars of transactions through PayPal every month. I buy and sell stuff on eBay and I pay podcast hosts around the world - mostly all via PayPal. I consider my bank the way I consider my mobile phone service provider - a legacy system that I am going to dump as soon as an alternative comes along. And I'm not alone. There are millions of people just like me.

Comments

[Phillip Molly Malone]

I don't know if I am ready to get rid of my bank yet, but I am definitely using Paypal more and more. I think a sign of things to come is the fact that Dell will accept payment from Paypal!
That really says a lot.
Molly

[Jonno Downes]

I guess I was talking about PayPal as a particular system, rather than PayPal as a brand. And you're right that PayPal is currently the cheapest and easiest way to do international payments.

But if PayPal the brand offer credit cards, SWIFT payments and other financial services, won't they have just become a bank themselves?

BTW I think you underestimate Coles Myer - it's a company that owns a lot of brands. And some of those brands are pretty strong - Coles Supermarkets, OfficeWorks, KMart, LiqourLand.

[Cameron Reilly]

Jonno, PayPal is already a bank imho. But they are a better bank. A 21st century bank. A bank who gets it. And more power to them. If they add more services I am likely to be an early adopter.

As for Coles... who are those brands strong with? There is now an entire generation that first goes online when they want something rather than go to a store. Tell me what Coles' online strategy is today? Coles Online?? LOL.

[Rob Irwin]

Are PayPal offering home loans? Can you have your salary paid into PayPal? It's a little way off being a bank... yet.

[Cameron Reilly]

Not yet Rob, not yet. But they are still a bank. A single focus bank at the moment, but they do a bloody good job at it. And the point is they have a very strong brand for people like me. If they move into other financial services, I will use them. Banks should be very scared.

[Jonno Downes]

Cameron,

I think a financial service product has 3 discrete components.
First, there is "the brand" - including advertising & marketing functions.

Second, there is "customer service" - whether it's at shopfront (bank branch) or via a call centre.

Third, there is the back-end infrastructure that actually stores and processes the financial transactions (databases and comms links etc).

I think these are really 3 seperate businesses, but at the moment most major banks are in all 3 of them. But there are also lots of businesses that do only 1 of them.

For example, there's lots of brokers that do the sales & marketing of home loans where the customer service and infrastucture is provided by a major bank.

Then there's companies like GE Money, that run the infrastucture for processing credit card transactions, but other companies brand and resell those cards.

The way I see PayPal is (like the banks) they also cover all 3 areas, although I think they are not especially strong on customer service and I don't think they could repurpose their current infrastucture very easily to handle e.g. mortgages or credit cards. Most likely if they did get into those products they'd be another reseller, pitting their brand against e.g. Virgin as well as the incumbents.

As for CML's online strategy - it's true they're not that interested in B2C. Their online strategy is mostly about B2B (i.e. they use online tendering to make suppliers bidding contracts, which drives prices down & CML margins up, & they run lots of web apps that corporate customers use for ordering stuff). That's changing as 'virtual' products become more important, but CML are still making sure they get their cut of that stuff too - have you noticed who has the exclusive rights to selling itunes prepaid cards in oz?

[Rob Irwin]

How long have you been using it, Cam? I've been on it since way before eBay bought it and, to me, it's just a tool that I see nothing special about. I'm wondering if your newness to it -- if indeed, you are new to it -- is giving you a completely different view of the service?

[Jonno Downes]

BTW, BECS = 'Bulk Electronic Clearing System' - it's the system used to process 'direct deposit' transactions between banks. Different banks market this system using different names, i.e. ANZ call it 'Pay Anyone', CBA call it a 'Transfer', on eBay it's called 'Bank Deposit Express'.

I don't know why the banks couldn't all agree on a single catchy name for it like they did with BPAY. But if they did come up with a consistent brand it would probably stop PayPal in Oz ever getting out of it's current niche. Especially if they let you do bank-to-bank transfers at an ATM.

[Cameron Reilly]

Jonno, "not interested in B2C" in my book translates as "not interested in our customers". B2C is about providing better ways for customers to interact with the business. Not caring about it is EXACTLY what I would expect from a corporate dinosaur like CML.

Paypal's customer service is actually pretty impressive. Every time I have left a support request, I've had an email response within 12 hours. Now, admittedly, the longer the issue goes on, I get 20 different people on that email thread, but at least they are prompt and sincere about trying to resolve my request.

Don't underestimate eBay. A $55 Bilion marketcap, $4.5 billion in revenues, $3.7B in profit... I'll take their chances over a traditional bank or supermarket chain any day...

[Cameron Reilly]

Rob, I've been using PayPal for years. Here's one reason I love PayPal. When I started TPN, I needed a way to pay my hosts around the world each month. I approached my bank and asked them about it. They said "yeah sure, we can TT the funds. It'll cost your $20 per transaction.". I did some quick math and realized that if I've got 100 hosts, and I'm paying each of them monthly, that was going to cost me $24,000 a year in bank fees. For doing WHAT? I'm using their e-banking interface to process the transactions. I'm doing the work! They muttered something about "foreign exchange fees".

So I checked out PayPal. When I pay my hosts now, it costs me NOTHING and costs them about $2 per transfer. Any currency. Anywhere in the world.

Jonno, eBay (parent of PayPal and Skype) is a business built around the internet generation. They get it. Banks do not. It's unlikely they ever will. At best they put lipstick on a pig. They continue to tell me bullshit like "it takes 20 working days to clear a cheque from a foreign bank" and "we'll charge you $2 for using another bank's ATM". Talk about pissing away any little brand value they had left. They couldn't piss me off more if they actually had it written into their strategy documents.

[Jonno Downes]

Cameron,

I probably should have phrased it better, or at least emphasised that CML was "not interested in *online* B2C". Obviously they're interested very much in the customers who come in to their stores.

But I think the fact that CML *aren't* doing anything much with online retail to individual consumers is proof that they don't see eBay (or Amazon) as taking any business away from them. I think eBay is much more taking away classified advertising revenue from Fairfax etc (i.e. what Kerry Packer used to call his "rivers of gold").

And I don't think it's fair to say CML are dinosaurs because they don't think there's any margin in online B2C. The few companies who "got it" back in web 1.0 days and are still around to tell the tale (like sanity) all came to that same conclusion as well.

But I do agree that banks suck for doing international money transfers. But I also think you're needs here are very atypical (both now and in the future).

Anyway I've enjoyed this converation - pity I just noticed your post re drinks in sydney last night, would have liked to have dropped by