It’s now a little easier to send money to CIty Index as they add PayPal to their deposit and withdrawal methods.
It’s probably cost them a load of money in fees to do so as you need extra regulation and PayPal will no doubt be charging City Index a premium for making it quicker for clients to fund their accounts.
Spread betting brokers like City Index are restricted by AML or Anti Money Laundering rules and can often only send money back to the account or source from which it originally came. While clients are often reluctant to post bank account, debit or credit account details online for fear of them being hacked.
A bank transfer is still probably the best method with which to move funds but some banks will charge for this and not all customers have access to online banking platforms.
Brokers try to be as flexible as possible, whilst staying within the AML rules, and one alternative to bank wire or card payments is the use of electronic wallets and payment systems.
City Index announced this week that its clients can now deposit funds into their trading account via PayPal.
PayPal is perhaps the best known of the electronic wallets and alternative payment system.
Founded back in 1998 and managed in turn by silicon valley heavyweights Elon Musk and Peter Thiel the company IPO’d in 2002 it rose to prominence when it was acquired by eBay later that year, eBay owned PayPal until 2015 when they spun the payments provider out as a sperate business.
PayPal provides a buffer between consumers, merchants and service providers. Customers set up a PayPal account linked to their email address and fund that account electronically from their bank. What’s more, they can use more than one bank account to do so.
Once the PayPal account is funded users can make purchases or transfer money to merchants and service providers who use the system without the need to reveal bank or credit card details.
The relative anonymity and heightened security that PayPal provides to users and merchants have proved extremely popular.
In 2018 PayPal processed 2.90 billion transactions worth some US$164 billion, a figure that was up by +25% over the prior year.
Paypal is not entirely immune to hacking and scams, however, most of these scams seemed to be aimed at getting account holders to reveal their credentials through phishing emails and alike. rather than attacks on the payment network itself.
By adding PayPal as a payment option City Index is hoping to reduce what marketing departments call friction.
Which is anything that gets in the way of a customer opening and funding his or her trading account. FX brokers want to make that process as seamless as possible in order to maximise the return on their marketing spend.
In making alternative payment and deposit options available these brokers are offering clients a greater choice which is something that we are very much in favour of. The added security that PayPal brings to the payment and transfer process is also to be welcomed, however. users should always be on their guard against scams which try to get them to reveal sensitive information.
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.