What happens when you pay PayPal $15k in fees? | Hacker News Reader

What happens when you pay PayPal $15k in fees?

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105 pointscft35 comments

TLDR; don't use paypal unless your business can sustain large amounts of frozen funds, terrible customer support, and shady fees and business practices.

I'm baffled by the ongoing willingness to use Paypal. It's been a terrible company since seemingly forever. 116 days I wrote a comment about how terrible it is: https://news.ycombinator.com/item?id=13851855 that in turn references my own horror story, from more than a decade ago, 28 days before that: https://news.ycombinator.com/item?id=13624393.

This is because consumers love PayPal. It means I am not giving my credit card to a potentially shady person and that I have a way to cancel the service. I also have 1 place where I can see all my subscriptions, so I don't keep subscribed to services I don't use but forgot about.

In general, if there are two equivalent options and one takes PayPal and the other doesn't, I am going with the one that takes PayPal.

As a consumer, I prefer Stripe's interface. It is low friction; I enter my details one a site when making a purchase, and if I opt-in, those details are available on any site using Stripe. And protected behind SMS temp passwords.

A credit card is insured. I am not sure I can say the same about the mandatory connction between Paypal and my bank account. It is much riskier to use Paypal than to give a stranger your cc number.

Because my conversion rates go up when we use it, and down when we don't. Sure, you can add social proof, but like any platform you take your chances and plan for when they lose their mind.

Interesting. Looks like you created this account less than a day ago, just to make this lone comment.

I'm pretty sure you shouldn't use paypal even if you can sustain that. :)

This company is pure scum.

Without sharing the details of my personal grievances I can assure you that you are better off sending money to others securely using any other payment system on the planet.

Who is the payment processing leader at this point for digital payments? I assume Stripe, no?

We've had issues with Stripe as well. For example, one of our customers forgot they were paying (happily) for a subscription to our software, and they flagged a recurring charge with their CC company. When Stripe notified us of the flag, we quickly showed them server logs showing that the customer was still actively using our software. We also provided the original purchase information and screenshot of what the user saw right before making the purchase.

Stripe said we lost the dispute because we didn't provide the customer's driver's license. (What?!) We persisted and at this point contacted the customer, who readily admitted that he was still using our software and was happy to pay for it. Unfortunately, even this was not enough for Stripe, who refused to reverse their levy on us. They claimed that someone had stolen the CC from its true owner, signed up for our software, and was emailing us from a fraudulent email address.

At this point, the customer (who was really nice) called their CC company several times to say that it was all a misunderstanding and that the charge was justified. But Stripe refused to accept this as proof. They might not be as bad as PayPal, but they're not saints either.

To be honest, this sounds like the experience you would have with any other merchant bank. They have zero impact on if you win the dispute or not, and most of those charges from them are likely (marked up) pass-thru.

The deeper you go into this world the more upset you are going to get. Basically the answer in pretty much absolutely any dispute or anything out of the ordinary is "merchant pays". It's not worth your time to dispute it in the manner you did, as you will likely find out over time.

Your story sounds like at least a dozen merchant banks I've worked with in the past in various capacities, I'm honestly surprised they even spent that much time talking to you about it. Things may be changing this day in age, but 10 years ago basically any card not present transaction that was disputed you automatically lost, and the Visa or Mastercard network would charge you the $35 for the trouble of you being defrauded by a customer :)

Yeah, it seems the only point in responding is to avoid being flagged as a fraudster. It is unclear whether Stripe's fraud detection system treats you differently if you (1) are flagged by a customer and do not respond; or (2) are flagged by a customer, respond substantively, but are nonetheless denied. If these have the same impact on your risk profile as a vendor, it is 100% not worth it to respond.

Good point, I didn't really consider that aspect. I truly do wonder now if it matters at all!

I'm convinced this is how some of the payment gateways make their money.

With one gateway after we switched providers and took the interface out of production we received about 5 fraudulant payments in the month that followed. Someone had hacked the bank's "iframe" service that we did not use and even though we only had the account open for a potential rollback we were still liable for $20 x 5 in fees. It was entirely the bank's fault.

Hi there, I work at Stripe. Sadly, the cardholder's bank ultimately makes the decision on who wins disputes, and we don't have the ability to reverse them. For some context, when a dispute is initiated, the bank automatically refunds the payment, and provides a window for you to submit evidence—and then they decide who wins the dispute. Frankly, this system's pretty antiquated—and oftentimes, they do favor the cardholder, but we want to help you fight back in any way we can (both in preventing disputes, and also responding). I'd love to take a closer look into this if you email me at edwin@stripe.com

> Sadly, the cardholder's bank ultimately makes the decision on who wins disputes, and we don't have the ability to reverse them

You absolutely have the ability to not charge me a $25 fine (which appears to go to Stripe) when all of the evidence from the customer and the vendor show that it is a valid charge – and the customer has in fact told the bank to reverse the flag on the charge. What basis is there for charging a fine for something when the underlying charge has been reinstated by the customer?

