We've been going around in circles with stories like this for years. In spite of all the horror stories, people are still using PayPal. That would indicate to me that either PayPal are exploiting a monopoly position, or there is a massive gap in the market for a fast, easy payment system that doesn't treat serious customers like dirt.
I completely understand the Googley argument that you can't provide much customer service if you have millions of users with a tiny average revenue, but what sense is there in treating a €600,000 account so poorly? Surely they must know that they have lost him forever as a customer.
The only logical answer I have as to why PayPal do this to big customers is that they know that as soon as anyone gets big they leave for a cheaper merchant account, so their account freeze is just a way for them to hold on to a customer long enough to make some real money out of them. I can't believe that they would, but I'm struggling to work out why else they would act like this.
That would indicate to me that either PayPal are exploiting a monopoly position, or there is a massive gap in the market for a fast, easy payment system that doesn't treat serious customers like dirt.
You're missing the third possibility, which is that efficiently doing what PayPal requires requires "treating serious customers like dirt."
PayPal is in the business of efficiently detecting and not paying for fraud. One type of fraud that they need to deal with is fraudsters getting control of an established account, sticking lots of fake payments in, then withdrawing the "money" before PayPal notices that it isn't real. Their strategy for this seems to be to make people jump over a low paperwork barrier, then wait long enough that the payments have all cleared before they pay out. Given this, paying for a dedicated customer service representative for the victim on top of that strategy is an inefficiency.
The last part of that decision ignores the effect of pissing people off on their reputation, and so may be shortsighted. But the rest of their strategy makes sense to me.
One type of fraud that they need to deal with is fraudsters getting control of an established account (...) Their strategy for this seems to be to make people jump over a low paperwork barrier, then wait long enough that the payments have all cleared before they pay out.
One day my account (solely used for sending payments) got blocked because of a "potential unauthorized third-party access". After completing the verification they asked (new password, new security question and credit card confirmation), I received another message asking me to send a scanned copy of my ID Card, a proof of domicile and my BBAN.
I told them that for confidentiality reasons, it was out of question to send any of these documents. I asked them to give me more specific information about the materials that led to the account suspension and to reactivate it without delay. The next day, I received an email with vague excuses and my account got reactivated immediately.
It is true that their antifraud system can lead to number of suspended accounts and frozen funds without any solid basis. But they may also take advantage of frozen money (eg. this 600k case) for further financial activities so as big-box stores are used to: http://books.google.com/?id=UOSk0J8vYugC&pg=PA533 (source: http://preview.tinyurl.com/2vrcddc)
> Their strategy for this seems to be to make people jump over a low paperwork barrier, then wait long enough that the payments have all cleared before they pay out.
I wonder why they don't just do this by default? Personally I would not be offended at all if they just had a status on the payments called "waiting for payment to clear."
Any combination of actions that lets fraudsters get money from PayPal without in the end having to pay money out is going to lead to huge losses. One way or another that money will come from PayPal in the end.
What I'm saying is that my impression is that the transaction is not reversed but that a subsequent insurance claim is made.
IMO if the money is available for you to spend then it has "cleared". Money that has cleared may be recouped, eg when you sell something fraudulently and get nabbed.
>PayPal is in the business of efficiently detecting and not paying for fraud.
I think it is likely that since PayPal has become an Ebay property, they are tighter with releasing funds to reduce their losses related to "Ebay Buyer Protection" on Ebay sales. On a sale where that protection is provided, a purchaser gets his money back from Ebay (which generally means paypal) when buyers have failed to deliver what was promised and failed to work out the problem directly.
So Ebay/PayPal needs/wants to be able to snatch the cash back. If the funds are held long enough, they're covered.
I seem to recall Ebay recently updating their user agreement terms related to PayPal funds.
I doubt that PayPal is trying to rip off or upset customers. They're trying to combat various types of theft/fraud and do so without using much in the way of resources. They should be more transparent with whatever is going on though.
Yeah seems plausible... Why not have a rate limit to how much you can take out of the account at a given time until they provide some kind of authentication that it is indeed you. An analog to that would be the ATM limit of $400/day and you can walk inside to get as much as you want out.(as long as the account does not have a daily limit for cash transactions.)
There are exceedingly few global payment systems, almost none of which, from a consumer perspective, are as trustworthy and easy to use as PayPal: When it comes to small vendors, I'd much rather pay them through PayPal (where I can even pay from a bank account) than to give my CC numbers to some micro operation.
PayPal, like all payment processors, deals with a large amount of fraud, yet they seem to manage to keep it low enough relative to the total cash flow that their rates are fairly reasonable for small vendors.
