Square and Paypal run on the same backend that I helped develop. Ironic in the end no matter who you use it comes back to us in the end for settlement.

As far as Paypal holding money, that's a temporary account condition The 21 day hold is reviewed every 35 days and if you meet volume and sales amounts set at a particular limit they remove the hold.

The 21 day hold will return if you enter into a dispute, or are reported negatively to Ebay on a transaction involving Paypal.

As far as starting your own Paypal goes you would need to do like they did and caption a large market like Ebay. For that you would need to develop a transaction and settlement platform that outperformed Paypal in some way as to make it attractive.

I can tell you the mathematical engineering that goes into a platform like this is somewhat stunning. Transactions don't really exist until settlement happens, so everything is done on a calculated margin that involves risks and about a thousand other factors.

Millions of dollars in float - or maybe a locked account due to a dispute - at even 1% interest, every day... eventually adds up to some pocket change.

Holding onto money and delaying payment is just good working capital management. "Get paid as quickly as possible and delay payment for as long as possible." It helps with cash flow and in better economic times it can make money in the overnight money market accounts.

Not only can it make money through investments, but there is another concept working here, it's called the time value of money. As the money supply increases it encourages inflation. Inflation and time value of money means a dollar earned today is worth more than a dollar earned tomorrow. So payment is really less the longer I wait to pay.

As long as deflation doesn't occur, this will hold true.

No sooner did I reply to this thread then I got another dispute notice from PayPal :rolleyes: Sold an item 2 months ago. Buyer just now claims he never received it?! Unfortunately, I don't think I tracked it because it was only $45 and seemed like an easy sale. I'm sure I've got the postal receipt, but no Tracking #. In the end, I will be forced by PayPal to refund the money and the guy has my item (likely to be resold by him on eBay at a later date). Welcome to PayPal-eBay 2013.

Another way they hold your money, is once a dispute is settled it takes PayPal weeks to restore the disputed amount to your account.

The reality of these actions by PayPal is there is no incentive for any seller to describe an item accurately, pack it well, ship it promptly or attempt to resolve any issues directly with a buyer. Because, it makes no difference if you do those things or not. PayPal will not consider these things as a defense in a dispute.