What do you need to set up a paypal like system?

Hi all,

I'm new to this forum, so please be kind to me.

I'm just wondering what exactly is needed legal wise to setup something like paypal. Not that I'm going to do it, but I am just curious. I know there must be some restriction, something like you have to have at least equal amount of money in another bank account as backup or something.

--Ben.

You need lots of things, starting with a good lawyer and CPA. Funds transfers are (rightly) a highly regulated industry. Go poke around PayPal's "about" area a while, you'll note among things a plethora of state licenses they hold.

When dealing with money, there are a lot of legal issues to follow. First, Visa, Mastercard, etc.. requires a certain encryption bit to store their customers card info. Certain States, Countries have strict laws.

Also, you need a domain. As well as a backend, such as JSP, CFM, etc..
There are tons of other things, as medialint mention.

Your best bet is to setup an actual Bank. There are a lot of regulations and rules tied to the money lending/payment industry. Paypal acts like a bank, but is not chartered as such and has used this to skirt some issues. For starters, Paypal accounts are not eliable for FDIC insurance and under their policies, they could close and confiscate funds in your account at anytime. They are not required to keep money in the federal reserve system to ensure liabilities can be covered in case of collapse like a bank.

I do not deal with Paypal period. I used it once several years ago to buy something off Ebay and paid with credit card. When Paypal wanted me to give out my checking account number, I closed my account and never went back. Ebay buying Paypal has helped I think, but still they are under the watchful eye of many state Attourney Generals.

Bottomline, unless you already have several million dollars or can find people to invest that amount in start-up, its not worth getting into.