Which is exactly why guys like this use the service in the
first place. As you mentioned, these stories seem to cycle around, yet lots of people still rely upon PayPal, and there's something to that.
Add in that every Western government is imposing strong anti-money laundering and anti-terrorism financing regiments on organizations like PayPal.
Seriously, people don't know how amazingly good they really have it. Having a snag in PayPal (and going through the arduous task of providing documents) is nothing.
> I'd much rather pay them through PayPal (where I can even pay from a bank account) than to give my CC numbers to some micro operation.
Really? I certainly wouldn't. I have recourse with American Express. They have far better fraud detection than Paypal, in large part because they know my spending habits far better than Paypal does. On the single instance I've dealt AMEX's fraud detection, they called me before they even authorized the fraudulent transaction, and overnighted me a new card when I confirmed their suspicions.
Paypal, on the other hand, flagged a transaction as potentially fraudulent simply because I had the purchase shipped to my workplace (a well known bay area address) and now they want me to go back to Kansas and wait at my home phone number for them to call and "verify my domicile." Screw that; my account can stay locked for all I care.
You are assuming that "better fraud detection" means "fraud detection that isn't triggered". Credit card companies aren't as concerned about as fraud because they don't lose money, the merchant loses money. It costs them little to be lax.
Paypal loses their own money when they don't detect fraud. They can't afford to be lax.
> You are assuming that "better fraud detection" means "fraud detection that isn't triggered".
It means "fraud detection that catches actual fraud and doesn't bother me otherwise.
> Credit card companies aren't as concerned about as fraud because they don't lose money, the merchant loses money.
Wrong. The merchant is indemnified against fraud and the CC company takes the loss if the merchant can show that they followed the guidelines in the merchant agreement (essentially: check that the card is signed and the signature on the receipt matches the signature on the card).
>Really? I certainly wouldn't. I have recourse with American Express.
When I pay with Paypal I have recourse with both Paypal AND my credit card. It doesn't remove that right.
>Paypal, on the other hand, flagged a transaction as potentially fraudulent simply because I had the purchase shipped to my workplace
Why is the fact that it's a well known Bay Area address of any significance at all? Paypal demands that shipped items only go to the address on record for the account. That seems pretty logical and of obvious value.
> Why is the fact that it's a well known Bay Area address of any significance at all?
Which do you think seems more fraudulent? This address:
1600 Amphitheatre Pkwy,
Mountain View, CA 94043
Or this one?
Hospital Road,
P.M.B. 2155
Kaduna, Nigeria
Which address do you think is more likely to be used for fraud?
> Paypal demands that shipped items only go to the address on record for the account. That seems pretty logical and of obvious value.
An obvious negative value, sure. I've shipped to at least 9 different addresses on Amazon. Sometimes I'm not buying things for myself. Sometimes I'm not at home and want it to get shipped to me at a hotel. Oddly, Amazon has no problem with this (maybe because they're indemnified against fraud losses by the CC company, as I noted elsewhere). But try to ship something anywhere but your recorded home address with Paypal and you have to jump through a ridiculous number of hoops. It's not logical at all.
Any corporate destination for personal purchases looks more fraudulent than any home address. Home addresses -- most notably the one correlated with the account -- have easy traceability. A package being delivered into the bowels of a place with thousands of employees, not so much.
I'm quite glad that any paypal purchases made on my account can only be delivered to my home address. Seems pretty logical to me.
"Oddly, Amazon has no problem with this"
Amazon is the seller. They take the risks because they have a large-margin product that they are selling you. PayPal is a very small margin payment facilitator. Your comparison is not at all valid, and borders on ridiculous.
"maybe because they're indemnified against fraud losses by the CC company"
This is absolutely wrong.
The CC company bears absolutely no burden for fraud beyond the administrative hassle, and it is wholly on the merchant's backs. Merchants have to follow the prescribed rules (e.g. taking a CCV number) or they lose their merchant account, or they fall into a tiered bin where they pay much higher rates.
I'm in India and Paypal had a tough time dealing with the central bank here. So yes, I would agree a little that these rules are most likely imposed by regulatory authorities but that doesn't mean what Paypal does is acceptable. Have intelligent rules not alarms that blaze through the roof everytime someone transacts above, say, a thousand dollars. Even after that they could very well treat sellers with a bit more dignity?
They probably also make a fortune on the interest accrued. I wonder if they defer to freezing accounts so easily is because they realize that it's easy money.
You would think so, and that was their original business plan — just make money off the float. Instead they ended up charging fees (30¢ + %3) to get to profitability.
