In today’s world, what everyone is looking for is quickness and efficiency. The faster the system/technology/application, the better. However, in the world of digital payments, a major competition is underway between the blockchain and PayPal. The blockchain is the relatively newcomer, while PayPal has been around for quite a long time. We’ll look at some of the pros and cons of both money transfer systems to enable you decide the long term winner in the blockchain vs PayPal debate.
BLOCKCHAIN TECHNOLOGY AND OTHER WORLD CHANGERS
Blockchain technology is one of those state of the art digital revolutions that only comes around once or twice every generation. It is as important an invention as the integrated circuit (1958), the microprocessor (1971), the personal computer (MITS Altair 8800, 1975), the internet (ARPANET, 1969), Windows (1985) and smartphones (2007). Blockchain’s distributed-ledger technology (DLT) offers a series of new, decentralized infrastructure for payment processing, accounting tasks, financial markets transactions and many other data and internet driven functions, both personal and public.
PayPal can also be included in the above-mentioned tech honor roll, as it vividly paved the way for e-commerce to grow at somewhat overwhelming speed. It also provided the world with an alternative to traditional bank wire services, Western Union among others. PayPal also aided in making consumers and businesses become more comfortable with the idea of electronic money.
THE PROS AND CONS OF BLOCKCHAIN PAYMENT SYSTEM
It is decentralized meaning no single point of failure can destroy the ledger’s contents.
Cross border payments take less time with blockchain as a result of fewer checkpoints.
Payments do not require any bank’s approval before they can be sent. The payor and payee control the transaction process, and no room for a third party.
Once data is entered into the blockchain, it cannot be tampered with except in rare cases, and then only by agreement of all parties affected.
v) NO LIMITS ON PAYMENT SIZE;
You want to send someone five million dollars worth of Bitcoin, quickly? You can do it on the blockchain. Just make sure you are aware of any applicable fiat-to-crypto (and vice-versa) costs.
i) COSTLY MISTAKES;
If you mistakenly send funds (crypto) to the wrong address, it is somewhat vain to look for any government regulator to bail you out.
Blockchain ledgers are public knowledge, inasmuch as anyone with the correct access codes can view the details of each transaction within. Privacy minded individuals and companies may not be comfortable with this kind of set up.
iii) SLOW TRANSACTION SPEED;
Slower transactions speed (transaction per second) compared to PayPal, Mastercard and Visa.
iv) FIAT TO CRYPTO CONVERSION COST;
This happens when all of your payments occur within the crypto ecosystem, you will need to convert your EUR, USD or GBP, etc. to Bitcoin, Ether, etc. When you receive payments in crypto, you will also incur transaction costs to convert the funds back to fiat.
ADVANTAGES OF PAYPAL PAYMENTS
i) FAST TRANSACTIONS;
PayPal provides users the ability to transfer their PayPal funds to their bank account in less than 5 minutes when done via debit card.
ii) FIXED FEE;
You will incur a flat 2.9% for receiving payments for your goods and services, plus 30 cents per transaction. However, there is zero charges to purchase goods and services via PayPal. Sending money to family and friends is also free but, currency conversion fees will apply if you send funds internationally.
iii) SEND MONEY TO ANYONE IN UP TO 26 DIFFERENT (FIAT) CURRENCIES WITH AN EMAIL ADDRESS; Well, this is applicable as long as they have a bank account and have signed up for PayPal.
This is another free PayPal payment option. It is almost similar to an ACH transaction in a traditional bank but can take a longer time to complete. This is an excellent choice for payees who want to avoid the 2.9% fee. You can always ask your payor to use an eCheck rather than the regular PayPal payment.
DISADVANTAGES OF PAYPAL PAYMENTS
i) PAYMENT LIMITS;
You can only send a maximum of $10,000 in any one PayPal transaction.
ii) FUNDS ON HOLD;
When receiving funds via eCheck, expect your money to remain in limbo for at least several business days. This is the downside of receiving funds without any fees. It is also a money maker for PayPal, as they collect interest on the float.
iii) CURRENCY CONVERSION RATES;
PayPal is responsible for determining the exchange rate you will receive. You must factor this additional cost into consideration when calculating your total PayPal transaction fees.
BLOCKCHAIN VS PAYPAL
Hitherto, PayPal can still process transactions faster than blockchain, but that may not be the case in the nearest future. In fact, PayPal is strong interest in blockchain and it’s potential to disrupt the financial world.
Will PayPal payments be sent via DLT in the near future? No one knows, but it’s definitely a possibility worth contemplating as this decade rapidly draws to a close. Who knows, blockchain vs. PayPal might morph into something like PayChain or BlockPal.
THE WILD CARD MIX
Bitcoin hash rates continue to go higher, although it was rather slow as of early 2019. More merchants are willing to accept cryptos as payment. With the possibility of a major US (worldwide?) recession looming in 2019-2020, it is very possible that revenue-hungry retailers will welcome any form of payment they can set their hands on, including major cryptos.
However, what will happen if 100 million Americans decide to use crypto every day to complete their personal and business transactions? Furthermore, what if most of those consumers simply choose to save their funds within the crypto space, never again converting their coins to fiat?.
in all, the future looks very promising for both blockchain and PayPal as world-class payment systems, worldwide. But, always be alert of the potential for government restrictions on crypto use (on consumer purchases, not really on actual crypto trading). If crypto purchases are limited by government decree, then the blockchain will automatically be affected and it’s development could be delayed or slowed down.
PayPal appears to be immune from such a hypothetical breakdown not unless they start offering cryptos as an additional currency. Regardless of future events, the blockchain vs. PayPal saga should prove to be an interesting competition in the future.