PayPal banks on European expansion

 

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By Simon Aughton

Posted on 16 May 2007 at 13:17

PayPal's European growth has been given a significant fillip with the decision by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg to grant it a European Union banking licence from 2 July 2007.

As a chartered bank, the online payments service will be able to offer its services to more online merchants across Europe. Significantly, it will be able to decrease its reliance on eBay, which as well as owning PayPal is also its main source of revenue. But in the past year revenues from other e-commerce websites rose from 33 to 39 per cent of PayPal's total income.

'Our goal is to give European consumers more places to shop securely and conveniently across the Web by making PayPal available on virtually every retail website in Europe,' said Brent Bell, VP of PayPal Europe. 'Establishing a new European headquarters in Luxembourg, and receiving this bank licence, is a significant step in the next phase of PayPal's European growth.'

It should also help the eBay-owned company counter the challenge from Google Checkout, which made its European debut in the UK last month.

Other initiatives designed to maintain its market lead include the development of new code that reduces the amount of time it takes to add PayPal to a website and the introduction of hardware security keys to help cut fraud. This is already well below the norm for online merchants, according to Rajiv Dutta, PayPal's president.

New services are also in the pipeline, including fund transfers via mobile phones or Skype, the Internet telephony business also owned by eBay, and a 'virtual debit card' that lets you pay using a Paypal account on sites that do not have a PayPal option.

According to the company, PayPal is accepted for payments by some 100,000 websites in Europe, where it processed $8.4 billion in 2006. Of its 35 million European account holders, 15 million are in the UK. The company does not have a banking licence in the US, operating instead as a licensed money transmitter.

PayPal will move its headquarters from London to Luxembourg but says it has no plans to offer traditional banking services.