I don't think the original business plan included credit card payments. You only ever put "real" money into your account, and in order to use the service you basically had to keep enough in there for them to float it. Adding credit card payments changed that. Notice that paypal still doesn't charge fees for payments that come straight from a bank account.
In almost all circumstances, the recipient of a Paypal payment gets the 30¢ + %n cut taken out, even if the money came directly from a bank account.
Paypal is also set up to avoid making credit card transactions at all costs — you need one to sign up (as effectively overdraft protection), but payments always debit from the bank account first. If you have a pro account and embed/link it to customers, they can have the option to pay directly with a credit card, but only if they don't have a paypal.com cookie.
There is only one way to reliably avoid the fees — you have to explicitly make the payment as an 'eCheck' which only takes out the 30¢, but Paypal will take at least a week to clear the funds.
Secondly, most PayPal purchases happen through credit cards. Credit card companies hold onto the payments for up to 60 days, meaning PayPal is holding onto absolutely nothing.
So..you're telling me their not holding onto his 600,000 euros and that the credit card companies are? At some point though, the money ends up in PayPayl's coffers and it's in their interest/profit motive to hold onto it for as long as possible and accrue interest.
At least he's a known internet guy, it's pretty clear where the money is coming from and this post alone will get paypal to sort it immediately.
But why do you have to be a celeb to get decent support from paypal? Freezing over half a million euros and they don't even assign him a dedicated support person? They don't call him? Disgraceful.
I am not in the US and I do have a dedicated account manager which I can call or write. He even calls me occasionally just to hear how things are.
With >€600,000 in revenue since the 25th of August there is no doubt that this qualifies for an account manager.
As for the blog post saying that “if they decide something bad’s being going on, they’re going to keep the money” — I think that must have been part of a misunderstanding, e.g. if PayPal find out that the €600.000 are collected via fraudulent means, yes, he will not get the money because people will be reimbursed, but PayPal doesn’t keep peoples money. Even with an account freeze (where the account owner doesn’t get it lifted), the money can be paid out after 6 months.
So what? In my case it was a bunch of newspaper articles about our website that made us grow quite a bit in a short time. A surge is not always fraud related and in the case of an account with long history of being 'in good standing' it is not entirely unexpected to do a bit of follow up after you've frozen the account 'just in case'.
Unfortunately paypal and courtesy only appear in the same sentence when there is a negative in there somewhere.
Look how they recently froze $10m that was donated to Burning Man.
Seriously, how does they review process work, exactly? They could try Googling the customer and find out it's an internationally famous festival that has been going on for years and years. Instead, they just seem to notice the money involved and try to seize it. I bet that somewhere in paypal, it works like DEA style asset forfeiture, and the people who freeze accounts stand to benefit financially, personally and directly.
> I bet that somewhere in paypal, it works like DEA style
> asset forfeiture, and the people who freeze accounts stand
> to benefit financially, personally and directly.
You'd lose that bet. They refund the money to the original payer. For better or worse. My company loses a few hundred euros each month to this. They keep asking for proof of delivery. Yet we sell internet access. No proof in that unless I'm willing to break the law (and my client's trust) and tcpdump my clients. No way I'm doing that so I swallow the losses. No client ever filled a complain in the first place and no client ever complained about returned funds for consumed services either. :P
To get around this situation, mark your paypal invoices as 'Services' and they can not refund them at all (unless however the card was stolen, etc). But 'Services' don't require shipping proof.
I'm sure they do that on a bit by bit basis, when they're isolating one transaction at a time, but are you sure that when they 'freeze' an entire account, they reverse all of the transactions?
Another Paypal horror story added to the list.
If someone was wondering (as i did), no, he didn't let 600k on his paypal account. That's what he's earned since they limited his account 25th august.
This game is nearly everyday on the front-page of reddit/digg/etc... , and a lot of people are making youtube videos of their creations. With all this web coverage he doesn't need to spend money in advertising :).
A game that makes people build something (even if useless, it's still a game) and make it easy to share, instead of bovinely click around like in Zynga's games. Recipe for success?
Yeah, it blew up on Reddit a couple of weeks ago. For some reason the story didn't take hold over here on HN. This is why I read both sites - often you get great stuff over there that doesn't make it over the front page karma barrier here because not enough people read /new ;-)
PayPal doesn't keep money it freezes for risk checks. If they determine fraud, then the money is returned to the sender (usually by force, as the reason it was held was due to a chargeback or bank reversal). If there was no fraud, then it's paid out after a 6 month hold.
