E-mailing
money: fast and convenient but how secure? By
Holden Lewis
• Bankrate.com
PayPal lets you e-mail money. With more than 15 million
registered users, PayPal
is probably the most popular online financial service. PayPal and
its competitors let you send money by charging your credit card
or transferring money from a bank account.
PayPal was a revolutionary product when it was introduced
in November 1999. At first, it was marketed mostly as a way to settle
small transactions with friends and family -- settling the check
at a restaurant, for example.
But it turned out that using PayPal was a good way
to pay for items bought from strangers in online auctions. Less
than a year and a half after the first PayPal transaction, it was
being used to settle more than a quarter of the auctions on eBay.
PayPal is easier, faster and usually cheaper than sending a cashier's
check in the mail (another favored way to pay for items bought in
online auctions).
PayPal's competitors include Citicorp's c2it and its
AOL Quick Cash service, Bank One's eMoneyMail and Western Union's
money transfer service. For about two years, PayPal's biggest competitor
was Billpoint, a payment company that was co-founded by eBay. But
in the summer of 2002 eBay announced plans to buy PayPal and shutter
Billpoint.
PayPal's competitors have their flaws. The other services
aren't nearly as popular as PayPal, so it's easier to find someone
who will accept PayPal.
Thriftiness
All of the payment services except PayPal charge
users for sending payments -- anywhere from 50 cents up. PayPal
doesn't charge anything to send money. All services charge for receiving
money and they have complex rate schedules.
Bottom line: PayPal is cheaper
than buying a stamp to send a check in the mail.
Convenience
When you buy something with a personal check
in an online auction, the seller usually waits a few days for the
check to clear. Of course, the seller can't deposit the check until
it arrives in the mail, which takes a few days. So when you pay
with a personal check, it might take a couple of weeks for your
seller to ship your item.
If you pay with a cashier's or certified check or
a postal order, you have to trek to a bank or post office to get
it and you have to pay for it. Then you mail the payment and wait
for the seller to receive it.
Online personal payments are easy and quick to send.
The recipient doesn't have to wait for a check to clear. The payments
are convenient, which is why they are popular.
Safety, security and privacy
PayPal
lets you keep money in a stored-value account that pays interest.
But it's not an insured bank account, so if PayPal were to go out
of business, customers conceivably could lose their money.
PayPal
and the other online payment services are constantly battling fraud.
Criminals see a source of easy money. The most common form of fraud
is the auction
scam, in which high bidders in online auctions pay electronically,
then never receive the goods. Payment services use myriad methods
to fight fraud, from verifying customers' credit cards to confirming
that users are who they say they are by authenticating their bank
accounts.
Every
payment service has its own privacy policy. PayPal says it doesn't
share personally identifiable information with outsiders except
to verify credit cards.
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