Some interesting things have happened since the PayPal/eBay divorce. Ebay has all but ousted any other form of payment on their platform, which was commonly believed to be the case anyway, and both companies have reported exceptional earnings, albeit PayPal was just shy of projections.

This at least shows that both companies are stable and profitable as separate entities, but the more interesting of recent developments was the prepared statement made by PayPal CEO.

"We are operating in a time when change is sweeping through the financial services industry driven by the rise of mobile technology and the acceleration of money becoming digital," he said.
Now you can take that how you want to take it, but digital currency is indeed a part of the "money" that is "becoming" digital, with the exception that it is not "becoming" it already "is". However, I am not implying that this was a hidden hint about embracing bitcoin or any other digital currency, they've already done that and in more way that Braintree.

The Not So Secret Revenue

I'll explain.

When Green Dot CEO, Steven W. Streit, and company decided to abolish MoneyPak, they all but handed certain revenues over to the BlackHawk Network on a silver platter. It started about year ago when companies came under scrutiny by United States congress due to fraudulent activity surrounding the prepaid account refill cards. Green Dot folded, Blackhawk did not and they have the chart history now to see the effect.

Blackhawk sat back and let this revenue roll in and had they not screwed it up with constant accessibility issues, day long activation processes, and horrible customer service, they might have kept raking in the revenue discarded by Green Dot.

In January of last year, Green Dot Corporation (GDOT) led Blackhawk Holdings, Inc (HAWK) by more than 10 points, and this time last year Green Dot was well over $25 per share and has never recovered dropping as low as $13 per share in 2015 sitting currently at $18.24 up from $16.94 earlier this month.


So what does this have to do with anything at all? 

Peer-to-peer (P2P) trading of Bitcoin. These are the aforementioned "certain revenues" that have shifted from one company to another and these revenues are in the millions of US dollars. 

Enter PayPal. It's no big secret that PayPal has been tinkering with digital currency, but until recently anyone caught selling digital currency using PayPal's payment system was typically banned with funds held for up to 6 months (the 180 day grip of death).

This is for reasons that only PayPal knows and they are not telling. However, they have become more tolerant of the transactions as of late and have even provided some guidance on the proper way to elicit optimal results.

This coming at a time when Blackhawk's ReloadIT has taken a serious dump in functionality, performance, and customer support. To get cash into the ReloadIT "safe" takes anywhere from half of a day to several days depending on the websites availability which is constantly inoperable. The "safe" is a cloud based value storage similar to PayPal and their My Cash cards, but without the ability to actually send money anywhere other than a few select prepaid cards,

It was once one of the go-to payment methods for P2P trading in the United States, albeit the least desirable of the similar methods like Green Dot. It was catapulted into first place after Green Dot and other similar service offerings diminished. Now it is increasingly disregarded and will likely be phased out completely.

The PayPal Sneak

PayPal was there with its service to save the day and collect the profits. MyCash cards took over and left the rest in the dust, however the company's policy is avidly against using the cards as a payment method unless they are first loaded to the account of the purchasing party.

The real miracle is that traders are starting to warm up to using PayPal in a climate where reversible payments of any sort are not considered a viable option. Some of them at least, many have been burned so badly by PayPal that they will never go back.

Given both of these maneuvers, the revenue that was once Green Dots and briefly belonged to Blackhawk, has made a transition to PayPal, and others like Skrill.

This is not without risk. PayPal is not offering traders any protection at all and this is nothing new, they never really have so this is no different than any other merchant selling a digital product. To remedy this any merchant must do their own KYC/CIP procedures and make sure to collect certain information required to combat fraudulent charges.

In other words, they've taken a "proceed at your own risk" approach and that is just fine by many traders since they don't like fraudulent activity either and they are far more paranoid than PayPal. Some of the lengths they go to protect against reversals is a bit over the top.

It is rather interesting actually. I used my card about three times today for various non-related (to digital currency) items and not on a single occasion was I asked to present anything at all. Neither in person or online. It is the digital currency traders, however, that are considered high risk.

Is this the reason for the positive earning? Not at all. They can chalk that up to eBay and Venmo, but it's certainly not hurting the bottom line, 3% of millions is a bit of cheese.


Side note: Just imagine the interest earned from the dreaded "180 grip of death" funds.  

Will PayPal be able to hold on and grow this area? I'm not sure it even matters given the over 2 billion they recently reported in earnings, and it may well not. However, it is millions of dollars and only an idiot would want to lose that, and apparently a company named Green Dot.







Story by dinbits
Banner Image Courtesy Bloomberg
Graph by dinbits staff

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  1. From my experience the best Bitcoin exchange service is YoBit.

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