I don't recall, but in all my other merchant agreements, it's stated in writing that funds held in reserve will be held in a non-interest-bearing account.
Neither of those have good support for countries outside the US. It's sad, but to date there's still no good alternative to Paypal. They suck but they're also the best.
The "paypal blocked my money" stories are frequent.
I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your accounts without a formal request from a legal entity.
Paypal doesn't "own" the money. This sounds to me as extremely abusive.
Can anyone explain how PayPal is not constantly in court defending against class action law suits? No lawyer anywhere has considered the possibility of a massive payout from representing all of the clients over the world whose money PayPal has swallowed without explanation? Or, somehow, PayPal has managed to craft contracts so legally airtight that they can do absolutely anything with anyone's money with absolutely no legal obligations on their part?
It seems like the latter, but that seems to indicate that the legal systems of the world are fundamentally broken.
They do sometimes get sued, though nobody's been hugely successful yet. Someone filed a class-action suit a few months ago over the holds issue, but I haven't been able to find any follow-up (e.g. whether it got certified as a class-action, dismissed, etc.): http://www.auctionbytes.com/cab/cab/abn/y10/m06/i08/s02
They were also sued in 2002 over the same issue, and settled in 2004 for the rather small sum of $9m, though they did also agree to modify their hold policy as part of the settlement (whether they've followed the terms of that agreement, I don't know): http://www.settlement4onlinepayments.com/injunctive.pdf
I've had this happen to me with $50K and it wasn't 'lies or made up' in that case, I suspect most of them are much like mine.
You realize you're up against a giant in a foreign country that says they'll release your funds in 6 months time. So rather than spend 50 K on American lawyers and end up with nothing even if you win you grit your teeth and get on with your job vowing to never use the service again. And they did pay out after 6 months.
In my case I've not even managed to stand by my vow because I had to pay a few people using paypal. But I'm no longer accepting paypal payments myself and I would advise everybody to keep their account balances as low as possible.
> But I'm no longer accepting paypal payments myself
> and I would advise everybody to keep their account
> balances as low as possible.
Sound advice. In my new private project, I redraw from paypal every 200 euros. Thankfully, that's a lot of redraws (for certain definitions of a lot) and I'm a bit behind redraws but I learned the lesson from the losses the company I work with endures every month. Details in this same thread. (http://news.ycombinator.com/item?id=1679288)
edit (recovered because parent deleted their comment):
> citricsquid wrote:
> And you're in the "legitimate claims" part, like I said. What's the story behind your problem, why did they take your $50k?
endedit.
To this day I haven't a friggin' clue. We were in their beta program when they started with batched money requests, we helped them debug their stuff and came with a bunch of helpful suggestions. We had over 30% of our customers using the paypay monthly money request to renew and had a whole pile of back-end stuff to handle the details.
boom one day to the next our account is frozen. But, and this is the juicy part, outstanding money requests were still being honoured and the money was taken from the users accounts when they tried to pay us.
So, from the users point of view they had paid and wanted service, from our point of view we did not receive the funds. Of course we realized the users couldn't help that so we gave them service anyway and only got their payment 6 months later. If PayPal would have at least stopped transferring money in to that account we could have made a different arrangement with those users for that month (fortunately this only affected the 'running' month for which money requests had been made).
Not a single person at paypal ever thought it worth their time to tell us why our account had been frozen.
I realize wallet systems are hard, that there are lots of people that will flock to a system like that in order to defraud it and so on. But when you're that close with a customer that has been in your pilot program and you freeze their assets and stonewall then you have a bunch of issues in your company that need taking care of.
PayPal, and by extension their parent company Ebay, sucks.
Re. Ebay, I alerted them recently to a bunch of guys that moved from Africa to London that are on their dutch auction site (yes, it's that complicated) using ripped images and fake details on vehicles and they're still at it, again, no response whatsoever.
I think that plenty of people are in the 'legitimate' claims part, and I'm giving you an illustration why we don't bother fighting. Personally I recognize too many elements in most of those stories to chalk them up to being bogus, what do those people have to gain from claiming paypal froze their accounts for no reason.
On my end there is nothing to gain, it's just another experience with a large company.
I've seen Paypal described as a fraud detection company monetized by a payment transfer front-end. With that core competency in mind, it astounds me how bad they are at recognizing communication from a customer that deserves attention and response.
Virtual access billing, a Dutch IPSP run by a bunch of friends of mine. They use segregated merchant accounts so the risk of them going belly up is minimal.
