PayPal Hates Conferences – Especially OpenCamp
openca.mp
openca.mp
From reading many of these stories, it's clear that PayPal wants to cap their risk. For a brick-and-mortar business, their risk is the difference between sales that have been billed and product that has been received by the customer. That might account for a week or two worth of sales volume on a rolling basis, so a business doing $100k a year of PayPal transactions will typically only have $3k-$4k at risk, which is on par with what PayPal will earn by serving such an account over 18-24 months.
For a conference, however, there might be six months of revenue for pre-registration before the actual event takes place. If the event planner then absconds with the money, PayPal could be on the hook for the entire amount, which has long-since been withdrawn and spent. Take that same hypothetical $100k business for a conference, now all $100k of it is at risk, and PayPal only stands to make $2,500 or so off of that.
It's pretty clear that the credit card companies have PayPal by the short-and-curlies, in the sense that PayPal themselves will be on the hook for any chargebacks.
I call this the "wash my Ferrari" problem. If you do a good job, you make $10. If you scratch the paint, you're out $10,000. Not a good risk.
Open question to HN: how could PayPal do a better job of handling the situation?
For a pair of pants I bought, I had to actually go to a retailer and get them to write a letter with their letter head, proving that they were a cheap copy. There is absolutely no reason a retailer would waste time doing this, why would they. They have a business to run, and are not doing a charity.
So now most savvy people purchase on paypal with their credit card, and when paypal pulls something like this, they just do a chargeback or threaten to do a chargeback.
Paypal are incredibly inflexible at times, their site is horrible, but they still have some advantages.
Excellent description.
By simply being up front about their terms. If they don't care about events then they should set a policy not to support them, it's that simple. Don't lure people in and then make their lives a pain in the ass once you're holding their money. They know better than anyone how they can make events work, if at all.
I agree, PayPal is often over criticized considering the spectacular international fraud resolution and prevention work they do that goes, mostly, unthanked. True, we should remember the alternative is processing the payments ourselves, but if you are going to offer a product, offer a good one or not at all. Especially when so much money is at stake.
If what's described in the linked article is correct, they deserve the criticism. There's fraud prevention, and then there's organized harassment and extortion. The examples given are of the latter, and if it were me I'd just hire an attorney and file a lawsuit with enough zeroes in the damage claim to get wide press coverage and, thus, the attention of someone who's actually accountable.
As I mentioned, to criticize PayPal's inflexibility in situations like this as "harassment and extortion" is melodramatic and misunderstands both the work they really do, and the number of times you aren't saying this about the people on the other end of the transaction.
Step two was "you don't want to play our game? Fine, we'll lock up your money". That's extortion, plain and simple. Given the reported background behind it, there is nothing reasonable about it. And no matter how much good work they may do in other cases, it provides no excuse for the conduct described in this case.
Or, more succinctly: there's a very good reason why Paypal has such an abysmal reputation, and it's not because they're portrayed unfairly in cases like this one.
That's just not true. It completely disregards reality. In a fantasy world where life is totally fair you are correct. Back in the real world, failure rate is a VERY relevant stat, and is never expected to be 0. The system and processes in the company have been optimized to handle certain types of cases extremely well. They will fail on other cases (like this one).
My argument is that they should change their policy to simply not support the cases for which their system isn't perfected, but you are using a volvo and expecting a porsche. But just because this one case was a failure does not mean the system is failing in general. It's not, there is a reason PayPal is so successful.
From reading this story, there are two possibilities:
1. A Paypal employee is just being petty and vindictive, or
2. Paypal simply wanted to get rid of OpenCamp's account and used ongoing harassment through (re-re-re-re-)verification as a means to goad OpenCamp into giving cause for freezing/closing the account.
If it's (1), the employee in question should be terminated and OpenCamp's account restored. If it's (2), Paypal should be on the wrong end of a lawsuit.
If I pay by credit card then I can recoup the money from them - but they're supposed to insure themselves to mitigate the effects of the risk going bad, again what's that to do with PayPal?
It sounds like PayPal are being screwed by credit card companies and not by event organisers.
You book a place at a conference using PayPal. PayPal transfers money to the organizer. The organizer withdraws it, buys a lot of beer, never organizes the conference.
You used your credit card to pay for the ticket, so you call your credit card company and request a chargeback. The credit card company takes the money back from Paypal IMMEDIATELY (this is standard in all merchant agreements), pending an investigation. Ultimately, PayPal gets left holding the bag.
Sure, credit card companies count on losses for fraud, but in most cases, they get their pound of flesh. In this case, it's PayPal's flesh.
Be open and honest in their position on (non-established?) conferences. I think it's likely that the author is spot-on about PayPal's motivations, and that they're doing everything they can within their TOS to get the client to terminate the agreement. So here they are with their pants around their ankles and their only recourse is to de-pant their client. Sounds like bad faith to me, but just try proving it in court.
