What happens when you leave your money inside Paypal account

As referenced from other posts Balance Investments (ie interests from money deposited): The money kept as PayPal balance is deposited by the company in liquid investments which earns interest. Now, this practice is legally & expressly stated (in the fineprint and buried among a Herculean list of legal terms) in PayPal’s User Agreement:“PayPal combines your PayPal balance with the PayPal balances of other PayPal customers and invests those funds in liquid investments in accordance with state money transmitter laws. PayPal owns the interest or other earnings on these investments.” And, this interest is a major source of revenue for PayPal in both relative and absolute terms. In other words, When you have money in your PayPal account, it isn’t just sitting there. Say you have a balance of $1,000. PayPal could take that balance and invest it in stocks and bonds, earning a return on that investment. By the time you withdraw your money, PayPal’s investment may have gone from $1,000 to $1,020, allowing PayPal to walk away with a “free” $20. But this is not shared with you or I, the end users who are the ones who contribute to and enable paypal to do this.

Think tens of millions of customers, all these add up to?

Think further this revenue source is a passive self-generating one for Paypal.

Think even more:

The fact that it takes at least 5 days to withdraw from your paypal balance to your bank transfer done is no accident.

When you withdraw, you have to pay a fee is calculated= 2.9% of amount value + $0.30 per PayPal transaction.

On top of this, you have to pay a fixed charge (which can be hefty and ambiguous as the charge varies across countries).

Paypal want your money in their system for as long as possible; on top of levying a fee and charge too.

Think and extrapolate: who provided the inputs / resources (a.k.a deposits) to Paypal? But this is not shared with you or I, the end users who are the ones who contribute to and propagate its growth and reach. We look forward to the day when Paypal will declare and share with us, in kind or otherwise?

Statistics by reputable management consulting firms and investment banks reveal a scarily high proportion of users will keep money in their PayPal account as Paypal balances. This accrues to a princely (some say, obsence) sum of interest revenue for PayPal.

So, thanks to SUPERBUY:

- there is an option to use your Paypal to top up your SUPERBUY account by a larger amount than what is needed merely to pay for this particular order purchase; and thereafter use as credits. - and SUPERBUY shares back with us. Legal disclaimer: The above is an amalgamation of many publicly available online sources. The above represents personal subjective opinions. There is no intention to prejudice individual opinions or sway public opinions.

How much of PayPal's revenue comes from interest rate arbitrage?Garrick Saito There is no way to tell. First, let's get semantics out of the way.  You'll never see interest income on or included in the line called revenue of any income statement.  It is considered a non-operating source of income (i.e. interest has nothing to do with the operations of the company) and, as such, appears in a section below the operating income sub total.  Often times, interest income is netted against interest expense, which makes the determination of either impossible. Other times, such as in Pay Pal's case, they may be a subsidiary of a larger company (Ebay, in this case) where the interest income is consolidated with the parent company's interest income. For both of these reasons, the relationship between interest income and revenue is indeterminable, in this specific case. When PayPal spins off into its own stand alone, publicly traded company later this year, this may change (depending upon how they choose to report their interest income).

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What PayPal does with your money The money-transfer service earns interest on funds in its custody, but analysts say it's a drop in the bucket compared to eBay's larger revenue picture. By Lenora Chu February 26 2008: 11:30 AM EST (FORTUNE Small Business) -- Next month, eBay (EBAY, Fortune 500) intends to implement a controversial new policy that will entail holding payments sent through PayPal for up to 21 days for certain "high-risk transactions."  Furious at the prospect of waiting to receive funds, sellers have been publicly speculating about how much money PayPal (and its parent company, eBay) makes off the accruing interest on funds under PayPal's control - and whether a desire to retain those funds for longer spurred eBay's holding plan.  However, company executives and industry analysts say the money PayPal makes off such payments has a negligible impact on its bottom line.  Any funds PayPal holds for dispersal are automatically deposited in a corporate bank account, which earns interest, according to Paypal representative Amanda Pires. The money is kept there until it's ready for distribution. PayPal, which processes payments for eBay auctions as well as e-commerce transactions from elsewhere on the Internet, counts interest payments on those funds as one of its revenue streams.  That's a perfectly legal practice, as PayPal is classified as a deposit broker, according to Federal Deposit Insurance Corporation (FDIC) spokesman David Barr.  "Deposit brokers make money being deposit brokers," Barr said. "That's the reason they're in business. As long as fees are disclosed, that's fine from our standpoint."  Indeed, Paypal's user agreement - which all accountholders must read and accept - states: "Paypal may combine your funds with the funds of other Users and place those Pooled Accounts in one or more bank accounts in PayPal's name."  This applies to any user funds that are in the company's "custody." The agreement further states that accountholders "irrevocably transfer and assign to PayPal any ownership right that you may have in any interest" that accrues in these accounts.  But the revenue generated from this practice is miniscule given PayPal's total revenue picture, said Thomas Weisel Partners managing director Christa Quarles.  "Money's definitely being made on the float, but is that the purpose at the end of the day?" said Quarles, who covers eBay. "Our sense is it's not necessarily material in its contribution."  Citigroup (C, Fortune 500) Director of Internet Research Mark Mahaney arrived at similar estimates by examining PayPal's public quotes of average "stored value." Mahaney approximates the interest earned on the float at "single-digit millions per quarter, and at most $10 million a quarter."  All that's a drop in the bucket, said Quarles. In 2007, PayPal generated $1.8 billion in revenue. EBay's total 2007 revenue was $7.7 billion. EBay does not break out PayPal's earnings in its financial statements, meaning analysts must rely on their own estimates of the division's profits.  "I understand sellers are angry about [the 21-day policy], but the fee changes are really what's going to drive broader revenues at eBay," Quarles said.  PayPal's Pires said accountholders should be aware that they have the power to collect interest for their own use on delayed funds. It's as simple as enrolling in the company's PayPal Money Market Fund, Pires said.  For enrolled accountholders, any funds earmarked for a hold are diverted into the Money Market Fund rather than PayPal's corporate bank account, Pires said. The dividends earned are credited to user accounts on a monthly basis.  "Every U.S. accountholder has the ability to invest in the Money Market Fund," Pires said.  PayPal's Money Market Fund is run by Barclay (BCS)'s Global Investments. No minimum balance is required, and the fund's current interest rate is 3.46%.  The company would not disclose what percentage of PayPal's 57 million active accountholders have enrolled in the fund. But Pires said the fund is a "well-utilized service by our customers."  Barr of the FDIC notes that PayPal does not ultimately fall under the jurisdiction of the FDIC, which regulates banks and banking institutions. Regulation of deposit brokers or money-transfer operations falls to individual states, he said.  Alana Golden, spokeswoman for California's Department of Financial Institutions, said PayPal's plans for a 21-day holding period do not run afoul of any DFI regulations. The DFI regulates only PayPal transactions that involve transmitting money to foreign countries, and has no jurisdiction over PayPal's domestic operations.  Therein lies PayPal's competitive advantage, said Quarles of Thomas Weisel Partners.  "They've figured out how not to be regulated, and they've done that globally," Quarles said. "[PayPal] has gone to great pains to be not considered a bank." To top of page

I'm already having trouble with what was supposed to be a simple refund case, I've had enough of PayPal.

Hi Sapphire, Oh yes, indeed! I share similar sentiments! I empathise and sympathise... Refunds can be kinda convoluted and exasperating!