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July 2000

How to E-mail Money
Still owe your friend $20? PayPal and other outfits let you send it over the Net

By Sreenath Sreenivasan

Sreenivasan's lastest piece for Time Digital was about digital stamps.

I HAVE SEEN the future of cash. And I like it. In fact, I love it. I haven't been able to print my own yet, but this will do for now. It's a person-to-person service called PayPal, and it allows users to send each other money instantly by e-mail. From my credit card to your bank account. No charge. No mother's maiden name.

When I tell friends about it, the first reaction is a snigger ("The geek's really lost it this time — money via e-mail?"). When I explain how it works and tell them the possibilities, the sniggering stops. The next reaction is often "How can I invest?" Too late: Goldman Sachs, Nokia Ventures and Deutsche Bank, among others, already have.

Even if you aren't the investing kind, PayPal (which recently merged with X.com, a former competitor) can play a major role in your life. You can use it to pay for stuff at auction sites, settle dinner debts with friends or nudge your cousin to repay that $50 he borrowed at the family reunion.

Here's how it works. You register at paypal.com with your name, e-mail and street addresses, and a credit card number. Right away, you can zap up to $200 to anyone in the U.S., as long as you know his or her e-mail address. PayPal will charge it to your credit card or bank account. You can raise your spending limit to as high as your credit card limit, up to $5,000, after a verification by snail mail.

Your friend, meanwhile, gets a "You've got cash" message in her In box. After she registers, the money is transferred to her bank account, or she can request a check. PayPal says it keeps all sensitive numbers under close wraps and uses the same encryption methods as the banks and online bill-payment services.

The service charges? Zero. In fact, the company pays you — $5 the first time you use it, and another $5 each time you refer a customer. PayPal makes its money through interest earned on the "float," the funds that users leave in their PayPal accounts. Many people who receive money leave it in an account, to be able to pay someone else later.

More than 1.4 million people use PayPal. While other outfits are challenging it for supremacy in digital payments, PayPal strikes me as the way to go. It's a snap to use and "always free," as the company says.

For auction payments, the main rival is a service on eBay called Billpoint. Sellers pay sliding-scale fees that can range from 35 to 3.9 percent of the transaction amount. Buyers aren't charged anything. Its main advantage: You can send and receive money internationally, which you cannot do with PayPal until later this year.

Then there's eMoneyMail, which handles general payments from your checking account or credit card. It charges a flat $1 transaction fee, which I found too high, especially for small payments. The web site is cumbersome, and the process is slower and less intuitive than PayPal.

PayPal has one other nifty feature. Users of Palm compatibles can "beam" money to each other. Just point and pay; the money gets added to your PayPal account when you sync with your desktop. Coming next: services for cell phones and two-way pagers. Playing with money has never been more fun.

From the print edition of TIME Digital.

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