The growth in global online payments market! Is there room for more?

PayPal is a household name among online retailers and those who buy from them. Even if you’ve never used PayPal, you likely know what it is and would trust it if you needed to. It is the most popular way of transferring money online and one of the largest companies in the world, with revenues nearing $10 billion a year.

PayPal was established back in 1998, and has been on a constant upward curve, through takeovers, public listings and the emergence of the smartphone era. It has adapted throughout, and technological development has never stopped.

It may therefore seem like a fool’s errand to try and beat it at it’s own game. Yet fintech startups offering online transfers, both local and international, are popping up and gathering a following.

What is it that has made PayPal so popular? Are there reasons its investors should be concerned about the competition?

Perhaps most importantly, should we be switching to the competition?

The good

As we mentioned, PayPal has been around for 18 years, constantly adapting to the times. The software and interface has been changed and refined to suit the boom of online retailers and integrate with new technology.

For the layman, PayPal is the intuitive choice. It’s user-friendly and efficient, and connects to banks around the world. Regulatory bodies have accepted it as part of the financial systems in their countries, and very little, if any, documents or bureaucracy is required.

Furthermore, many online retailers make PayPal the easiest option with which to pay. The big exception is Amazon, which does not accept it as a payment option.

The bad

So what problems does PayPal have that other companies are trying to take advantage of?

The most common complaint about PayPal concerns their high fees. PayPal charges 2.9% on each payment, which is significant even on smaller payments. When it comes to large payments, it can be prohibitive.

Cross border payments are even more exorbitant. Depending where you’re paying from, it can cost an extra 3%. If you’re using a credit or debit card, that number is around 4 to 5%.

Furthermore, PayPal offers very little support, which makes it difficult for users uncertain of regulations, fees, and processes.

If you dig a little deeper, you’ll find complaints about PayPal freezing accounts with little explanation. My personal account was suspended due to a technicality which was resolved easily. However, I had to do the work to find out the reasons behind it.

PayPal alternatives

How do the alternatives measure up? Let’s take a look at the other options, both peer to peer, as well as cross border.

Peer to peer


Venmo is one of the biggest alternatives to PayPal. In 2014, it surpassed $2.4 billion in payments. However, it has a very different purpose to PayPal. Venmo is meant as a way to share money between friends. You’re only supposed to use Venmo with people you know, otherwise it can be quite risky. Fee-wise, it’s free for bank account transfers and major debit cards. For everything else, it’s a flat 3%.

Square Cash

Square Cash at its base serves the same purpose as Venmo. It can be used instantly for payments between friends only. However, there is a business option, which is much safer, and comes with a fee of only 1.9$ per transaction.


clearXchange is a more secure option, as members have to be part of a big bank. You can send payments relatively quickly (it takes 24 hours) and to strangers, whether business or acquaintances.

Overseas transfers


Transferwise is an industry disrupter. Their mission statement is to provide an alternative to the big banks. Transferwise has transferred more than £3 billion since its inception in 2011. It was started by partners who had experienced the difficulties of overseas payments. They experienced the large fees of big banks and wanted to provide another option.

Compared to PayPal, their fee structures are tiny. Each transfer is around £2 or 0.5%, depending on which is larger. The pay rates are also much smaller, and it’s good for small and large transfers.


Payoneer is another big international transfer company, started in 2005. It sees a huge amount of payments come through every month, and promises safety and quick service. It’s a popular option for businesses and professionals.

In comparison to PayPal, it’s much faster and cheaper, with minimal administration costs. Their Mastercard makes it easy to withdraw money, which is convenient for people who want to use it on a day-to-day basis.

Conclusion: the future of PayPal

PayPal has dominated the online payment sphere for over a decade and a half, and is still doing billions of dollars of transfers every year. They have a captive audience who will not be abandoning anytime soon. It’s convenient and available with most online retailers. However, its fee structure can be prohibitive, and it can be similar to the banks, in that transfers themselves take a few days to go through. Most payments have a 2.9% fee, and a possible extra 4% if you’re doing international transfers.

As alternatives become available, with much lower fees and shorter processing times, PayPal may no longer be the best option. The peer-to-peer options are still small and limited, but they serve their purpose at cheaper rates. The international transfer options, on the other hand, are growing quickly and have big advantages over PayPal.

PayPal will not be disappearing anytime soon. It’s still trusted by most clients, who love it for its ease of use. However, if they keep the pay structure as is, they stand to lose a significant number of clients. The alternatives are becoming more accessible, and are building names for themselves. It’s likely that PayPal will adapt, as they have done over the past 18 years. For now, if you’re willing to try something new, the alternatives are certainly better options.