If you’ve ever bought or sold anything on eBay than you’re familiar with PayPal. PayPal is an online money transfer service that allows the secure transfer of funds from one party to another. Provided the sender has the funds available, the receiver will get the amount of the transaction minus their transaction fee.
Last week I was sifting through hundreds of PayPal transactions I make through my company and it occurred to me that PayPal is making a ton of money. Then it hit me, all the companies that make the transfer of money easier are making a killing. It’s always the recipient of the funds that pays.
At 4:00AM Saturday morning I had the displeasure of taking an Uber ride out of Boston. During the ride the driver told me Uber collected a 30% royalty for handling the transaction. I started to think about all those PayPal fees on top of the Uber percentage.
Individual fees really aren’t much at all until you add them up. I’m picking on Uber and PayPal because I’m familiar with both. But, I have used other transfer services that have charged anywhere from 2% to 4% depending on the type of transaction. I have yet to hear of a truly free service for receiving money. Businesses have to make money or they wouldn’t be a business.
What really happens behind the scenes at a company like Uber or PayPal? Well, they make more money than the simple transaction fee. They also make interest on the money they are holding for you. Basically these huge companies are acting like a bank and are using your money to make more money.
I fund my Uber rides using PayPal. I negotiated a $20.00 fare Saturday night which was paid immediately to Uber via PayPal. In accounting terms, the driver will realize a $14.00 net (after all fees) which he can collect in approximately one week. During that time Uber has control of his money.
Companies like Uber accumulate massive amounts of money for all the drivers. Technology allows them to instantly receive $20.00 fares from customers which are held in a giant bank account. During the week they’re holding the driver’s money they are also collecting interest on those funds.
This article kind of goes back to one I wrote some months ago about free stuff not really being free. Although half the transaction is free, the seller’s half is definitely not. I don’t imagine myself giving Uber rides, but in the past I have sold online and have been turned off by the expenses. Online selling of products and services is handy, but we’re giving up a fair amount of money for that convenience.
The real question I have is how much we’re giving up to all these technological companies? Cash used to be the best way to buy something because it was the only way. Credit cards came out and vendors started balking they had to pay a percentage for the convenience. After vendors got used to the idea we soon realized it made us more money because it was easy.
Somehow we’ve become accustomed to the idea of shelling out money for the benefit of receiving money back. Yes, technology makes transferring money from me to you easier. Pushing the button on my phone easily and expeditiously sends money. But, I see a time in the not so distant future when consumers start to question the true value of convenience.
(Jeromy Patriquin is the President of Laptop & Computer Repair, Inc. located at 509 Main St. in Gardner. You can call him at (978) 919-8059 or visit www.LocalComputerWiz.com.)