Many have said that Bitcoin is of no use to PayPal, and only threatens it, because Bitcoin's payment system solves the problem of online transactions better than the PayPal model. I disagree. I think Bitcoin poses the biggest business threat to Visa, not PayPal, and that the latter, being a technology company, can leverage Bitcoin to expand its market reach.
Expanding merchant base
The main problem with PayPal is that it's not merchant friendly. Consumers love it, because they can chargeback a payment if they don't receive a product from a merchant, and fees are reasonably low, but merchants have to worry about fraudulent chargebacks. If the product that the merchant provides is one that is not shipped, because it's digital or a service, then it is difficult, if not impossible, to prove delivery to the customer, meaning the customer will almost always win the dispute.
Due to this limitation, there are many merchants that cannot accept PayPal. Those who sell bitcoin are a case in point.
PayPal could get around this by offering its customers a new option: to pay with bitcoin. By allowing PayPal users to make standard Bitcoin payments, PayPal would immediately be able to reach every merchant in the world, regardless of the risk of fraud and chargeback in their industry or region.
How it could work is that when a PayPal user wants to pay with bitcoin, national currency in their account would automatically be converted to BTC, and sent to the merchant. PayPal could charge a 1% conversion fee, and make money from the process in this way.
PayPal buyers would gain from being able to hold their money in more stable national currencies, and purchase BTC only when they need it. PayPal already has tens, if not hundreds of millions of people who have connected their bank accounts to their PayPal accounts, positioning them to make conversion from fiat -> BTC extremely easy for a large number of people.
This would make PayPal accounts more useful to buyers, give PayPal a new source of revenue, and greatly expand the number of merchants that can easily accept online payments.
