What PayPal must do in order to survive.

An open letter to PayPal. . .

So it’s been six long years since EBay bought you and by now you’ve made a name for yourself all up and down the internet doing everything from payment clearing for Ebay auctions, to tight integration with Ebay, and even logo automatic logo insertion into Ebay auctions! Son - you’ve made your mom and I very proud.

The landscape has changed and by resting on your laurels you’ve been leap frogged in terms of innovation and squandered the relationship you have with a very captive audience.  If we had a choice I think you’d be shocked at how users would turn on you faster than you can say landslide (and believe you me, choice will come).

Here’s your homework assignment:

1. Centralized secure checkout: I know you are dropping a few breadcrumbs in this area. . .though I’m currently paying for my Itunes w/ my PayPal you’ve notoriously dragged your feet here.  Google Checkout will be the 800lb gorilla sooner than you can say “earnings came in shy of expectations this quarter.”  You need to put the pedal to the metal with this, *finally* consumers have a healthy fear of identity theft and credit card fraud, do yourself a favor and capitalize on it.
2. Security: Though the RSA fob is cool, the open source community is where you want to be on this one.  Open source is great not just for interoperability but just as important is that by virtue of the Darwinian way open source development works, we are getting inexpensive (or free) solutions that are at least as strong, if not stronger from a crypto standpoint vs. the private sector.  Write this formula down on a chalkboard in your offices, Good Will Hunting style, and see who can solve it: Interoperability + low cost implementation + strong encryption = wide adoption. 
3. Default payment method: I know you save money when I use my checking account, but mark my word - the day you quit making us jump through hoops to use a credit card as a funding source is the day the bloom falls off the rose for Google Checkout.  This isn’t a little nit pick - this is a huge deal.
4. *Net* fees: Give us an option to let the payor absorb all the fees in a given transaction. . .presto, now I can use PayPal to do lots of little things like pay the baby-sitter, dog walker, and others.  I have no problem absorbing the $2.80 or whatever it would cost for the convenience it would allow if I could shoot $50 or so here and there.  
5. Mobile payments: I *really* hope you’re working with Apple (and every other phone manufacturer) because unlike every other industrialized nation with a high rate of cell phone adoption the US has no widely accepted mobile payment infrastructure.  Or you could just side step this and let someone else get real rich. . your call (PS - Your current effort does not qualify as a mobile payment infrastructure).
6. Innovative features: Don’t bury the cool stuff, like the Virtual Debit card system that was recently released, deep on your website.  Also don’t force me to use browser plug-ins  - I already have about 7 toolbars too many. . .instead why don’t you just make a Vista widget and an OSX widget and call it a day?