So you call most of the people who've ever claimed to have a problem with PayPal liars (unsurprisingly no less) and the nearest thing to a citation you provide for this claim is an anecdote and some naive pop legal analysis about "if they were bad they would get shut down!"?
There seems to be some kind of timeout for responding to people who respond to you. I had to wait over 15 minutes to respond to someone yesterday. I get the feeling it has something to do with thread depth (e.g. prevent us from getting replies instantly nested 10 deep).
>My experience has been that while Paypal definitely have problems, a lot of the reported problems are exaggerated or lies.
Again you make the claim with nothing resembling a citation. What do you mean "my experience". Do you work for PayPal and actually chase these? Do you just hear things around the water cooler and have this impression? What is your experience exactly?
>So are you contesting that Paypal would get away with stealing everyones money all the time?
All the time? It's relative. Relative to the amount of transfers they do, I suspect it's a very minuscule amount. And I don't think they steal the money per se, just freeze the account.
Personally I think the problem is just that PayPal has near non-existent customer service. So if your account gets frozen you just have no way of getting something done about it.
That's the rub--Paypal is not a bank. They can do whatever they want with the virtual money that is exchanged on their servers. Which is why a real merchant account is the only serious option for a larger-scale business.
While that may be true, Luxembourg is known as a tax haven. I note that Amazon also registers its European operations there. From the same source as you cited:
"Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20." [http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking]
So, in effect, Paypal is probably a bank in nominal terms only. They can still do pretty much whatever they want with your money and get away with it. That is why my company went with WorldPay even when we started out. We don't get charged any fees, just commission, and we get free fraud insurance on the major credit cards.
Paypal is a bank in Europe, as stated. I was one of those who lobbied to
achieve this. I was burned by this odious outfit more than five years
ago. You don't get two chances with someone else's money in their
lifetime.
You can't be a bank "in nominal terms only" in Europe. Once registered
as a bank you are bound by EU and Member State laws. There's no
sidestepping that. Governments can't sidestep them.
The fact that Paypal is registered as a bank in a European Member State
means that they must abide by these laws and the regulation that goes
with it.
Remember, loser pays in European courts. So when a bank steps outside
the law, it will be liable for costs and "damages". It is not in their
interests to break or even "stretch" the law.
Regardless, I wouldn't do business with Paypal if you paid me. Well,
perhaps I would, but pay it straight to my bank, and not via Paypal.
P.S. My fight goes on: this week I have been active again in the
European Parliament with MEPs fighting to get the appalling ACTA spiked.
Something we should all be aware of and striving to kill.
Paypal actually is a bank, just not in all jurisdictions.
As for the 'virtual money', it's not virtual, it's real. They run what is technically called a wallet system.
A real merchant account is of course an option, but the transaction fees can be quite high, there is the charge-back risk and a whole pile of regulatory hoops to go through before you can get that to work. Larger scale businesses have plenty of users for who credit card use is not an option. Large parts of the world are relatively free of the credit card plague and so can not pay you using your merchant account. For those situations paypal (or something like it that does not have paypals drawbacks) is a solution.
Stories like this have been frequent for almost ten years now. I remember writing about this in 2005 and it was already old news by several years then.
The problem is credit cards. Credit cards are very un-secure and a credit card owner usually has a right to do a charge-back which means that a credit card processor has to get their money back, which means that every credit card processor puts in conditions in their contract that allow them to block your funds if they smell even a whiff of impropriety.
> I'm curious to which extent this is legal. I'm pretty sure a bank isn't allowed to block access to your accounts without a formal request from a legal entity.
I'm building a website that I would like to launch soon and were planning on selling digital goods. My initial idea was to just use the PayPal shopping cart, since I already have a PayPal account and it so easy to set up(I definitely don't want to go through the hassle of setting up a merchant account).
But all these horror stories I have read on HN the last few days have scared me a bit. I also seems that its even worse if you're not a US citizen, especially if you live in a "suspicious' country (I'm South African, not really a country with high internet fraud cases, but all African countries are painted in a bad light for some reason). But are there really any good alternatives?
I run BitBuffet.com where we enable end users to sell digital downloads and we use PayPal exclusively. These horror stories are somewhat uncommon (we've never experienced one or heard of a customer experiencing one).
My advice: go with PayPal until you are making well over $2-4k a month, then switch to a dedicated merchant account once you have proven volume. There are 100 other more likely points of failure than not getting your money from PayPal.
That's what we have done. Paypal horror stories freak me out, so I regularly withdraw to my bank account and then transfer to another account so paypal can't go after the withdraw. Paranoid, yes, but better than nothing.
