As part of the launch programme PayPal is to reduce or eliminate withdrawal fees for its UK members. Withdrawals of under £50 to a UK bank will cost 50% less or £0.25 and fees will be eliminated completely for withdrawal amounts of £50 and above.

A wholly-owned subsidiary of online autioneer eBay, PayPal will also offer UK consumers a "seller protection" guarantee, promising fraud protection from chargebacks for qualified transactions. To qualify, sellers must have a verified business account, make a timely shipment of tangible goods, and retain proof of shipping.

"PayPal is already being used by a large number of people in the UK to buy and sell locally, regionally and across borders around the world," says Matt Bannick, general manager of PayPal. "With the new customised features and seller protection programme on the site, we are bringing additional convenience and security to our UK customers."

PayPal UK is the company's first international Web site and part of its broader plan to expand the service in Europe. The launch follows the establishment last month of the company's new European headquarters in Dublin, Ireland. The Dublin headquarters provides customer service, fraud prevention and operational support for PayPal members in the UK and other European countries.

Founded in 1998, PayPal pioneered the idea of person-to-person funds transfers by e-mail. The company currently claims 31 million account members and is available to users in 38 countries around the world.

The expansion into Europe comes just days after Citibank decided to throw in the towel and shut down its own P2P payment system C2IT. In Europe, PayPal faces competition from NatWest, Egg, ING, Yahoo/HSBC, and the Visa and MasterCard credit card schemes.