IS PAYPAL RACIALLY BIASED TOWARDS BLACK BUSINESSES?

sultan aliDecember 8, 2021

395 4 minutes read

IS PAYPAL RACIALLY BIASED TOWARDS BLACK BUSINESSES

Anyone who takes electronic payments for goods or services must have heard about PayPal, the Oligarch of payment processors.

PayPal history: the beginning

PayPal history began in 1998 when it was established as Confinity by Max Levchin and Peter Theil. In 1999 it was launched to transfer money and received its initial public offering in 2002. Its fame came when eBay acquired PayPal in 2002 for $1.5bn. After this monumental step, PayPal started to grow worldwide, accepted by many online merchants.

For the next couple of years, PayPal grew its reach internationally under eBay. In 2006 the payments giant added ten currencies to its platform, including the Singapore dollar and the Swiss franc.

Banking license and beyond

In 2007 PayPal landed an EU banking license, giving it far more access into EU countries. By this point, PayPal had around 35 million customers across Europe, including 15 million in the UK.

At the same time, PayPal moved its headquarters to Luxembourg, intending to grow a more significant presence in Europe. PayPal’s history has been steeped in strategic moves that have produced impressive revenue and a large customer base.

2007 continued to be a busy year for PayPal. MasterCard enabled customers to pay via PayPal on websites that accepted MasterCard but did not facilitate PayPal’s platform.

By the end of 2007, PayPal had generated $1.8bn in revenue. Now its parent company looked to buy out the competition. In 2008 eBay acquired one of PayPal’s biggest rivals, Bill Me Later, for just under $1bn. Bill Me Later was a leading competitor in the digital payments industry. Boasting an effortless payment experience, Bill Me Latter’s network included more than 1,000 online stores, catalogs, and travel partners, including Amazon, Bluefly, Continental Airlines, Fujitsu, JetBlue, Toys “R” Us, and US Airways. The move boosted PayPal’s presence as the dominant money transfer platform worldwide.

From 2008 through to 2018, PayPal continued to expand, from adding more currencies to launching apps that supported iPhone and Android-powered devices. Mobile payments hit $4bn in 2011 and in 2013 almost doubled year-on-year to $27bn.

Split from eBay and onwards

After a 16 year relationship, eBay decided to part-ways with PayPal, ditching the company as its primary payments processor for Dutch firm Adyen. The news took the payments industry by surprise, although eBay insisted that the decision would benefit sellers and buyers.

PayPal spun out of eBay in 2015. The company will remain a payment option for eBay shoppers until July 2023.

That hasn’t stopped PayPal from continuing to grow. In May 2018, PayPal announced that it was buying Swedish payments start-up iZettle for $2.2bn. The takeover comes less than three weeks after iZettle said it would list shares in Stockholm. PayPal will now have an in-store presence in 11 European and Latin American markets.

Shortly after, in June 2018, PayPal bought Hyperwallet for $400m, stating that the acquisition would enable it to offer payment solutions to e-commerce platforms worldwide. PayPal history reveals that the company can accelerate its growth and deliver a seamless service to its customers. Although the company has experienced some testing times, PayPal has a robust network. The more users sign on to PayPal, the more necessary the service becomes for retailers to accept, creating a lucrative cycle for the payments company.

Paypal During The Pandemic

Since the coronavirus outbreak in 2018, the company has been rough times. The company has been cracking down on some individual and merchant accounts, especially those owned by people of color. “Paypal customer service is the worse, and they blocked our account without a plausible explanation, said a fashion merchant from New York.” Another merchant who sells braided wigs online also aired their dissatisfaction with the service. She said, and I quote, ”After they blocked our account, I wanted to find out what the problem was, so I called PayPal customer care number numerous times, and I couldn’t reach customer support for three months. When I was finally able to get a hold of a customer support, the lady looked at our account and said that Paypal had decided not to do business with us anymore. Feeling hurt and unsure of what just happened, I went out and spoke to over 50 black-owned merchants who do similar braid wigs business, and they said that the Payment Oligarch terminated their accounts too. One of such merchants is Poshglad braided wigs, a registered American company from Delaware also lost its Paypal account. In an interview, the company’s CEO Gladys Okereke told us that before they signed up to Paypal, they inquired from PayPal if they were eligible to sign up for a merchant account. Two Paypal representatives told her, yes, so she signed up. A year after, Paypal closed their account for no credible reason. The fact that PayPal can close down more than 50 business accounts of black entrepreneurs in 2021 without plausible explanations is outrightly alarming. That can only mean one thing: racial targeting of black businesses, revamp of racial segregation, and an approach to limiting black entrepreneurs. We urge the U.S. Securities and Exchange Commission to look into the business practices of PayPal.