PayPal rules the P2P epayment waves

Grassroots pressure

PayPal is America's most popular online person-to-person (P2P) e-payment service. (It's also the most unpopular, as a cursory inspection of the paypalsucks bitch board shows.

A Gartner survey of 1,000+ American online consumers reveals that PayPal is the most trusted and most used of all Internet P2P epayment systems with 27 per cent of respondents using the service. Billpoint is the second most popular service, used by 11 per cent. The percentage of people planning to use either service for the first time in the future is the same - eight per cent. Other contenders are Citibank-owned C2IT, used by one per cent of respondents and Yahoo! Pay Direct, used by three per cent.

The more popular the epayment system the more trusted it is: PayPal is considered a highly trusted provider of payment services by 33 per cent of online consumers, while Billpoint earns the same accolade from 21 per cent of respondents. Having a big parent helps - C2IT is highly trusted by 17 per cent, far more than its user base, while Yahoo! gets the highly-trusted thumbs up by 12 per cent.

And Paypal is on a roll, Gartner points out. The company has built on its key partnership, established in 1999, with eBay, to forge relationships with credit-risky and small retailers, which do not qualify for credit card merchant status.

Now it is pushing towards the mainstream: currently the company has a user base of 13 million, and it's adding 20,000 users a day. When it hits 25 million users, mainstream merchants will have to offer PayPal as an alternative to credit card payments, Gartner forecasts. Credit cards today account for 93 per cent of online consumer payments, the analyst firm says.

Standing in PayPal's way are US state regulators "who have hinted that PayPal looks too much like a bank to escape regulation (PayPal divested itself of X.com, an Internet Bank, about one year ago)," Gartner says. "Already, four states including California and New York, are considering regulating PayPal, perhaps in response to some merchant complaints about the company."

Gartner reckons that PayPal is "likely to end up being a bank again -- to ensure both consumers and merchants remain protected." ®

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