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I work in currency conversion, and honestly the conversion rates here do not look bad for an ad-hoc, small value transaction. The spread between buy and sell r

I work in currency conversion, and honestly the conversion rates here do not look bad for an ad-hoc, small value transaction. The spread between buy and sell rates is how traders make profits. If there was no spread, or the spread was small, traders would need to take a proportion of the conversion as a fee. Some banks and third parties do this - they offer a really wide spread, and then take a proportion over and above that. Also, Paypal may not itself be interfacing with the currency markets, but may rather be using a third party intermediary to perform the actual currency trades.

yashg 13y ago
I have $200 of yours with me. I initiate the process of giving the $200 to you, like I take out my wallet. Then I stop before I actually give the money to you, I put my wallet back and then I tell you "Hey you know what now I owe you only $180!" This is what it looks like - http://i.imgur.com/GIaP5O2.png http://i.imgur.com/GIaP5O2.png Does that look right?
- codeduck 13y ago
  Paypal has $200 of mine with them. According to the rules governing financial institutions in the country in which I reside and from which I have registered for their services, ther are required (by law, as a condition of their continued right to offer a payment service in that country) to pay that $200 into my account by close of business today. My account is for Rupees, not USD. Because of the way the Banking system works, that currency must be exchanged so that it can reflect in my account. This exchange is performed at the current market rate, plus some surcharge of fees levied by Paypal's liquidity provider to perform the currency conversion, and by Paypal in order to cover the SWIFT interbank charges plus any backoffice administration they need to do to verify my identity. There are additional verifications they need to perform on the US side; for e.g. that my bank account is not on a Interpol, NSA, FBI, CIA or INS watch list. That money is then sent, likely via the SWIFT interbank network, which levies a charge. Those funds arrive at my bank, where my bank levies a charge. The money reflects in my account, and I see that 'Paypal' have given me a terrible exchange rate. They haven't. They've likely given me a reasonable rate, because it is not in their interests to charge punitive exchange rates as it will drive customers to competitors. My point is that there is a whole different level of processing and infrastructure hidden behind Paypal's facade that you are not privy to; all of it has people performing tasks to move the currency from a US account to a Indian account, and all of that requires a modicum of human oversight because of incredibly strict financial fraud controls. Trust me when I say that the small markup Paypal is charging you is nothing compared to the level of bureaucracy you would run into were you to try to perform the above exchange manually.
  - yashg 13y ago
    That would hold true if the transfer had been completed. PayPal is able to stop the process and credit my account back means that money has not actually left their system. I agree the underlying mechanisms are much more complex but I also understand that what we see in that screenshot is just entries in a database and no real transfer or conversion of money has taken place as yet. If it had happened a day later then I would accept the fact that the process was well underway and some money had changed some accounts. The point is PayPal decides right at the time of beginning with the withdrawal how much in Rupees it is going to pay me. So if it decides for some reason it doesn't want to pay me, it should again give me back the same USD.
    - mnarayan01 13y ago
      I'm not entirely sure I follow everything that's happening here, but it seems to me that what you're requesting would, if nothing else, allow a currency trader to use PayPal to conditionally do conversion only if they were making a profit. PayPal is doing the conversion at the time at which it is responsible for the conversion rate, which seems like the "right" thing to do. Admittedly, this results in subpar outcomes for people in India, but I'm not sure they can do anything different.

yashg 13y ago

I have $200 of yours with me. I initiate the process of giving the $200 to you, like I take out my wallet. Then I stop before I actually give the money to you, I put my wallet back and then I tell you "Hey you know what now I owe you only $180!" This is what it looks like - http://i.imgur.com/GIaP5O2.png http://i.imgur.com/GIaP5O2.png Does that look right?

codeduck 13y ago
Paypal has $200 of mine with them. According to the rules governing financial institutions in the country in which I reside and from which I have registered for their services, ther are required (by law, as a condition of their continued right to offer a payment service in that country) to pay that $200 into my account by close of business today. My account is for Rupees, not USD. Because of the way the Banking system works, that currency must be exchanged so that it can reflect in my account. This exchange is performed at the current market rate, plus some surcharge of fees levied by Paypal's liquidity provider to perform the currency conversion, and by Paypal in order to cover the SWIFT interbank charges plus any backoffice administration they need to do to verify my identity. There are additional verifications they need to perform on the US side; for e.g. that my bank account is not on a Interpol, NSA, FBI, CIA or INS watch list. That money is then sent, likely via the SWIFT interbank network, which levies a charge. Those funds arrive at my bank, where my bank levies a charge. The money reflects in my account, and I see that 'Paypal' have given me a terrible exchange rate. They haven't. They've likely given me a reasonable rate, because it is not in their interests to charge punitive exchange rates as it will drive customers to competitors. My point is that there is a whole different level of processing and infrastructure hidden behind Paypal's facade that you are not privy to; all of it has people performing tasks to move the currency from a US account to a Indian account, and all of that requires a modicum of human oversight because of incredibly strict financial fraud controls. Trust me when I say that the small markup Paypal is charging you is nothing compared to the level of bureaucracy you would run into were you to try to perform the above exchange manually.
- yashg 13y ago
  That would hold true if the transfer had been completed. PayPal is able to stop the process and credit my account back means that money has not actually left their system. I agree the underlying mechanisms are much more complex but I also understand that what we see in that screenshot is just entries in a database and no real transfer or conversion of money has taken place as yet. If it had happened a day later then I would accept the fact that the process was well underway and some money had changed some accounts. The point is PayPal decides right at the time of beginning with the withdrawal how much in Rupees it is going to pay me. So if it decides for some reason it doesn't want to pay me, it should again give me back the same USD.
  - mnarayan01 13y ago
    I'm not entirely sure I follow everything that's happening here, but it seems to me that what you're requesting would, if nothing else, allow a currency trader to use PayPal to conditionally do conversion only if they were making a profit. PayPal is doing the conversion at the time at which it is responsible for the conversion rate, which seems like the "right" thing to do. Admittedly, this results in subpar outcomes for people in India, but I'm not sure they can do anything different.