Burning man defeats PayPal
fastcompany.com
fastcompany.com
PayPal seems to have the same issue with fraudsters. They spend the majority of their time dealing with fraud and looking for fraud (the good transactions are automated and therefore abstracted away from human eyes for the most part) that everything that comes across their desk looks like fraud and is treated as guilty until proven innocent (hey, just like the IRS!). The assumption probably is that 'the system' detects fraud and 'the system' is practically infallible, so when it flags something as fraud they need mountains of evidence to prove that 'the system' is wrong (because 'the system' is perfect, didn't you know?).
We supplied everything they asked for and more. They denied our appeal and then locked $2,600 in our account for 180 days without explanation. We worked every channel we could to get a more reasonable outcome and it was to no avail.
There were a few good people in the PayPal bureaucracy who became champions for us but they were powerless. It was very discouraging.
The irony is that PayPal originally challenged the man. Now they are the man.
Unlike a credit card company, if they feel they might have to dip even 1 cent into their own profits to deal with a bad transaction, they will immediately kill an account, no matter how large or how old.
I simply do not understand why there are not more competitors to PayPal - don't these corporations see the billions PayPal has made (THREE BILLION profit per YEAR) and how they get to skirt all the rules and regulations that banks have to follow? Why not jump onboard and give consumers some choices?
If you read the excellent interview with Max Levchin in Founders at Work, he alludes to the fact that PayPal is really just a state-of-the-art, best-in-class fraud detection system with a payment frontend. He also says that Banks are more conservative than PayPal - in that they can't go after a business model where there is going to be fraud - and the game is to minimize the losses.
I wouldn't be surprised if at one point the government come in and tries to apply credit card regulation to them if thats not already the case.
Their customer support tends to be really good in my experience, don't base too much on the one in a million horror stories that make it to this site.
Even if the stats are really that low ... why does that horror story have to exist? Why can't they be fair to everybody?
I surmise this is because you're a techy and you talk to people who run businesses online on a regular basis. If you spent a lot of time on, e.g., credit card discussion boards (they exist), or spoke to "regular people" about their payment issues on a regular basis, I suspect you would come to the opposite conclusion in a hurry.
Paypal is not a scam which achieves profitability by freezing accounts. That is crazy talk.
The point is, there are no rules, there is no transparency. Their decisions are entirely arbitrary and you are at their mercy. Never again.
PayPal doesn't have the right to just freeze money for periods of 180 days without providing sufficient methods for their customers to quickly resolve the issues. 180 days for freezing all money for one suspicious transaction is absolutely ridiculous. I don't claim PayPal achieves profitability by freezing accounts, I do claim they regularly screw their own customers with questionable account balance freezes.
Imagine a system where…
1. You pay a 20% fee to withdraw money from an ATM that doesn't belong to your bank.
2. The bank puts thru a charge they shouldn't, you run out of cash, and you get whacked with a $35 fee.
3. The bank charges you a monthly fee after that - another $35 fee.
4. The bank shuts off your card because you're in another city, meanwhile you're lost in the dark, and alone, and out of money, and can't get a cab.
And on and on and on…
Not to mention outright defrauding.
2. Overdraft fees are disallowed by law and are opt-in now.
4. Also, it's not typically the banks that cancel cards, it's the processing network that does.
Most problems people have with banks are user-error, plain and simple. When you misuse a computer program, you waste time. When you misuse a bank, they charge you money.
Checks, ACH transfers, and recurring debit transactions can still generate overdraft fees without an opt-in consent.
re #4: The networks pulls the trigger, but the standing orders come from the issuing institutions. Fraud detection is often used as a differentiation feature by the networks to attract bank customers, the networks themselves don't have a direct incentive to prevent fraudulent transactions beyond this: they don't stand to take a loss.
That kind of thing is illegal in other countries.
Even a 2% fee is usurious. That right there sucks up any potential interest gain you'd ever have.
In Austria, all ATMs are free, on both ends.
I don't know that Paypal ever achieved profitability. They raised a whole lot of capital, and then when it looked like they might fold, eBay stepped in to make sure they didn't. Paypal's lack of profitability was legendary when I was in online payments, since they were the Microsoft of the industry.
It seems to me that deal with fraud is an important part of any bank's business.
