Thursday, May 17, 2007

Paypal upgrades from e-money issuer to bank license..!

Automatiseringsgids reports that the Luxembourg supervisor for banks, the Commission de Surveillance du Secteur Financier (CSSF), has given PayPal a bank license for the European Union, starting as of July 2, this year. Paypal will also move its headquarters there.

This is a remarkable moment in time, as it demonstrates the succes of the e-money directive. The e-money directive was made to allow new and innovative players entry into the banking market, without having to fulfill all banking rules. Now Paypal has been obliging with those rules for a number of years and have apparently concluded that they are better of with the EU-bank license. Which is a lot more convenient than the hassle they have in the US, where they comply with a whole bunch of state regulation (see this list).

The move also has tax-simplicity advantages. eBay recently created eBay Europe, S.à r.l, a new entity that became the new contractual partner for all of its EU-based members on March 1, 2007. The creation of this new entity means all EU-based eBay sellers are now treated equally and are subject to the same rate of tax on their eBay selling fees - the Luxembourg VAT rate of 15 percent.

According to Forrester, 23 % of the European online shoppers use and prefer Paypal. There are some 35 million EU-accounts active and Paypal is an acceptance brand at more than 100.000 locations in Europe. The payment volume of Paypal in Europe is now estimated at € 8,4 billion dollar (and is thus similar in size as all cash payments in the Netherlands in one year).