Now that we have $1.5k a month in donations, we are using Braintree. Wasn't worth setting up before proving financial viability, but definitely worth the peace of mind with a proven business. Great piece of advice.
You'll usually have to pay monthly fees, and some will keep your money for some weeks before they release them, to cover for chargebacks. But as mentioned earlier, as soon as you have enough sales to cover the cost, switch to something other than PayPal. NEVER let it become your only source of income.
Make sure that whatever method you use that you never ever build up a balance bigger than a few hundred bucks, that way if they go south, decide to freeze your account or do any one of a hundred other nasty things you don't have too many eggs in that basket.
Epassporte is in trouble by the way, best to stay away from them.
While you're small, you can use a combination of PayPal, Google Checkout, or Amazon Payments. His mistake is not upgrading to his own merchant account once he started making a bunch of money.
What.. just bought Minecraft last week, awesome :)
Hope he gets this sorted out.. Also i think it's quite interesting to see one person making such an amount of money with an alpha version of a game that has not much content and graphics from the last century but fun gameplay. EA and friends should learn from this.
Fun gameplay is the key. For the rest, we have our imaginations. (I can't remember the last time a game scared me as much as when I fell down a pitch black cave and heard the groaning coming from all directions! :eek:)
Edit: Sorry, I'm not trying to make a counterpoint, I agree with your statement.
I run a browser based MMO that once upon a time earned a fair amount of money (not at Minecraft's astonishing levels though!) and Paypal is my only method of payment. The first time I made a large withdrawal (10s of thousands) they did something similar.
I think people are being very knee-jerk with their reactions about all of this. Yes, it's annoying to have your money frozen temporarily, but Paypal is basically on the line for all of that money if it turns out to be fraudulent. All they need is a series of business documents proving you really are who you say you are, and then they will hand over the money.
Let's face it, few people show up out of nowhere and earn a million dollars in a month!
Notch even knows this, if you read his blog post he says he's sure it'll get sorted out. Once you go through this process once they will not do it again.
I don't consider myself screwed at all. They held my money until I gave them proper documentation. When you run a business this kind of thing happens all the time. Just paying taxes to the government was way more complicated and intrusive.
Yes they can earn interest on money, but it's much more likely to me that they are covering their asses about the money rather than earning a small amount of interest on it.
Paypal has to deal with a lot of fraud. If you listen to the owners in interviews they say they lost a ridiculous amount of money in the early years to fraudulent users. It is reasonable for them, in my opinion, to make sure the money was owed to you before giving it to you.
In my ING Direct account (savings) I earn 1.1% APY currently, on 600.000 that is 6.600, that is 550 a month. If they freeze your accounts for two months, they have "earned" 1.100.
Now think of the amount of money going through paypal or sitting in paypal accounts, that is a fair chunk of change.
You are only thinking this from the point of view of a software merchant, with low expenses. They can easily wait a few more months for the check to clear, but what if you are selling something that costs a significant portion of the sale price to make?
Plenty of healthy businesses would either go bankrupt or have to delay shipment (which would royally piss off the customers, because from their point of view, they already paid...) if the money paid by customers suddenly took more than a week to arrive.
I wonder what someone's legal recourse is in a situation like this. I mean what gives Paypal the right to claim 'suspicious activity, your money is ours' without having to provide some kind of evidence.
And IF something is a legitimate case of fraud, aren't they required to simply freeze the assets and turn the account holder over to the appropriate authorities ?
It's hard to imagine that this type of due process can be waived simply by having agreed to certain terms & conditions.
1. Their site is very slow which hurt conversions. People who may have simply paid using a regular credit card went down the PP funnel and got frustrated and simply left.
2. Retention for monthly subscribers was 10 to 20% lower than credit card subscribers.
3. Refund policy sucked. It would take several days for our customers to get their money back if we refunded them.
4. Tools to manage bulk recurring subscriptions sucked.
Their site really is slow as can be. I dread not being able to dig something up in my email, that means I have to go use Paypal's search - each page can seriously take 10-15 seconds to come up.
I had a similar case with PayPal, back in 2001, but the sums were much smaller. I was doing freelance work, and most of my clients paid me via PayPal. Then PayPal froze my account, when I had about $2,500 in it. I needed that money to pay rent. It took about 6 weeks before they re-opened my account. To pay rent I had to borrow money from friends and family. PayPal was very hard to deal with. They kept asking for proof that I was me. They wanted me to send bills that verified my address, but I was subletting an apartment for 3 months and had very little evidence that I was really me.
