PayPal Readies European Subsidiary

PayPal’s expansion into Europe has hit a new gear with word that regulatory approval for the setting up of a subsidiary across the Atlantic is imminent.

The eBay-owned online payments platform has notified users that a separate PayPal Europe Ltd. subsidiary will be set up in the U.K. once approval is received from Britain’s Financial Services Authority (FSA), a regulatory body.

PayPal spokeswoman Amanda Pires told the launch of the new subsidiary would beef help deal with safety and security issues for users in Europe.

“It’s quite complicated to start doing business in a new country because of major differences in regulatory, safety, security and infrastructure. This helps deal with those issues,” Pires said.

One major bridge to cross, Pires explained, was the authentication verification service (AVS) used in the U.S. to verify a user’s credit card information against addresses. “There’s no service like that in Europe so we have to find different ways to do credit card verification,” she said.

With the European subsidiary, which will be based in the U.K. and Dublin, Ireland, PayPal gets regulatory approval to create relationships with banking customers and processors in European countries where.

The plans for a European subsidiary comes on the heels of the launch of a standalone PayPal Web site in the U.K. which now offers seller protection to British customers. Once PayPal Europe launches, Pires said the company would be able to offer buyer protection, which is only available to U.S. users today.

“There are logistical things we have to build in European countries. As we expand internationally, we’ll be able to offer all these services,” Pires added.

PayPal’s expansion to the European market is a double whammy for the San Jose, Calif.-based eBay. The online auction giant has married PayPal to its Web marketplace and is regarded as the preferred payment method for millions of its users.

Last September, eBay and PayPal set up European headquarters in Dublin to host PayPal’s customer service and fraud prevention operations there. As part of the expansion into Europe, PayPal plans to aggressively hire staff and expects to have 400 employees in Dublin by the end of 2005.

In addition, eBay plans establish a second European customer service center at this Dublin facility in 2004 to support users in the U.K., Ireland and other European countries. eBay expects to have 300-400 employees working in this facility by the end of 2005.

PayPal recently made a move to cash in on the growing online music market, rolling out a new micropayments strategy exclusively for digital music stores. That initiative included a revamped payment processing rate of 2.5 percent plus 9 cents per transaction — well below the average of 2.2 percent to 2.9 percent plus 30 cents per transaction now available for existing PayPal merchants.

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