Wednesday, David Marcus, president of EBay Inc.’s PayPal unit, spoke to a Bloomberg interviewer on camera about mobile payment security and during the discussion commented—albeit briefly—on the position of the virtual currency Bitcoin. In the discussion, he mentioned his own fascination with the currency and that his company is “thinking about it” when it comes to including the currency on their rolls.
You can watch the video over at Bloomberg, but here’s the salient section (from about 2:55):
So I’ve been spending a lot of time looking at it, and it’s truly fascinating actually: the way that the currency’s been designed, and the way that inflation is built in to pay for miners, and all that is truly fascinating. I think that for us at PayPal, it’s just a question whether Bitcoin will make its way to PayPal’s funding instrument or not. We’re kinda thinking about it.
Many have touted PayPal as one of the larger reasons that Bitcoin has been making major inroads into different markets. In part this is due to somewhat draconian policies when it comes to do whom the Internet payment service will permit—such as rebuffing Wikileaks, Mega (and other cyberlockers)—and complaints that the anti-fraud mechanisms that PayPal implements can freeze or injure businesses who find themselves accidentally on the wrong side of sudden transactions.
PayPal could certainly function as a payment processor, exchanging BTC for local currency. This is very similar as to what brick-and-mortar payment services companies such as MoneyGram and Western Union might be thinking as they look into the ever-rising popularity of Bitcoin. However, restrictions on what sites that PayPal will work with may likely limit the audience and consumer base even if bitcoin payment processing is permitted.
The service would also have to examine the incidence of “chargebacks” as part of their fraud protection when exchanging for bitcoins. Due to the difficult-to-defraud nature of BTC itself verses credit and bank sources used to fund exchanges this could be a breaking point for the payment processor and is at the core of why much of the Bitcoin community do not trust PayPal currently to fund BTC exchanges (aside from PayPal themselves eschewing almost all things virtual from their fraud protection.)
Can PayPal not enter the bitcoin market?
All that said, the addition of PayPal to the bitcoin economy would become a massive boon as PayPal already has a huge customer base. It means that there could be a rapid and powerful influx of customers who otherwise wouldn’t know how to get or store BTC and it would also mean that a large number of merchant clients could just add it to their stores via PayPal (considering that they might already have it.) Not to mention that it would probably mean eBay would become a platform for auctions including bitcoins as monetary exchange.
It’s too far out to speculate on how PayPal would enable this, but if they did it could bring about an accessibility revolution overnight. Hardcore marketeers who know BTC may be less trusting of a PayPal payment service and would most likely glare warily at a PayPal wallet service.
There may be backlash, of course—the entire basis of the distributed Bitcoin economy thumbs its nose at the notion of money transfer companies (like PayPal.)
In the end, as Bitcoin becomes further useful and used on the Internet to store and transfer value, it will be hard for companies like PayPal to stay out of the game. In fact, if they don’t get into the game (in spite of whatever backlash) it could be argued that companies like PayPal would be marginalized out of virtual currency trade even as it eats into Internet payments.
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