Hmmm I got double-billed by Hilton on my Visa a few months ago. Basically the clerk had mis-entered my arrival and departure dates. I sent them copies of my plane tickets showing me arrival and departing the same day, and yet they still wouldn't reverse the charge. Guess what happened when I called up Visa to dispute it? "Sorry, you'll have to work this out with them". Stolen credit card, totally different story. Charges were taken off no problem.

This is a really good point. Security and Convenience are always inversely proportional, and the trickiest part as I see it is predicting where consumers will fall. Google Wallet looks like it will have fine security, but lacking convenience and I just don't know if it will ever take off. It will be interesting where PayPal comes in on that.

Not really. Dwolla and Google can accept payments, but still ultimately have to charge it to a bank account or debt/credit card. In other words, they are middle men. PayPal essentially acts as its own bank. Huge advantage for offering simplicity, features, and lower fees.

I was in Whistler a few months ago and was surprised by this. It makes sense but doesn't seem to be coming to the USA anytime soon.

Absolutely correct - it's a cool idea with many advantages, but it only works at the regional level and requires a partnership with all the local banks. That's easier said that done, as Bling Nation is finding out - http://www.americanbanker.com/issues/176_109/bling-nation-mobile-payments-1038582-1.html

All the other comments here stated PayPal's fees were below 2%. I would have to check my math, but I think 2% is *lower* than 3%, not higher.

You've hit the nail on the head. Imagine an Commerce system where merchants get charged between 1-2% transaction and customers not only pay a dime, but don't have to worry about overdraft or ATM fees. I'm sure that's what PayPal will be selling.

The flaw is anyone can setup a PayPal account. When money is sent, PayPal has no way of knowing if it's going to sick kids or to buy weapons for diamond smugglers. Much like they police, they can't see everything, so they just have to rely on behavior patterns.

Nice one. People forget the fundamental security benefit of PayPal - you're SENDING the payee money. With credit / debt cards, anyone with the card information can charge you any amount. Huuuuge fundamental difference. Hopefully they will keep that paradigm going on in a POS setup.

Places that are cash only usually do so because they can't afford the startup costs and 2-4% overhead that accepting credit / debt cards does. Not to mention training their staff. There's a huge opportunity to just provide something that's easy to use, cheap, and only charges around a 1% usage fee per transaction. Whoever gets that concept and executes on it will get their foot in the door on this market very easily, and will start to chip in to Visa / MC / Amex's territory from there.