Comments on: Celebrating PayPal’s ‘centenary’ – Paypal business model analysis http://thebankwatch.com/2007/04/11/celebrating-paypals-centenary-paypal-business-model-analysis/ Tracking the evolution of financial institutions Wed, 15 Feb 2012 16:44:07 +0000 hourly 1 http://wordpress.com/ By: Jim Bruene http://thebankwatch.com/2007/04/11/celebrating-paypals-centenary-paypal-business-model-analysis/#comment-8091 Thu, 12 Apr 2007 04:37:21 +0000 http://bankwatch.wordpress.com/2007/04/11/celebrating-paypals-centenary-paypal-business-model-analysis/#comment-8091 PayPal makes much of that $1.4 billion profit by charging 3% acquiring fees on ACH transations that costs it pennies. That’s one hell of an arbitrage gain, makes it look like interchange might be over-priced and ACH underpriced. No matter how you look at it, it’s $1.4 billion the banking industry gave up by not creating a PayPal-like product prior to 1999.

But as they say hindsight is 20-20. Banks had a lot on their plates back then: gearing up their online presence, Y2K, then the sub-prime credit card meltdown, 9/11 and so on. PayPal took on an enormous amount of risk in the early days, and is now being rewarded. A great story.

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