Is PayPal moving in on the credit card market?

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March 9, 2010

Australians can now pay for Singapore Airlines airfares with PayPal on its website, without the need to use a credit card. The move is not groundbreaking by any means - PayPal can also be used by 26 other airlines across the world. But this potentially spells a move away from the stranglehold credit cards have on online purchases.

The main advantage of using PayPal is it provides a secure payment platform for consumers - payments can be easily traced by PayPal, unlike credit card payments or bank transfers. Credit card details are not transferred or kept on the site either, which means you won't be exposing your account information to a third party.

The new system is not without its barriers, though. Customers must be a PayPal member - they cannot easily make a one-off payment.

Frank Lavorato, a project manager from Sutherland, Sydney, who is currently looking to book an overseas flight, says because PayPal has an extra layer of security, it puts him at ease. He is also familiar with the system from using eBay.

"Buying online from different sites using your credit card leaves you open and at a higher risk of credit card fraud," he says.

"The fact that your sensitive financial details are held securely by PayPal in the one location is a bonus."

PayPal essentially acts as a middle-man between you and the company you're dealing with.

Some consumers will no doubt be wary about adding an additional player into transactions. But if you're a frequent flyer with an airline that accepts PayPal, there are clear advantages, including you get rid of the hassle of keying in your credit card details at every transaction.

It is unlikely, though, that credit card companies will be running scared. Frank says he is unlikely to ditch his credit card in favour of using PayPal because it requires users to transfer money into their account, which can take several days.

"There will be times that I need to make an urgent purchase online or out at a physical location and unable to make the bank transfer into PayPal," Frank says.

Not all Singapore Airlines purchases can be made with PayPal, either. Credit cards also still need to be used for buying preferred seats, insurance and Singapore stop-over holidays on its website.

If companies begin charging extra fees for credit card payment, it may force some consumers to use PayPal.

Just remember to always check any credit card fees regarding online purchases and choose the most cost-effective payment option for you by comparing deals online.




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