The issues PayPal are raising (Events are risky, don't make PayPal much money) are the same for every one of EventBrite's customers.
On their own each event is powerless against the might of PayPal, but in aggregate EventBrite has some leverage against PayPal given the amount of business they send PayPal's way each year.
I'd think they would have sufficient volume to drive the transaction costs down.
Of all the events hundreds of events we have hosted we have only ever received one complaint from a purchaser. Somebody was apparently using our service to sell "power leveling" sessions for a game the he never received the service after he paid. The ticket price in this case was $20 I believe.
At the same time we have moved over $700,000 in the last 12 months all through PayPal. $20 is a very small percentage so I don't really see events as a high risk. Of course, EventBrite is much larger and they probably attract more scammers.
We exclusively use PayPal as our payment processor and have yet to run into them closing down somebody's account. Our main trouble with PayPal lies in their terrible interface and people being able to override the pingback url.
Why is this a problem? Someone overrides the URL; an IPN gets lost; they don't get what they paid for.
Or am I misunderstanding what you're saying?
In this time we've had some problems regarding people configuring their own Paypal account, Paypal's usability, and other minor issues, but we've not heard about this kind of treatment from any of our customers.
In fact an event with more than 3K attendees celebrated in Paris and collecting +100K€ has been using Stage and Paypal as its unique payment gateway with no major problems. The paypal's behavior detailed by opencamp organizers totally sucks but I can't refer it as usual from our experience.
Our main reason for using Paypal is simplicity. Open a merchant account is far from be an easy or even possible step for many small, casual event organizers. We could provide our own payment gateway but this would probably force us to change our pricing model that currently is a fixed, not percentual, fee of 1$.
One commenter below the OC story describes how he has used the PP/EventBrite combination successfully and comfortably for a couple years. That's great for him (for now).
The problem is the unpredictability of how PP may treat any customer in the future, without regard for their past performance/association with PP (as in the OC case).
Personally, given the number of (unresolved/unexplained) horror stories I have heard with PP, I would not advise anyone (ANYone) to risk any business connection with PP (beyond what they are perfectly happy to lose) - no more than I advise people to take their retirement funds to a casino.
We will now not offer PayPal as an option.
For reference, we will offer direct bank transfer and cheques in advance. We are also dealing with the venue, and they may offer CC facilities, but that's still being negotiated.
I understand PayPal's position, but I'm not going to run the risk of having them continue to accept money on my behalf, then not give it to me.
So, still very limiting.
Anyone that thinks having an account for quite some time or is doing $xxxx in business per month is some kind of safety net is kidding themselves.
Honestly, EventBrite or Amiando should offer their own payments system as they easily have enough traffic to make it worthwhile I would have thought.
Which then prompts me to ask... why is OpenCamp not using EventBrite's own gateway then? PayPal thus circumvented.
Seems like the market is there for a PayPal alternative. It would be an interesting start-up. I'm putting together a Wiki soon to spec out the project.
I think credit checks are overrated, as far as fraud mitigation. The relative risk profile would need to be determined. That said, OpenCamp represents a relatively low risk to PayPal in real terms. They have the event booked with the Hotel, They have real organizer profiles.
Being the innovator, PayPal grew up with these fraudsters, building an in-house database of knowledge about how to handle them as they cropped up one by one.
If you're talking about building a PayPal competitor at this point, you're launching at a point when there isn't going to be as much investor interest in your startup combined with a mature fraud ecosystem prepared to shut it down.
And those are only the problems we know of.
after what kind of verification?
1. to incorporate and file an LLC agreement
2. to go in person to open a corporate bank account
3. display photo ID, in person
4. show proof of residency
5. show proof of business address
6. get checks for that biz acct
7. fax/paper mail all sorts of notarized stuff to ANOTHER company to open a merchant bank account
8. rinse and repeat to open a credit card processing account, fax/paper mail
9. talk with reps on the phone because something inevitably goes wrong
10. Pay a total of about $1200 for all the above services,
11. not to mention at least 2-3 hours of traveling around, even if you live in a city where it's all available nearby.
You will also likely be subject to a personal credit check since your business is brand-spankin-new.
So, yes, PayPal didn't treat you all that nicely... they treated you exactly like you'd be treated if you set up to open your own CC processing.
FTR, we've had no problems selling tickets to all our events, but we didn't open a brand new PayPal account to do it - we used our longstanding one. Sounds like you opened a brand new PayPal account, right? I assume that since you mentioned that you had another, longstanding account. That's like saying "I have good credit, but my friend Joe doesn't, so we applied for the credit in Joe's name." It doesn't transfer.
Also, just in case you think you should use Google Checkout instead - if you think PayPal is bad, brace yourself, since Checkout is 100x worse:
http://slash7.com/2009/03/26/google-is-evil-worse-than-paypa...