At another time some friends of mine started a business with me and we had a PayPal account for awhile. At some point we stopped using it, and then someone sent us $200. I've no idea what happened to that $200. Possibly it got auto-refunded at some point. Possibly it is still sitting there, in the account. Whatever email address we used for that account was tied to the company we had, which had a domain name we gave up on years ago.
All the same, PayPal is the easiest way to go when you are starting up a new site. And PayPal has aggressively bought up some of the competition that used to be a lot better than PayPal. (PayFlow Pro, for instance)
There's Google Checkout and Amazon Payments, neither of which work outside the US. There's also AlertPay, which is apparently used by IPREDator and which is sometimes used by 7chan. I'm not sure whether I trust them more than PayPal.
Do you mean that you can't register to checkout and amazon as a seller if you are not an US resident? Because as a buyer i've used checkout a lot of times from Italy, same thing should be possible in other european countries.
It works for buyers as long as you have an international card. But to register as a seller a US bank account is a must. Given the new features added to Checkout By Amazon and all the Paypal stories, they might get traction if they remove that "US only" tag. Not sure how easy it is though.
When I asked, that was kind of my point: There are alternatives, but nothing that works internationally except places that we don't have any reason to expect to be more reliable than paypal is(n't).
We operate a large site with thousands of PayPal payments per day. This is a sample email we just got from PP:
Hello ....,
We were recently notified that a payment you received was reversed by the buyer's bank.
As a result, we have reversed the following transaction:
Transaction date: xxx
Transaction amount: xxx USD
Buyer's email: xxx Buyer's name: xxx Your transaction ID: xxxx
PayPal is committed to maintaining a safe environment for our buyers and sellers. You can help protect yourself against claims and reversals by following the guidelines of our .
Thanks,
PayPal
Note that their email template has a bug: it says " following the guidelines of our ."! Cannot they fix their email templates? They are dealing with f..ing real money! The Viagra spam that I get has less bugs in their email templates!
Google is trying to create their own payment system. It hasn't gotten much traction. Why don't they go ahead and support countries throughout the world (if they want to leave out a FEW places like North Korea that would be fine)? Seems to me that then they would have a ready-made constituency. Not to mention pleasing a huge number of Android developers. Yet they don't do this... Why? There must be something difficult or dangerous about it, but what? Does anyone know the answer?
Is it also worth pointing out that Google isn't exactly known for it's high level of customer service. Is there any reason to think they won't be just as bad as PayPal if they had the same number of customers.
I can't believe there isn't a better option yet, it's not like PayPal have suddenly become worse. Stories like this have been around for years.
Paypal has the most customers of any financial institution in the world, they have some of the largest challenges of any financial institution in the world. Not the least of which being that everybody who is capable of using paypal is simultaneously connected to the biggest and most efficient megaphone ever invented (the internet) and the unique consequences for bad press that situation entails.
You can decry paypal's customer service, no doubt, but recognize that the root cause of these problems are all of the very real scammers who have abused the system and never make the news. Consider an analogous situation, check fraud. There are many stores and restaurants that do not accept checks, is this because banks are evil and hate honoring checks? No, it's because of repeated abuse from fraudsters devaluing checks as a method of payment. The same is happening here with online payments. You can get around the problem by paying more money for a merchant account but that only protects you from the immediate effects of the problem for a little while.
You can decry paypal's customer service, no doubt, but recognize that the root cause of these problems are all of the very real scammers who have abused the system and never make the news.
If you discover that you have processed a fraudulent transaction, undoing it is quite understandable, but keeping the money for yourself (as per the link) is a pretty shady solution.
Fraud is not so simple. Step 1 is identifying a potentially fraudulent transaction. Most financial institutions put the breaks on any funds transfer in that case until a further investigation has completed, rather than merely reversing the previous operation (indeed, that would lead to an even greater adverse impact on false positive cases and would aid the fraudsters as well).
If withdrawals from your bank account is frozen due to suspected (or actual) fraud, few people jump to the conclusion that the bank is out to snatch up their money. Why not extend paypal the same courtesy?
I addressed that. Do you not appreciate that when a bank freezes an account for fraud that it too is "keeping the money for itself"? Indeed, this is the appropriate course of action until a better determination of whether or not fraud is involved is made, whether you're Chase or PayPal.
Let me be more clear: what, precisely, makes you believe that when paypal freezes an account due to suspected fraud that it is more likely actually due to nefarious purposes on their part than when Chase or Bank of America or any other bank takes exactly the same actions for exactly the same reasons?
I work at PayPal, though not in fraud detection, and it always seems interesting how much bad publicity the company is getting lately. I personally wish they would address the social part of doing business on the web.
