Paypal’s recent power outage drives bitcoin adoption
PayPal users become disillusioned with Billion dollar company, following power outage that cripples network.
During the evening of October 29, Paypal experienced a service interruption for approximately two hours, caused by a power outage.
“The network experienced an intermittent interruption during a period of relatively low traffic. At 7pm PT, the majority of volume is in APAC [Asia and Pacific countries] not in EMEA [Europe and the Middle East] or USA.”
— – Paypal
Many angry customers flooded the official Paypal twitter page with questions and complaints, asking the company to fix the problem urgently. Customers experienced a multitude of problems, including the inability to reach the Paypal website, process credit cards, access account information, and some incorrect balances.
Approximately two hours after acknowledging the problem, Paypal tweeted that the power outage occurred at a single data center.
This explanation raised concern among Paypal users, who questioned how a single point of failure could cripple a service provider of this size. Following its separation from eBay Inc, on July 17, the company has reported strong financial performance.
In the third quarter (Q3) of 2015, ending September 30, Paypal reported record revenue of $2.3 billion, a 15% increase on a non-GAAP pro-forma basis, and 19% on a foreign currency-neutral basis. The company also reported gaining marketing share, processing 1.22 billion payment transactions, with Total Payment Volume (TPV) climbing 27% to $70 billion.
The company also continues to lead in mobile payment solutions, processing 345 million mobile payment transactions, which is an increase of 38% from last year. In addition, Paypal [reported](https://www.paypal.com/hk/webapps/mpp/country-worldwide https://www.paypal.com/webapps/mpp/about) that a record number of consumers and merchants signed up in Q3, growing its customer base to 173 million active customers, in 203 markets and 26 currencies.
Investment analysts also expect PayPal to gain market share as its own entity, separate from eBay. “Retailers are much more comfortable now that PayPal is independent, and it’s only a matter of time before they turn it on,” stated James Friedman, a Susquehanna Financial Group Analyst
“We are operating in a time when change is sweeping through the financial services industry driven by the rise of mobile technology and the acceleration of money becoming digital. These two massive trends play directly to our strengths and we are leveraging this transformation to extend and accelerate our lead.”
— – Dan Schulman, Paypal President and CEO
Based on the company’s Q3 report of $70 billion TVP, a rough estimate of the average daily volume would be over $700 million, which is approximately $60 million every two hours. While neither the number of customers nor the number of transactions affected by the recent power outage are known, it likely cost merchants millions of dollars.
Braydon Batungbacal is the co-founder of Spreesy, a social commerce platform that turns social network pages such as Facebook and Instagram into selling tools, used by 25,000+ businesses. During the Paypal downtime he tweeted “Paypal breaks and we miss 180~ transactions in the last hour.”
Batungbacal was one of many unhappy users to comment on social media, there were many more that stated they would abandon the platform altogether, with some advocating bitcoin.
Making comparisons between bitcoin and Paypal is a pastime as old as Bitcoin itself. Although Paypal is a much larger network, accepted by millions of vendors from all around the globe, it inhabits the online payments space, which bitcoin is expected to disrupt.
While Paypal processed almost 1.22 billion transactions in Q3, an average of 13 million transactions a day, the daily number of bitcoin transactions has yet to reach 250,000, which would still be less than 2% of Paypal’s volume.
Paypal, however, is a payment service provider, and can provide bitcoin payment options. In January 2015, the global payment platform Braintree, a division of Paypal, started a private bitcoin beta test for all of its U.S. based merchants, through a partnership with Coinbase.
Accepting bitcoin through Braintree is not as simple as integrating Paypal. Merchants need to open a separate merchant account with Coinbase, link it to their Braintree account, and add a few lines of code to the merchant’s website.
Paypals apparent hesitancy makes more sense when considering the functionality of bitcoin. While it’s currently provided as a payment option through braintree, widening the customer base for braintree using merchant’s, those very same merchants may well figure out that the digital currency provides lower fees, can be integrated easily, and has no single points of failure.
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