Ever gone out to a fancy restaurant with friends, only to find that someone lacked the cash to pay their share? Is writing a paper cheque to a relative (say, a kid in college) a hassle?

PayPal's tagline says it's "the world's most loved way to pay and get paid," but it's not the only game in town. New services aim to do for money transfers between individuals what PayPal did for e-commerce: provide a way to make payments online without having to give recipients your credit card or bank account information. In addition, businesses seeking an alternative to selling goods and services via PayPal can find plenty of options.

Person-to-person payments

Popmoney, which debuted late last year, and ZashPay, which arrived this summer, work much like PayPal: For payments, you need only the recipient's email address or mobile phone number. One important difference: PayPal lets you send and receive payments only via your account with PayPal. To make a payment, you must first fund your account (through a linked bank account or credit card). To receive a payment, you must transfer it to the bank or credit card in order to use it for anything other than a PayPal purchase.

Popmoney and ZashPay simply transfer money directly from your bank account to the account of the person you're paying (neither service supports credit cards). This process resembles the one used in electronic bill payments, and in fact, both services are offshoots of companies (Cash Edge in the case of Popmoney, and Fiserv in the case of ZashPay) that manage bill payment services for banks.

Both sender and recipient must have accounts on these services, but the services don't tie up any money, they just associate your existing bank account with your email address or your cell phone number.

If your bank offers either service, it will set up your account automatically, no need to provide additional info. Cash Edge says that some 175 banks already offer Popmoney, Fiserv says that ZashPay had about 70 banks on board as of early October.


Otherwise, you can still use these services to receive cash by signing up for a personal account on a service's website, but you must provide sensitive information, including your date of birth, Social Security number and the accounting and routing numbers for the linked bank account. You must then go through a verification process, which involves waiting for the service to deposit two small sums to your account and then reporting the exact amounts received.


Popmoney doesn't let you send money through its site at all, you can use it to send money only if your bank supports the service. For payments from someone who wants to use that service through their bank, you set up a Popmoney account.

Pros: Account setup on PopMoney site is free, as is receiving money. Some 175 banks offer free accounts to customers.

Cons: Accounts created on PopMoney's website cannot send payments, only accounts with a bank that supports PopMoney can do so. To create an account, you must go through a verification process that involves providing a lot of personal information.


Since our bank doesn't offer ZashPay, we set up an account for the service online, which took a few days, including waiting for the small verification deposits to appear in the bank account. All we had to do to make a payment was provide the recipient's email address and the amount we wished to send. When we received a payment, the service notified us via email (you'll get a text message if you set up your mobile phone). Turnaround time was one to two days.

Pros: ZashPay lets you send money via email or text message. There's no third party account to fund (as there is with PayPal, for example). Instead, money transfers directly between bank accounts. Account setup on the ZashPay site is free, as is receiving money. Payments of up to $500 cost only 75 cents per payment to send.

Cons: Creating an account involves a verification process that requires you to supply lots of personal information. ZashPay doesn't yet have as many banks on board as PopMoney, about 70 as of early October.

Other upstarts

Other personal payment services are AlertPay and Obopay, which work on the same basic model as PayPal: You must set up and fund an account that makes and receives payments. Obopay offers strong support for mobile devices. AlertPay serves some people that PayPal does not, accepting additional funding sources such as money orders and letting you send money to more than 190 countries.

Will people quit writing cheques (or carrying lots of cash) and use these services instead? In order for that to happen, says Jim Bruene, who tracks online finance in his NetBanker blog, making payments has to become "as easy as pulling out a $20 bill."

Such convenience may not be possible until cell phones with built-in near-field communications (NFC) technology for contact-free payments (payments you make by tapping the phone on a payment terminal or another phone) become ubiquitous in North America, Breune adds.

Strictly business

PayPal makes its money on fees for playing the role of Internet transaction middleman. Along the way to becoming the most popular service of its kind, PayPal has also made quite a few merchants unhappy.

One of those is "Notch", a game developer whose account of several hundred thousand euros PayPal froze for suspicious activity. That is an extreme example, because most PayPal accounts aren't so flush with cash, but it suggests an institutional high-handedness that has upset many sellers. Here's a breakdown of how key alternatives to PayPal work for business customers.

Google Checkout

Google created Google Checkout to compete with PayPal and to offer users a superior platform for conducting transactions online. For processing your sales, it charges you 1.9 percent plus 30 cents per transaction, depending on your monthly sales volume, without monthly setup or gateway fees and with no fees for buyers.

