Making Money on Ebay

For more than a decade now, PayPal has reigned king of online payments. Just last quarter alone, their revenue was nearly a billion dollars ($971 million according to VentureBeat). It was a good move for eBay to gobble them up years ago, because today, an estimated 40% of the company’s revenue comes from the PayPal unit. In a press release last month, eBay stated that by 2013 they expect PayPal’s annual revenue to be in the ballpark of $6 to 7 billion. Will that still happen now that Visa has entered the playing field?

Visa’s new PayPal-like service
On March 16th, Visa issued this press release about their new service, which will allow Visa debit and credit cardholders to send money to each other. Visa has offered personal payments outside the United States but this is the first time such service will be available domestically.

“Bank customers of participating financial institutions will have the option to select a Visa account as the destination for funds when making a personal payment. By simply entering the recipient's 16-digit Visa account, email address or mobile phone number, consumers can send funds directly from their bank account to a recipient's Visa account.”

The press release didn’t specify an exact date this feature would be rolled out, other than saying it will be “soon.” Two other companies – CashEdge and Fiserv – have partnered with Visa to offer this service.

Is Visa the first formidable opponent for PayPal?
Obviously, this will not be the first or last competitor. A number of similar services have sprung up over the years, without taking root like PayPal has. Google Checkout was supposed to be "the PayPal killer" when it launched in 2006, but that expectation never materialized. So if the Goliath Google can’t beat PayPal, why would Visa have a fighting chance? Here are 3 things to consider:

Customer Base: At the end of last year PayPal reportedly had 94.4 million registered users – no small feat to accomplish and their first-mover advantage surely contributed to that success. Visa, on the other hand, may be new to personal payments here in the U.S. but they already have a massive customer base they can tap: 269 million credit cards and 397 million debit cards, as of September 30, 2010 (Source: Visa).

Processing Costs: Due to their sheer size, one can assume that the credit card processing fees incurred by PayPal must be bargain basement, comparable to a Wal-Mart or McDonald's. Regardless, it’s still a big expense. That’s why when a credit card is selected as the funding source, they direct you to a page to try and persuade you to use a checking account instead (where you will find an eye-catching orange button for it, which some allege is visually confusing). By cutting out the middle man, Visa might have a real advantage here when it comes to costs.

Card Benefits: If you’re like me, you prefer card payments. I love to exploit my cash back credit card rewards whenever I get the chance. Of course you can earn cash back on your credit card when sending PayPal payments, but the 2.9% fee incurred on the other end can be a deterrent (if the recipient doesn’t want to pay the fees, or you don’t want them to). Visa hasn’t stated whether or not these payments will qualify for rewards, but if they do and the fees are lower, that would be attractive to both parties.

Another benefit [some] credit cards offer is top notch customer service and dispute resolution. I admit, it does sound like PayPal’s dispute resolution has improved drastically over the years, but I think many would agree it still won’t hold a candle to the service you get with something like a Chase Sapphire or other Visa Signature card (disclosure: my website markets the Chase Sapphire card). The benefit of dealing directly with your credit card company’s customer service might be considered a selling point.

Conclusion?
It’s too early to tell if Visa’s personal payment feature will be a hit or miss. Both companies have their strengths and weaknesses. PayPal definitely knows their stuff when it comes to online payments, however my PayPal credit card review demonstrates their ineptness in the card arena. It will be interesting to see whether Visa’s idea fizzles or sizzles.

Disclosure: My company's website, CreditCardForum.com, advertises credit cards. Therefore I have direct and/or indirect financial ties to some credit cards. Additionally, a close family member of mine owns a small amount of Visa stock, which I had advised them to buy several months ago.

I wouldn't advice anyone to start a business on E-bay unless you sell something no one else sells. E-bay put my wife out of business! A few years back my wife had about $12000.00 closing and after that she got suspended. We got a call from somebody saying your going to get kicked off of E-bay and started laughing. We thought it was a prank but right after that my wife gets suspended. It turned out somebdoy broke into her account and started shield bidding. She called E-bay and the guy said don't say I said this but I believe this is an inside job. I was told people who work at E-Bay can sell on E-bay. So if you are taking business away from somebody you know what happens. People bidding with zero feedback was another problem. People who sell on E-bay would make up fake names and fake bid on your item you are selling to discourage buyers from buying your item in hopes they will bid on their same item. This happened everyday and E-bay did nothing to stop this nonsense. Another time a lady bought 8 items and left 8 bad feedbacks so my wife got suspended. She said she never received her tops. She calls E-bay and says ask the lady to show that she paid for the items. E-bay says that is our problem. I could go on and on. E-bay is a nightmare!

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