PayPal's Peter Thiel: Trump’s Proud Gay Immigrant Supporter
On the last night of the bizarre circus that was the Republican National convention, the proceedings hit a new level of incomprehensibility when Peter Thiel used the occasion to publicly declare his sexual orientation. There had already been plagiarism, a Nazi salute to Trump, a statement by a top Trump adviser that "Hillary Clinton should be put in the firing line and shot for treason". Now PayPal co-founder Peter Thiel, an immigrant born in Germany who became a naturalized American, has thrown more than his financial support behind Trump, he’s endorsed him as a candidate, adding that he’s “proud to be gay”.
Meanwhile, in California a British artist living in the US installed a 15 cm high wall replete with razor wire, keep out signs and tiny US flags around Donald Trump’s star on the Hollywood Walk of Fame. Known by the pseudonym Plastic Jesus, the artist mocked the wall between the US and Mexico Trump has promised to force Mexico to fund, saying he feared the US could be set back 40 years if Trump won the presidency.
Peter Thiel ‘Don’ of PayPal Mafia
Originally, PayPal was a palm-pilot money-transfer service created by Confinity, a company Thiel co-founded which was acquired by Elon Musk’s company X.com in 1999. Later, after the name X.com was seen as having vaguely pornographic connotations, the company was renamed PayPal. eBay purchased the company in 2002. Within four years, only 12 of the original 50 employees remained at eBay.
Most were friends from Stanford University, staying connected socially and in business, many worked together to form new companies. Their prolific business innovation- producing Tesla Motors, LinkedIn, YouTube and Yelp, among other companies- inspired the group to be called the PayPal Mafia. Billionaire Theil’s status as the ‘don’ of the PayPal Mafia indicates his Silicon Valley influence, although few innovators agree with his political preferences.
On July 15, 145 tech industry leaders signed an open letter warning that Trump “would be a disaster for innovation.” As Silicon Valley draws from a global talent pool, Trump’s prohibitive immigration policy plans would have a negative impact on the industry. According to the Silicon Valley Index, nearly three quarters of workers aged 25 to 44 in computer or mathematical positions were born abroad. Trump derides the H-1B visas that allow many of these brilliant minds to work in the US as “a cheap labor program.”
PayPal expands to checkout with Visa Deal
Away from the raucous atmosphere of the convention, PayPal and Thiel’s investment firm Valar Ventures have had a busy week. After a year of tense negotiations with Visa they have struck a deal that allows customers to pay with PayPal at checkout. In May that deal was unforeseeable as Visa’s CEO Charlie Scharf threatened to compete with PayPal “in ways that people have never seen before.” He termed PayPal a foe for urging its users to fund their PayPal accounts with their bank accounts rather than their debit or credit cards. The arrangement profited PayPal, not Visa. Scharf complained- in terms that only the head of Visa could- that PayPal was causing Visa to be: “disintermediated from the transactions.”
A year after it split from eBay, PayPal is evolving from internet based payments to pursue a larger share of consumers as it becomes possible to use PayPal accounts to buy goods with smartphones in stores. The deal also allows PayPal’s mobile apps, including Venmo (a peer-to-peer payments service) to withdraw cash if they link to their Visa debit cards.
PayPal CEO Dan Schulman captured the ongoing tension of the deal between rivals, saying, “We want customers to pay any way they want, and the deal with Visa allows us to move more aggressively into the store.”
Eighteen-year-old PayPal has 188 million active customer accounts, an 11 percent increase over a year ago and a 2 percent rise over the first quarter this year, according to the company. About 28 percent, or $24 billion, of its payments are now processed on mobile phones. At the end of March 2016, customers of PayPal held more than $13 billion in accounts at the online-commerce company.
Increasing Investing in Deposit Solutions
Peter Thiel, the first outside investor in Facebook, has also increased his investment in German fintech startup Deposit Solutions, this week. In January Thiel invested £840,000 or, according to our calculator €1 m or $1.1 m into Deposit Solutions.
He and investors including FinLab, Greycroft Partners and e.ventures are increasing their holdings, as part of a £12.5 million ( €15 million, $16.5 million) investment round. Founded in 2011, Deposit Solutions provides a platform that allows users to compare and access rates from multiple banks without having to open up new accounts. Now valued at £91.9 million (€110 million, $121 million), the company recently opened a London office and has plans to launch its UK platform by 2017. Valar Ventures has also invested in other German fintech companies as well as foreign currency company TransferWise.
Countless Complaints about PayPal
PayPal has one of the worst ratings on customer review site TrustPilot, with a one star, 1.9 out of 5 rating. 1,309 reviewers cite that PayPal favours buyers, in their kinder reviews. Many others make liberal use of expletives and exclamation points. They often state that the company holds onto funds as long as possible, which appears quite likely given the already stated fact that in March of this year PayPal held more than $13 billion in customer accounts.
With 15 million UK customers, PayPal has been the subject of a BBC Watchdog Daily investigation regarding the frequent complaints of payments being delayed and accounts being frozen or suspended.
They reported on a business that was crushed by PayPal’s security policies. Jake Wright’s online video sales business used PayPal until the day he got notice that his account was limited and his eBay account suspended. When he complied with a request to send bank statements, supplier invoices and more identification, PayPal repeatedly refused to accept the documents saying they were illegible.
Wright lost his business when “eBay contacted all of our customers with a fraud alert notification. They told them they should raise a resolution in their resolution centre against us. Even though the customers had already received the products they’d paid for.” He added, “There seems to be no sensible appeals process.”
Current US Lawsuit and UK Startup Issues
After a five-year legal process against PayPal which accused the company and eBay of improperly placing holds or suspending accounts, PayPal has agreed to pay out a £2.25m ($3.2m) settlement to US sellers who had an account between 2006 and 2015 and experienced the infamous account issues.
In 2015 PayPal agreed that PayPal Credit would pay a $25 million fine to settle a complaint that consumers using PayPal were signed up for PayPal credit accounts without their knowledge nor consent.
A UK startup Huel reported PayPal to the Financial Conduct Authority (FCA) after the online payments processing service put £44,000 of the company’s funds on hold for 90 days as they investigated his four-year-old account for fraud. PayPal’s UK website explains that PayPal business clients should anticipate rolling reserves-holding back a percentage of each transaction per day, and PayPal would then release the amount 91 days later.
The company isn’t sharing the vast profit it makes on the interest on this $13m with the businesses whose funds it holds for 90 days, either. The only ones profiting from such policies are PayPal, Peter Thiel and Donald Trump.