PayPal Enters Credit Card Market
Online payments service PayPal, is to move into the mainstream financial services market by launching its’ own credit card next month.
The launch of this new credit card is a joint venture with GE Money, the brand behind many of the UK’s well-known store cards. This is a bold step by both firms, as they will be entering one of the UK’s toughest financial markets.
Optimism is abound however, due to Paypal’s successful launch of financial service products in the United States and will enable customers to use their credit card in order to make payments through PayPal’s online service.
Consumers in the UK will also be able to make purchases on the high street using the card, which has a competitive APR of 12.9%. The card will also offer 0% interest on balance transfers for six months and also has no annual fee.
Predominantly used by eBay customers as a method for making and receiving payments for goods, PayPal has recently been the subject of criticism in the UK for weak consumer protection.
Many consumer groups have been inundated with complaints from both buyers and sellers online, claiming they have fallen foul of rules and fine print that are difficult to understand. Many have also criticised PayPal’s complaints procedures, saying that it rarely pays out or finds in the customers favour. Despite offering payment protection of up to £500, many customers who were victims of misadministration failed to win compensation.
PayPal is the recommended method of payment for eBay users and is regulated by City watchdog, the Financial Services Authority (FSA). Essentially, PayPal is a middleman that passes money between buyers and sellers while keeping bank details hidden. This offers eBay customers greater protection than making financial transactions directly between themselves. PayPal is owned by eBay and currently has over 100m accounts in 55 countries worldwide.
The credit card will eventually be available to the general public from mid-May after initially being available to 10,000 UK PayPal customers.
David Walsh, the firm’s UK marketing manager, said the company hoped to have greater integration of the card and customers’ PayPal accounts in the future.
The company is looking to explore initiatives such as allowing customers to use money paid into PayPal accounts to clear balances.
The company said its card will offer ID theft insurance and an internet fraud guarantee.
Alisdair Milton
12/4/06
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