Instead of a reasonable process, I got the runaround for months and bogus excuses (e.g., driver's license request). As another commenter mentions, your dispute resolution system is so poorly set up that it's not worth jumping through your hoops — just to lose at the end of the day. I am actively looking at an alternative processor because this was such a hassle.

The driver's license request is seriously absurd given Stripe controls the UI for collecting payment details, and that UI does not ask for D/L information.

We disputed perhaps 1500 chargebacks with Paypal and won only 2 or 3. Chargebacks for "virtual goods" are unwinnable. Be sure to keep your chargeback rate under 1% by the number of payments, otherwise reserves will be applied.

What load of horseshit on Stripe's part. From anecdotes I've read on HN, they're the same as PayPal or any other payment company just with a newer brand and better API.

I've processed over $1.5M on Stripe for one of my companies and lost 11 of 11 disputes. I didn't support evidence for most though.

I have another startup which has processed only 30k and had 9 disputes. I won one dispute (4 charges) but only because I got the customer to agree in writing that he would withdraw and I would refund. I submitted a screenshot of my conversation with him in Intercom. He withdrew it and I refunded him as soon as I could.

Seems like it isn't really worth the time to submit evidence unless it's for a lot of money or the customer agrees to withdraw and calls off their dispute. Def. in the customer's favor.

My question to you, the payee identifier configured for your company's Stripe profile (what appears on the customer's CC statement), did it make the product name obvious?

The margins in CC processing are so low, the companies need to pull stuff like this to stay solvent :(

https://www.datanyze.com/market-share/payments/

That chart is for number of domains. PP is still the market leader by a huge margin. I'm sure if you looked at the number of transactions per month, Amazon might move into the top 3, but PP would still be the largest.

Which one of those does all the CC processing for the big porn companies?

None. The big porn companies have direct banking relationships with (typically multiple - as banking access is typically the largest risk such a company carries) merchant banks. They will then use whatever payment processor they feel like (e.g. an authorize.net clone) or build their own, but hooked into their merchant account on the backend. These will (generally) be invisible to you, as all the API calls are done in the background and hosted by the company itself.

The small porn companies typically use ccbill or epoch, although my knowledge is slightly dated in that area.

This is not unique to PayPal, it's standard in the credit card processing business. https://www.merchantmaverick.com/understanding-rolling-reser...

However, they do seem particularly aggressive in applying a reserve in this case.

We are missing a lot of data here, for example the business' chargeback rate.

>It's worth noting that our chargeback rate is well under 0.1%

Thanks for highlighting. This does seem pretty aggressive.

This does stink, but they have options. If their revenue is as large as they state, they can likely go to a bank and get a line of credit with their receivables as collateral. If they were in a B2B business, they would likely be facing Net 45 terms from their customers anyway. http://www.comcapfactoring.com/blog/line-of-credit-secured-b...

I'm curious if they need Paypal due to customer preference, or if they could simply accept credit cards directly. At that volume, implementing your own merchant account sounds like a much better idea than paying the absurd rates Paypal charges.

However, I'm fairly certain that they would have thought of this :) I'm assuming they need to accept Paypal due to customer demand.

Chargeback rate is low, but:

1) NZ company operating out of Australia- complicated international ownership structure.

2) Industry is software. Software is a high risk product category.

3) Very quick unexpected growth in transaction volume. Another big fraud red flag.

This isn't an aggressive reserve, it's a defensive one.

Industry standard holdback rate is 10% for six months. I've been in the payments industry 15+ years and never heard of anyone holding more than 10% except for PayPal. Not giving a timeline on when the holdback is returned is also unique to PayPal. There's no defense here. What they are doing should be against the law.

Back in my college years, the standard procedure was to have multiple accounts. Paypal guys can easily close/freeze like 10 out of 20 accs after first chargeback dispute, but to leave remaining 10 even when they were listed on the same webpage. I thank their lazyness

Lots of complaints about receiving money from a stolen credit card, and surprise surprise Paypal takes the money back. What, they should eat the cost of cheaters? Why? They should use their resources to get your goods back? Why?

Selling stuff mail-order is risky; you get cheated sometimes. Paypal is not going to fix that for you.

Are we talking paypal or payflow? Because 15k in fees is virtually nothing.

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