Pros: Google is no fly-by-night Internet startup, so you can deal with Checkout with confidence. Google also provides solid customer support, albeit through email only.

Cons: Some people fear that Google is a global Big Brother with access to too much information already. Sharing financial accounts and transaction details with the company would be another log on the fire for such critics.

Amazon Payments

Amazon is the largest online retail site, and it has expanded to include trusted third-party merchants, so it makes sense that the company should have a means of transacting cash. Customers who shop using Amazon Payments can complete purchases using the shipping and payment details stored in their Amazon accounts. Businesses can provide a simple means of payment without forcing users to leave the site to log in elsewhere.

For sellers, fees are assessed on a per-transaction basis, they vary by dollar amount and volume. The base fees are 2.9 percent plus a 30 cent fee for each transaction of $10 or more, and 5 percent plus a 5 cent fee for each transaction under $10.

Pros: You can use the service without sharing your payment information and without having to re-enter shipping details, simply by using the details stored in your Amazon account. Purchases are protected by Amazon's A-to-Z Guarantee, which ensures the condition and timely delivery of the products bought.

Cons: The service has limited implementation outside of It is nowhere near as widespread as PayPal.

Revolution Money Exchange

RevolutionMoneyExchange is a newer player in online finance, launched by America Online founder Steve Case. The service doesn't have the brand recognition of Google or Amazon, but it allows users to make online purchases, transfer funds and make payments to and from each other with no fees. Even businesses can request and accept RevolutionMoneyExchange payments without paying fees.

Pros: No fees except in certain situations such as stop payments or overdrafts. Good account security. Accepted as a method of payment by a number of reputable companies such as Walgreens.

Cons: You can't send or receive more than $1000 per day or more than $2500 in a calendar month.


Moneybookers has the unique honour of being accepted on eBay as a PayPal alternative. In that regard, it's arguably the most comparable option. Moneybookers lets members transfer money to and from each other based on their registered email addresses. Consumers can also use the service to make online purchases, and businesses can use it to receive payments for purchases. Though it's a more obscure PayPal alternative than others, it's a good choice if the goal is to buy and sell on eBay.

Pros: Members can receive payments for free, a significant savings over PayPal, especially for international transactions. Customer support is solid.

Cons: The fee for requesting payment by cheque is high at 3.50 euros, it amounts to nearly $5 depending on the conversion rate. Sending money incurs a fee of 1 percent of the transaction amount, putting the fee burden on the buyer rather than on the merchant. Outside of eBay, the service is not widely used or readily available.


DigitalRiver is more of an e-commerce system for merchants than a method for transferring or exchanging funds between users. Still, for businesses with an online presence that need a shopping cart and e-commerce service, it's worth a look. There are no upfront costs associated with setting up an account, and the fees for receiving payments start at 2.9 percent plus a $1 transaction fee. In some cases Digital River is the company responsible for back-end processing of credit card payments made through PayPal.

Pros: Tools and services are particularly well suited for online sales and downloads of software. Digital River enables customers to retrieve or redownload previously purchased content.

Cons: In many ways, especially for consumers, Digital River is not a viable alternative for PayPal. Customer service has been a frequent target of complaints, and many critics have expressed concern over costly rip-off services' being linked to Digital River transactions.

What to choose

If you are among the 25 million sellers who conduct business on eBay, there is really no escaping PayPal. Because eBay owns PayPal, using that service is a requirement for setting up a seller account in the first place and most competing online transaction services are banned. eBay has been tied up in litigation, defending itself against a class-action antitrust suit related to PayPal, but the dust is still settling.

If avoiding PayPal is a priority, but buying and selling on eBay are imperative, Moneybookers is your best option at least for now. Google Checkout and Amazon Payments are solid options from credible online brands, and Digital River provides online merchants with powerful shopping cart and e-commerce tools.

Of these alternatives, RevolutionMoneyExchange is the most compelling overall for businesses. More than just a method of transacting money exchanges on eBay, it seems most like PayPal in its ability to transform the way money is used and exchanged, including such simple tasks as paying a friend for your half of a lunch tab.

PayPal is likely to remain the most recognized brand in online transactions for quite some time. But other companies are availing themselves of the opportunity to jump on the Internet commerce bandwagon and compete. Ultimately, both consumers and merchants will benefit from the competition because it will drive innovation, keep costs in check and provide choices.