[marcinzm]

>Specifically, what's stopping a competitor from eating Paypal's lunch right now?

There's already regulations (or industry rules) regarding money laundering, credit card processing, credit card charge backs, international money transfers, etc, etc. That alone creates a decent barrier to entry.

Then there's other issues such as merchants lying, customers lying, refunds, stolen accounts, etc. PayPal closes accounts (and so on) as a consequence of trying to deal with all these issues.

I'd posit that PayPal does not suck because it's PayPal but because of the product itself and anyone who tried to fully replicate it would run into the same issues (and thus suck just as much).