PayPal in focus: risks and opportunities for German consumers

PayPal has established itself as a significant market power in Germany, with more than 32 million active users. The payment service provider enables uncomplicated money transfers, for example for shared gifts between colleagues. Users only need an email address, which makes it particularly easy to use. According to a study by ibi research, eight out of ten online shoppers use PayPal at least once a year, which brought the market share of German online retail sales to over 28% in 2021, although this could continue to rise since then, as the IT financial magazine reports.

PayPal is often viewed as trustworthy and is widely used in online shopping. The service also offers buyer protection for commercial payments, so customers usually get their money back if goods are not delivered or damaged. However, there are also critical voices: The option of paying bills in monthly installments could tempt financially weaker customers in particular to live beyond their means. While the app details all purchases, this does not protect against financial problems. In addition, the interest rates for installment payments are often higher than for conventional consumer loans.

Regulation and competition

The Cartel Office is currently examining PayPal's market power not only based on market share, but also based on several criteria that, among other things, take into account its lead over competitors. This study is important given the dynamic development in e-commerce, because there are large areas, such as travel and events, that are not included in the market share figures. When talking to large e-commerce providers, it could turn out that they do not pay the conditions stated in the PayPal price list, which makes PayPal one of the most expensive online payment services in Germany. Competitors such as Mastercard and Visa are now developing new solutions, and the German banking industry has improved its giropay process, which raises hopes of successful competition.