There's a reason why the hold explanations are vague but it has nothing to do with questionable intentions.
We've experienced this issue in the past. If you're gonna use PayPal, here are some tips:
1) Use your full legal name when creating the account.
2) If you're creating the account for a company, make sure the owner of the account is an officer of the company (CEO, Vice President, etc).
3) Have only one account. If you're creating an account for your business, and you already have a personal account, you're gonna run into problems.
4) Make sure the mailing address you give is actually accessible. PayPal's gonna mail a verification code to you once you start making a sizable amount.
And just in general, once you start getting money into your account, PayPal's always gonna come knocking. At one point, PayPal prevented us from even receiving payments. But eventually, after a while of working with them, they got off our backs and we stopped having problems with them.
Most of the paypal horror stories always relate to paypal users not providing or not willing to provide valid information to identify their accounts.
In Luxembourg (and paypal is a registred and regulated bank in Luxembourg), the government requires the bank to know it's customers identities, otherwise the bank is not allowed to do business with their customers. And an email will not be enough. You have to provide passports/identity cards.
And I guess that's what happens here. After a certain transaction amount, paypal requires more information than just an email address.
1) Companies learn that to cheap out on the payment process and go through PayPal is stupid and things like this WILL happen. You deserve what happens when you go through PayPal as it means you either didn't research it's history or didn't listen to the warnings.
2) Customers learn not to do business with a company that is too cheap to setup their own payment process and not go through PayPal. By supporting business' that are using PayPal we allow the cycle to continue.
Everyone has known for years that Paypal is awful, regularly steals large amounts of money held by perfectly legitimate customers, and does it all through inscrutable, unfriendly, customer-service processes.
I know this, man.
Yet Paypal is bigger than ever, and there's no glimmer of improvement on the horizon.
So either we assume Ebay, the parent corp, is so clueless about milking Paypal for profit while reinvesting as little as possible back into it, or we assume Ebay has a reason for not improving Paypal in any significant way in the past 5+ years.
I'm starting to suspect there's a great financial reason for Ebay to keep doing this. And it might be a similar financial strategy that Amazon has famously used from day 1. Amazon collect payments immediately, yet ships items much later. This means their cashflow is always more than their inventory expenses at any given moment. For however much time there is until that gap closes, Amazon is in a great position—essentially getting a short term loan, and if you consider their volume of transactions, that is billions of cash being held in floating pools.
What if Paypal provides a similar benefit to Ebay's bottom line? Paypal isn't a bank, so they can do whatever they want with the held funds. I suppose what actually happens to the held funds is a corporate secret they guard carefully. But I bet it props up Ebay's cashflow in a major way. If Ebay changed ways and forced Paypal to provide better guarantees, much like a bank, then their cashflow would take a hit.
To add to the other poster about collecting payment before shipping: It's not just Amazon that never does this; generally speaking (in the US, at least), nobody is allowed to collect on an item until it ships.
Typically a merchant handles this by initially placing a hold for the amount of the purchase on your credit card, preventing you from using the funds for anything else but without a transfer actually taking place, and finalizing the transaction only after stuff goes out the door.
('Generally speaking' because it's been almost a decade since I've done physical goods e-commerce sites. I'm not sure of the exact source of the requirement (law? contracts with the credit card companies?) nor the cases where exceptions are made.)
I'm told Amazon holds its inventory for 20 days, and Best Buy holds it for 74. Standard payment terms are 45 days. That's where Amazon's cash float happens.
PayPal recently pulled this stunt on me. While very frustrating at the time, especially since there was no phone support available for the next 3 days due to labor day weekend, at least now I have scanned copy of my Passport on my computer.
no, but paypal wanted me to scan some form of identification to prove my identity. since my driver's license is expired and i'm no longer living in california, all i have is a paper driver's license that they mailed me, so i use my passport for identification purposes. if i am ever traveling in a foreign country in the future, it will be useful to have a digital copy of my passport in case i lose it and have to deal with embassy issues. i have not requested the dmv mail me a new driver's license since the picture was taken when i'm 15 and the inevitable "you look so different!" conversations are kinda lame
I completely understand the Googley argument that you can't provide much customer service if you have millions of users with a tiny average revenue, but what sense is there in treating a €600,000 account so poorly? Surely they must know that they have lost him forever as a customer.
The only logical answer I have as to why PayPal do this to big customers is that they know that as soon as anyone gets big they leave for a cheaper merchant account, so their account freeze is just a way for them to hold on to a customer long enough to make some real money out of them. I can't believe that they would, but I'm struggling to work out why else they would act like this.