"We started with this, 'Fraud is going to kill us. What can we do to save ourselves?' They started from, 'We have no fraud. How can we build this and not let any fraud in'
He also goes says something about how in the Internet world it is very hard to verify someone - the more information you get to verify (e.g. PayPal verified account) - the more 'safe' user you are. And something about how the Banks couldn't do this (virtual transactions) because most of them were public companies and couldn't hide $10m/month in fraud losses (what PayPal was losing a month to fraud at that critical point) and not spook their institutional investors.
One of the reasons why newcomers have relatively little chance is because credit card companies hate start-ups that do wallet systems.
Yes, you read that right... PayPal took every cent in their account 3 times. And there's no law against it.
I understand Google Checkout also had similar issues in the past?
I know, I know, just get a merchant account. And I will. But this is not really a startup or company and much more of just a small idea I'd like to test out. Ideally, if it picks up steam, I'll switch over to a real merchant account.
Seems like a pretty significant disadvantage for an internet business.
I imagine PayPal gets the worst rep because of its larger user base - though I could be wrong. Google Checkout has some horror stories, too.
One of the last times this was discussed, a YC-funded start-up was mentioned: http://ycombinator.posterous.com/need-to-process-payments. I haven't seen nor heard anything about it, and it's US-only, but maybe pg can give us the inside scoop on the progress.
Do I have to have a Social Security number and driver's
license with a photo to sign up?
Yes. You can use a passport as an alternative to a
driver's license.
Sign into PayPal to send money. If you have a credit card as a payment method and a bank account as a payment method, PayPal will auto select your bank account. That's fine, except when you change your payment method from the default bank account to your credit card. A confirmation page comes up and tries to change your selection back to your bank account. There are two options: Use Bank Account / Use Credit Card. These options are randomly changed back and forth to confuse the user. Even the highlighting of these to option (which one is yellow) is randomized to make you accidently select the Bank Account option.
The ACH system has very strict rules guaranteeing payments once they clear the network, as opposed to the more consumer friendly rules that the card networks offer. ACH, afterall, is meant to be used by financial institutions that know exactly what they're doing.
The resolution? There hasn't been one. I tried to get PayPal to accept our tax-exempt documents, but they've refused because we're not a 501(c)3 charity (we are 501(c)12) and both the org and my personal accounts stay frozen.
Paypal will not change their ways so long as people keep giving them money.
Paypal is not a bank and thus doesn't have to follow the same rules as a bank. Please people, quit treating it like its a bank. Do not store your money there. Do not link it to your primary checking or savings accounts.
Remember! Paypal will cause you great pain and serious amounts of anger. Its only a matter of time.
Glad to see someone met their needs, WePay just got some damn good publicity.
A few hackers bitching in online forums is one thing, A large social media response in connection with a well known festival threatening to close accounts is going to be much more effective
PayPal has been the sole payment solution for my software company for more than 5 years. 99% of all of my money, my families money and my employees salaries goes through PayPal. When I bought my first home (at the end of 2005, oops...) I had to call PayPal to get some financial details for the mortgage company. I spoke with a nice person on the phone from PayPal and they faxed me the documentation I needed write away. Every time a new payment processor comes on the scene I check them out, but none have been able to offer the pricing or features I get via PayPal.
That being said. I have read all the horror stories. So I just assume that any money left in my PayPal account overnight could be potentially lost. No problem, I just withdraw it every morning so my lost potential is always minimal (a few grand).
I don't de recurring subscriptions. I imagine things would be different then. If I did subscriptions I think I would want my own merchant account - you want to own as much of the customer as you can.
The funny thing is that the competitors don't undercut PayPal. It's no wonder they aren't getting much traction.
This is extremely bad customer service. All PayPal has to do is (1) refuse to do business with non-profits or (2) present non-profits with an accurate description of what could happen (account freezing, etc.) before they sign-up. (Burying this in the terms of service doesn't count, by the way.) Customer service is as much about expectations as it is about delivering.
They permanently froze my account after I refunded everyone and refused to talk to me when I called. I wasn't able to get a merchant account and I lost thousands of PayPal recurring subscriptions. This was the death of my first start-up.
PayPal is a scam and it's not as uncommon as you think. If you're using PayPal, your time will come. I didn't think they would do it to me either, they never bothered me once until all of this went down.
In my case, my account was flagged (the business was legit, but I could understand if they had some cause for concern), but it was such a hassle to satisfy them I gave up. I couldn't talk to a person; I had to send dozens of faxes; I couldn't even email - I had to use a stupid form with a character limit; it was never laid out what I had to do or how many steps remained.
Customer support only gets a chance to prove itself once something goes south, and I get the impression that it's unequivocally bad.
