PaidByCash - A Niche Market That May Be Too Small
by
on February 27, 2007,
PaidByCash is a new service from the Retail Expansion Network. Marketed as a way for those without credit cards, and those who prefer not to use credit cards online, to easily use online shopping sites, PaidByCash hopes to increase the number of onilne shoppers while making a decent profit.
The service involves going to a local brick-and-mortar retailer in the PaidByCash network and exchanging your cash for a Virtual MasterCard, which can then be used anywhere online that Debit MasterCards are accepted. With 24/7 multilingual support, PaidByCash is obviously focused on those who are unable to obtain a credit card or don't wish to share their credit information online.
The biggest obstacle I see is that adoption of this service is an uphill battle against existing providers. For those who already have credit cards who simply don't want to share that information with each and every online retailer, services like PayPal offer virtual credit card numbers, created for use for a single transaction. If you already have credit, it's simple to use PayPal or Google Checkout for maintaining some form of financial anonymity.
As for the other markets, those who are otherwise unable to obtain credit cards, PaidByCash may actually be onto something. Two weeks ago Bank of America announced that they would begin offering credit cards to those without social security numbers, an issue that feeds into the hotly contested issue in the U.S. of undocumented foreign nationals. Some oppose the offering on the basis that it allows illegal immigrants to function more freely in society, while others blast the move as taking further advantage of a segment of the population already living in poverty. A service like PaidByCash, if marketed correctly, could placate at least the segment that feels Bank of America's move is a predatory business practice, since the only fees collected by PaidByCash are the merchant's normal MasterCard fees. The cards themselves do not have a fee attached.
As more and more people move away from cash and toward electronic means of payment, PaidByCash may be able to step in to serve a segment of the population left out of that migration.
Source: Reuters , VentureBeat
If you enjoyed this post, make sure you subscribe to profy RSS feed!
kalipso
Mav
Orient expresS
Opensource 
Michael Fidler 
It would also be interesting to know how they did their market research. I would like to know the percentage of people who actually have a computer with internet connected to the internet, but who also do not have a credit card.
Well, let’s make that … who actually have a computer which is connected to the internet.
I’m not sure about home computer access, but there is actually even a segment of the homeless population who accesses the Internet via public libraries. I highly doubt they are ordering from, say, Sephora, but there is at least a population online with no credit cards.
It’s also possible to get things like cheap dial-up and cable connections without a valid SSN, but up until the B of A announcement, getting a credit card just wasn’t happening for anyone without one. It’s possible, but you’re right; how do you do market research on a segment of the population uneasy with admitting their presence?
Spoiled kiddies! About 25% of the people in the United States don’t have a credit card — and they’re not all homeless people using free computers at the library. They are people who work hard for a living at one two and even three jobs at once.
Pull your jeads out of your *** and take a good look around at your neighbors — you might be surprised to see they all don’t live the way you do.
Forget about the poor — if you just take all the teenagers/slackers/and 20-somethings still living at home — you have a multi-billion opportunity. I’ll bet they don’t have credit cards.
Hardly a niche market.
They may not have credit cards, but don’t most checking accounts and passbook savings accounts come with a Visa or MasterCard co-branded debit card? I know a lot of people without a credit card, myself included. I do, however, have a debit card that works as a credit card.
There is also the PayPal option of using direct access to a checking or savings account for online payments, and PayPal already has the large customer base and name recognition.
PayPal? The vast majority of web sites do NOT accept PayPal. (Including the very largest: Amazon). It’s bascially only good if I want to trade trinkets and used comic books on Ebay.
For real purchases you need a Visa, MasterCard or American Express. And it sounds like that’s what PaidByCash does.
Newegg, Buy.com, and iTunes are three sites I use PayPal on regularly, and PayPal are also now providing the Virtual Debit Card linked to your PayPal account for sites that don’t accept direct payment from your PayPal account. Mind you, I’m not affiliated with them in any way, but just think it’s going to be awfully hard to reinvent the wheel when so many people already have a PayPal account, which leads back to my concern that this is a limited niche.
Oh please. There is such small traffic through PayPal that the vast majority of top sites don’t even bother offering it as a payment option. You might have mentioned three sites — but so what? For every 1 site you mention there are a thousand that do not accept Paypal.
