The Future of Virtual Bank Accounts

If we asked what virtual bank account site you use the chances are that most of you would say PayPal. The company has over 230 million accounts, of which almost 90 million are classed as active and for the time being their name is synonymous with online payments.

The total amount of PayPal transactions in 2008 was $60 billion and in 2009 $71 billion. Yet while it remains the virtual account of choice for many people around the globe there is a strong chance that it will see more competition in the years to come and that in a few years time it may no longer be the ubiquitous presence we have been used to seeing.

Three of the big problems which PayPal customers often complain about are the fees, the US bias and the reliance which it has on the user’s existing, traditional bank accounts and cards. While the first point is one which a potential rival could presumably attack (revenues were well over $600 million in the first quarter of 2009 so there seems to be scope for this) who out there could find a way to challenge them by looking at the second and third points?

One of the names which we often see linked to the world of online banking is Facebook. There are strong hints that the company will be looking at moving into this lucrative market in the future and they certainly could find ways to integrate a payments system into their site. If seems to be a question of when rather than if and the answer could arrive sooner rather than later.

Another possible contender is Square. This is a system which lets you accept card payments wherever you are. While the most common current use is to let small business owners accept payments from customers there is also the interesting possibility of people receiving their wages or other funds by this method and then using the money as their spending cash. While the current system doesn’t support the full functionality needed for this it could happen soon.

There are also cards issued by sites such as Payoneer and Moneybookers which let you fund your account and then use at an ATM to get cash or spend it in shops which accept credit cards. This type of funded card can also be used online and can be loaded by anyone who owes you money. While it is currently used mainly by the likes of internet freelancers who live in countries where the PayPal site doesn’t offer a full service it is easy to imagine this service being used more extensively over time and gradually becoming people’s main cards for both online and real life transactions.

So how will we receive and spend money in the future? There are still plenty of unknowns which need to be answered and it seems certain that there are more twists and turns to come. The one thing clear is that PayPal is going to receive some more serious competition in the near future.