If I am looking at buying a laptop, I don't care much about whether it's a matter of "if" or "when" it breaks, but how the customer service and repair shop handle it once it happens.
PayPal's "customer service" is the Damoclean sword that people fear moreso than the false positives. Because good customer service would be able to ameliorate most of their mess and admit errors on their end.
1) Never solely rely on PayPal for your income. 2) Never keep large amounts in your PayPal account - they can be come PayPals for 6m+ at a moments notice.
This is VERY important to remember. If your business is making a good chunk of change a month you should be able to afford the card card processing fee your self. Get a REAL bank account, preferable somewhere local so you can go in and talk face-to-face with a person if an issue arises- more likely to get results this way. It's also easier for you to get scammed by scammers with paypal, not so much with a real bank as they will fight for you.
I am not saying, "never use paypal". As your business grows and matures make sure the way you handle your finances does as well. If you are able to process cards yourself you can also sell that service to other people or use it in another business venture. Build your empire, not someone else's.
Also hire/lease accountants. If you must use paypal for business ventures buy the business account. A lot of stories I've heard were from people who still used a personal account for their business.
Of course, this means that every Patrick, Patricia, Pedro, Paul, or Penelope Welch who leaves a numeral or something off their email address thinks they are pwelch@gmail.com. Or one of their colleagues or friends thinks they are pwelch@gmail.com.
Long story made short, some idiot set up a Paypal account on my email address and now I can't get it off. I've contacted Paypal and nothing came of it.
I've heard enough insane PayPal stories from enough people that I trust such that I have no trouble believing pinksoda.
That is the problem with pay pal. Dealing with them is like dealing with a roach motel: data and money go in, but nothing comes out. A sign of how abusive they are is that you cannot get a telephone number for them. There is no one you can call. No one you can send a certified/registered letter. Everything has to be via email.
And indeed, Paypal also doesn't talk to me anymore. They don't close my account on request, they don't respond to any kind of mails. Only the list of problems to resolve gets longer and longer.
Please read their terms and conditions. It is one document with numerous extensions, 48 pages as I counted them the last time! The way it is done looks to me like they want to make it impossible to understand (my personal interpretation). Try to find out under which circumstances Paypal may freeze your account or under which circumstances they transfer your money , as you request: It is their personal decision. There are no clear criteria given. It is a matter how much they think you can be trusted. Check it yourself.
Sorry for the rant. Hearing the name of Paypal really makes me angry.
Steve Jobs once said: I don't sign a contract that is longer than 1 page. Good advice.
(EDIT: iTunes ≠ iTMS)
While I've had some odd issues here and there and the user experience for clients is poor, I've never had anything close to what you've described.
I have to say–either you're wrong about "your time will come" or there's simply more to your story.
Either that or your time just hasn't come yet :)
As far as I can tell, they aren't much worse than most other payment processors. Most payment processors, if someone with bad credit comes along, or someone gets lots of chargebacks, or if someone is in a funny business sector, they keep some percentage of your money in escrow for a certain number of months.
Now, personally, I have a very liberal refund policy (and really, I think anyone who accepts paypal or credit cards should do the same... because anyone who wants to, with either of those methods, can get their money back, if they really want to.) so I generally don't get chargebacks on my papal account. My last 'dispute' in fact, was an accident... the guy says he meant to dispute the next transaction, with a different company.
and hell, if you tangle with the IRS, your regular bank account will get frozen.
Now, I have heard many, many paypal horror stories from non-profits.
I wonder if paypal is going overboard in cooperating with the US government (in this case, the government harassing not-for-profits who haven't lawyered up enough) to avoid the fate of e-gold?
The e-gold guys, as far as I can tell, were told 'freeze your business or we will throw your asses in jail.' I've still got around a hundred bucks in e-gold I can't access because of that.
E-gold was set up a the way a privacy nerd would set up a banking system, and they built a fairly secure system, but they ignored fraud, saying they were trying to be 'like cash' and first accumulated a reputation for serving the shady and outright fraudulent market, before being shut down by the government.
Nothing they could do to appease PayPal. Six months later they got their money back, they now hate PayPal with a passion, and use eWay who have been great
That's my experience with them anyway. Eventually got it all sorted out but at the cost of not being able to get at my money for about a month.
Just having friendly helpful customer support who can explain what's going on would make a huge difference.
I will take the occasional inconvenience in exchange for a payment method that makes my life much, much easier.