Furthermore — you need to be at least 18 to open a PayPal account — so there goes the gaming and teenage market. How do the 60 million teenagers in the US get to pay for things on the web? Beg Mommy and Daddy for their credit card?
Is that how you do it?
ANd the only form of payment that PayPal does not accept . . is cash.
I think this is a great product — and at the end of the day — PayPal “claims” 30 million US accounts — HA!. More likely a fraction of that are even active. Even if we believe the hype — that means 90% of America has chosen NOT to open a PayPal account — hardly an entrenched player.
Slowy pull your head our of your ***, open your eyes ever so slowly so the light doesn’t blind you, and repeat: “just ‘casue I read it on a web 2.0 blog doesn’t make it so.”
I guess I’m confused at where your anger is coming from. I’m not a teenager, and as I said earlier in the comments, I use a debit card linked to my bank accounts.
I’m curious as to why you are so invested in this idea, which isn’t really all that new or different; most malls in American have been selling Virtual Visa cards as gift cards for quite some time now.
I view pretty much all new businesses in the same light; looking for an interesting concept, which this company has, as well as its chances for profitability. America is increasingly moving away from a cash-based society toward electronic means of payment, hence the availability of Visa- and MasterCard-branded debit cards with most standard bank accounts. I would assume that teenagers shopping online do have debit cards tied to bank accounts, but I haven’t done that reasearch.
I do know that, at least according to Marketwatch, PayPal revenue now makes up 25% of eBay’s sales, and is growing at a faster rate than eBay’s other revenue streams (37% per year).
I read this article, and I have to say that I use PaidByCash services on a REGULAR basis.
With that said, I want to make a few points.
One, though I have bank accounts, I will NEVER, EVER AGAIN provide Paypal my banking information in ANY form (whether bank account info, or through a Visa/Mastercard debit card tied to a bank account). The reason for this is simple and frightening (as I have experienced PERSONALLY).
Paypal is NOT considered legally as a bank or financial institution, and therefore they do NOT have to follow or abide by ANY of the laws or regulations that other banks do.
By calling themselves a “payment processor” they are able to circumvent the protection that regular bank customers have against arbitrary freezing of their accounts and seizing of their funds for no reason.
Why do you think that payments through Paypal are sent to accounts ultimately controlled by Paypal, and not DIRECTLY to accountholders bank accounts (like Bidpay, and other payment processors do?)
It is so that Paypal can have total control over the funds, not only in the Paypal account, but ALSO in their users bank and credit card accounts!
Believe me, I found this out THE HARD WAY!
You know those “verification deposits” that Paypal makes to “verify” bank accounts? Well I found out the hard way that those verification deposits give Paypal automatic and blanket authorization to withdraw funds from that bank account as they see fit!
When I first used Paypal I made the mistake of giving Payfrauds my bank info, and I used the account to sell a few items on eBay with no problem. Then all of a sudden, one day, out of the blue, I wake up to get an email that Paypal “has noticed some irregular activity” and they had limited my account, freezing ALL the funds that it had.
Despite numerous emails and calls they would not tell me what the problem was, and then they made unauthorized withdrawals from my account claiming unpaid fees (which is BS, since they deduct the fees automatically when payment is received). They not only CLEANED OUT my entire bank account, they still kept on trying to withdraw funds, even after the account balance was at $0, causing me to go into NSF overdraft.
Since the charges were unauthorized, I refused to pay it, which caused me to get into ChexSystems, TeleCheck and Scan, which I am still fighting to get removed from over 3 years later!
I will NEVER, EVER again give Paypal my real credit card or bank information, which is where PaidByCash comes in!
When I need to make a payment on sites (like eBay) where Paypal is the only payment method, then I can open a Paypal account for that ebay account or specific purchase, add the Paid By Cash card to make the payment, and then when the funds are depleted from purchases, either delete that card from the Paypal account and add another, or use another PaidbyCash card with another Paypal account.
Now I have other prepaid, and regular credit cards and debit cards which I don’t have a problem using and in fact have used several times on reliable, and trustworthy sites like Amazon, and others.
But I don’t consider Paypal trustworthy or reliable in the SLIGHTEST, as I (and numerous others - see Paypalsucks.com, or Paypalwarning.com) have found out the HARD WAY, and if I have to make a purchase on eBay or other sites that primarily or only accept Paypal, then PaidByCash and other services are a GODSEND!!