Why does it cost money to send money?

Why do I need to pay PayPal, etc when I want to make a transfer? I mean, all they have to do is flip some digits. It should be instantaneous and super easy. Is there, like, a good economical reason why it is necessary for them to charge me? Or is it just a cheap way to make money out of nowhere and there is nothing else to it? Could a better system with no fees exist?

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They need to pay their employees, server costs etc.

 

It's a business model. Why else would they have made the system in the first place if not to make money?

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It wasn't until I heard about block chain and cryptocurrencies for the first time that I really started thinking about how, outside of paying with straight cash, money is being intercepted by third parties all the time. Credit/debit card transactions, legal fees, ATM fees, bank accounts, interest etc. Its all very seedy when you really take the time to think about it. Still, I get it. But its all really unproductive. Like really, loan officer? You're in the business of having money? That's your specialty?

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2 hours ago, Memfis said:

Why do I need to pay PayPal, etc when I want to make a transfer? I mean, all they have to do is flip some digits. It should be instantaneous and super easy. Is there, like, a good economical reason why it is necessary for them to charge me? Or is it just a cheap way to make money out of nowhere and there is nothing else to it? Could a better system with no fees exist?

The reason why is plain old capitalism--those fees go both to maintain PayPal and as rent to its owners. And yes, a better system exists, but everyone has been convinced by 150 years of propaganda that it's pure evil so nobody uses it.

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Banksters not only can make money from the air, but also can bought presidents and senate, and rule the whole country.
banksters-preview.jpg

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1 hour ago, Woolie Wool said:

The reason why is plain old capitalism--those fees go both to maintain PayPal and as rent to its owners. And yes, a better system exists, but everyone has been convinced by 150 years of propaganda that it's pure evil so nobody uses it.

How is a system that rewards laziness, punishes work and property, and depends on too much human coordination and self-sacrifice to function, good? Capitalism meanwhile comes naturally because anyone can be a merchant.

 

As for why these services cost: the alternative is to pay a postman to send cash. And I doubt it's mere flipping of numbers; otherwise hackers would have easily multiplied their deposits. And sure, it's being paid to cover the upkeep costs. Price is small enough not to bother users.

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1 hour ago, Woolie Wool said:

The reason why is plain old capitalism--those fees go both to maintain PayPal and as rent to its owners. And yes, a better system exists, but everyone has been convinced by 150 years of propaganda that it's pure evil so nobody uses it.

No country that's used that as its model has ever survived. Forget morality, that system is simply unsustainable in any form. Capitalism is the only one that rewards the hard workers and innovators, the people you need more of.

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2 hours ago, Woolie Wool said:

The reason why is plain old capitalism--those fees go both to maintain PayPal and as rent to its owners. And yes, a better system exists, but everyone has been convinced by 150 years of propaganda that it's pure evil so nobody uses it.

 

Socialism does nothing but ruin nations. The fact that people in Current Year can be so uneducated as to think it works is laughable. 

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5 hours ago, Memfis said:

Why do I need to pay PayPal, etc when I want to make a transfer?

Because it's a service.

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That's just the cost of doing business. You want a middleman, it's going to cost you. They aren't providing this service as a charity.

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3 hours ago, Woolie Wool said:

The reason why is plain old capitalism--those fees go both to maintain PayPal and as rent to its owners. And yes, a better system exists, but everyone has been convinced by 150 years of propaganda that it's pure evil so nobody uses it.

150 years of propaganda? More like 150 years of the system failing miserably.

 

How are things going in Venezuela?  What about Greece?

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PayPal specifically is essentially:

Delivering your money;

Insuring your money;

Making it easier for you.

 

Yeah, they deserve payment. 

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I would be even more fucked up, if sending money would cost more money than the money you sent. Or if you would have to pay for paying more than you paid. So every payment would make infinite debt.

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3 hours ago, riderr3 said:

Banksters not only can make money from the air, but also can bought presidents and senate, and rule the whole country.

So, so very true. The United States is run completely by money.

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You might find it's a much more complicated problem than you think. The banking system differs from one country to the next, but PayPal has already done all the legal and technical legwork in order to provide a common interface for international money transfer. I've seen a bit of the behind-the-scenes detail about how this stuff works and it's way more complicated than you'd think.

 

Aside from infrastructure, when you pay for their service you're also paying for things like customer service, dispute resolution and (mandatory) anti-fraud checks. It's a lot more than just changing a couple of numbers in a database.

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14 hours ago, Memfis said:

Could a better system with no fees exist?

So you want someone to run VISA's or paypal's infrastructure with all its reliability, speed, capacity, security measures and insurances... for free?

 

I'm all for regulating their exorbitant percentages and forcing them into more transparency, but destroying the entire system is like cutting off your fingers for being too clumsy. You don't know how good you have it!

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15 hours ago, Memfis said:

Could a better system with no fees exist?

Potentially, yes, but you have to keep in mind that the system has a certain number of requirements.

  • Speed
  • Security
  • Convenience
  • Liability (if something breaks down for whatever reason, you need a way to redress the situation)

All these things require people to invest skill and effort in it. In modern society, that translates to money. So how could a system like Paypal exist with no fees? Simple: they need to get money some other way. What other ways are there?

  • Subsidies. Paid for by taxpayer money, in exchange for providing said taxpayers with a free service. Problem: unfair to taxpayers who don't use the service (but end up paying for it anyway); inappropriate for an international system (you'd need international taxes).
  • Sponsoring. Paid for by patrons and sponsors who cover the bill for you, in exchange for something. Problem: in exchange for what? Advertising is pretty much as far as you can go this way; and honestly it starts to detract from "speed" and "convenience" if you're made to click through ad screens telling you about how your use of Paypal is possible thanks to the generous donations of rich oligarchs here and there.
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Memphis is right! We need the Star Trek method where there is no money and everyone does things for free!

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The best option I am aware of for moving money around internationally is Transferwise. Much lower fees than regular bank transfers, and reliable and quick. There are fees, but they are minimal, and as people have pointed out, it isn't a simple process, and there are regulatory requirements.

 

How it works diagram from Wikipedia

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