Paypal logo illustration by Michael Jan as illustrated on his blog.
As an avid Transformer buyer and dealer as well as an early adopter to online transactions, I am all too familiar with Paypal. If you haven’t heard of it, then what are you doing reading this blog about buying and selling Transformers? Other long-time Paypal users like me have seen the costs per transaction increase steadily throughout the years, and this is most likely due to the ongoings practices of its parents company, Ebay. The ease of use and popularity of the Paypal transaction system can sometimes be overlooked once it comes to the reality of doing business in this way; and by reality I mean the one unavoidable aspect of each paypal transaction: The dreaded Paypal fee.
The Paypal fee is a two-tiered process. Removing money from the Paypal system and adding it to your bank incurs a % fee and receiving money for a transaction or purchase from a buyer incurs an adjustable fee as well. The fee is on a sliding scale but usually lands somewhere around 1.5% of the total payment involved. The total value of large amounts appear to bloat or decrease depending on which side of the coin you find yourself on. In the end, the Paypal fee serves as a pseudo tax and increases the costs of utilizing an online cashflow.
Many Transformers sellers have circumvented this fee by requesting to be paid “as a gift” or asking their buyers to “gift” them their paypal payments. Some sellers will even upcharge their buyers if they refuse to gift the funs, citing that they need to pay their paypal fees. This is quite humorous considering that most small-time Transformers “dealers” have never actually run a business of any scale and don’t understand the meaning of “operating costs.” Passing on your Paypal fees to your buyers is the lowest form of business-ethic around. Since I recently discovered that a seller has stiffed me on a more than $350 transaction, I am realizing I will never again gift Paypal payments to anyone I don’t know in person. Let it be know that you cannot retrieve any payments that were originally declared as a gift.
Enter Dwolla.com, a Des Moines-based start-up determined to thwart online-transaction giants like Paypal by offering flat rate $.25 transactions. That’s right, you can send $1 Million or more for the one-time low price of $.25. This may completely erase the sticky situation individual buyers and sellers find themselves in when it comes to who needs to pay the Paypal fee. Instead, it should now be a no-contest decision for the seller to fork over $.25 to receive a payment of dozens, to hundreds of dollars of cool hard cash. Legitimate online retail owners should be flocking to Dwolla in droves to shave thousands of dollars a year off of their bottom line.
What does this mean to Paypal? I’m sure they aren’t batting an eyelash. Their stance has always been to be the first int he market and be the biggest. Paypal has been around for over ten years and they have big-time seniority. Still, I would never underestimate the power of innovation when it is pitted against greed…
So will Dwolla gain enough users to make a dent in Paypal or even Google Checkout’s annual revenue? Probably not at first, but I’m signing up and I’m NEVER looking back!