Sunday, May 04, 2008

PayPal & The New Bank

PayPal has discovered a free interest free way to borrow funds. Not even the Federal Reserve Bank can offer such cheap rates.

Where is PayPal getting free money? From eBay sellers who fit into the newly created risky transaction category.

It's called the Paypal 21 day hold for eBay sellers.

Simply classify certain items and eBay categories as risky and hold that sellers payment for 21 days.

Also, don't disclose what these particular items or categories are and just about any transaction on eBay could be deemed risky and subject to payment hold.

What exactly does PayPal do with all these seller's monies? It surely doesn't sit somewhere collecting dust. Our educated guess would be it is being invested in short term funds, derivitives, stock market, or some other interest bearing account. With potentially millions of dollars on hold, the interest earned would be significant.

eBay sellers are basically floating free loans to PayPal.

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