Those who don't know their history are doomed to repeat it.

A Paypal/X.com History Lesson

Paypal and X.com were born together. The two start-ups began independently in the same building. Paypal was intended to offer cheap, easy person to person payments. X.com was an online bank. Although this epinion is about Paypal, this history lesson is about X.com.

X.com was founded by Elon Musk, an exceedingly wealthy Silicon Valley hotshot, as a way of revolutionizing the banking industry. X.com was designed as a financial portal, offering checking accounts, certificates of deposit, and investment services through First Western National Bank in Colorado.

Everything about X.com was free. The checking accounts were free. The CD's were free. Even the stock purchases were free, and managed at the click of a button from the X.com website. In fact, the checking accounts actually collected interest, and the stocks were boosted gratis by 1% as a token of X.com's affection. It was too good to be true.

X.com made a big splash. It offered $20 free bonuses to anyone who signed up for a checking account. It made Forbes magazine. It was one of the most trafficked, most "influential" websites on the internet. As X.com grew, it looked back at its roots, to Paypal.com.

Paypal was also growing. By allowing regular people to exchange money for free, it attracted the Online Auction crowd. Paypal almost effortlessly became more popular than Visa and MasterCard combined on the auction sites. It was also X.com's competition. X was also trying to tap into the person to person payment niche, but was not doing nearly as well as its former playground pal. So X.com did what all big companies do when they see competition.

X.com bought Paypal.

Veteran Paypal users noticed the change about two months after the merger. Now Paypal is called "X Paypal." But for X.com users, like yours truly, the change was far more drastic. X.com, the former online banking powerhouse, was gone.

The X.com website no longer allowed users to sign up for checking accounts, and all mention of the FDIC insured bank were stripped. Month after month, X.com slowly shut down its banking services, all the while reaffirming its commitment to its banking customers. "We're integrating the sites," they said, "be on the lookout for great things!" Month after month, X.com users sat by, seeing none of the promised improvements.

Latest news? X.com is sick of us. The "free" checking accounts now have $12 monthly fees. They're trying to drive us out. Last month, when I asked about their commitment to their existing banking customers, the response was:

Our future plans for X Finance have not been finalized at this time. However, we continue to focus our energies and resources on our industry leading e-payments service - PayPal.

In other words, "go to hell."

Only Paypal Remains

Am I a bitter user of an obsolete website? Yes. But does the X.com Finance story have any bearing on Paypal? Also yes.

X.com is a company that undertook the responsibility of managing a federally insured bank. X.com asked hundreds of thousands of users to uproot their financial lives--to trust X with their savings. And what did X do? As soon as the next "big thing" came along, X.com abandoned its commitment to its users. X lied to us. And not just during the merger, but repeatedly, for many months, promising improvements it seems to have had no intention of delivering.

Although Paypal, which is now only free for "noncommercial" use, has always been reliable and speedy, so was X.com. And although X.com pledges to remain committed to offering Paypal, it said the same about its banking services.

If they shut down their bank as soon as they tired of it, why should internet users believe that Paypal will be...

1) a safe place to keep money*
2) trustworthy with sensitive financial information
3) more than just a fly by night operation?

The answer: They shouldn't.

Go ahead and use Paypal--I do, sometimes--but don't keep much money there, and don't expect Paypal to be in it for the long haul. The people running X Paypal have a lot of maturing to do before they can truly be taken seriously. Let's just say their track record isn't exactly golden.

Caveat emptor.

--
* Paypal deposits are insured up to $100,000. However, X Finance accounts are also insured for $100,000 by the FDIC. Although the insurance is crucial, insurance alone does not make a company safe or reliable. Don't believe me? Head to the X.com category on epinions and see for yourself.



Recommended: Yes