Paypal is holding over 600,000 euros from the minecraft developer
notch.tumblr.com
notch.tumblr.com
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.
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.
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.
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.
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've done some research, and I was misinformed on that point.
Paypal loses their own money when they don't detect fraud. They can't afford to be lax.
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).
It's a different procedure online. Usually the CVV number is used instead of a signature.
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 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)
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."
Because for the majority of their customers, not getting money for several months would cause them to look for another solution.
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.
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.
You're thinking of AlertPay.
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.
PayPal would absolutely tell the customer that "we can't do anything the CC company is holding the funds". They don't appear to be doing that.
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 wouldn't bank on that. It's possible, but by no means sure.
> But why do you have to be a celeb to get decent support from paypal?
Consider the fact that he is a celebrity and does not get decent support, you can imagine how it is for the rest of the world.
Especially when you're not in the US.
> Freezing over half a million euros and they don't even assign him a dedicated support person? They don't call him? Disgraceful.
Business as usual for PayPal, see below.
Unless the whole minecraft thing is a cunningly disguised money laundering scheme for the illegal sale of fjords to rich American businessmen...
We've heard this one before, a surge in sales triggers Paypal's fraud systems.
Unfortunately paypal and courtesy only appear in the same sentence when there is a negative in there somewhere.
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.
That's complete nonsense. I'm not aware of paypal never paying out money owed, they just drag their feet about it.
A 6 month holdback is enough to kill a smaller company, so it's bad enough.
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.
See http://twitter.com/Toucanator/status/24089600756 and http://twitter.com/xnotch/statuses/24089647124 .
EDIT: Minecraft complete steam sales data,amazing: http://m00d.net/minecraft/sales/
In the US, the government doesn't even have to opportunity to prevent you from leaving the country.
Found some stats - http://www.minecraft.net/stats.jsp
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?
If they were truly concerned about that something fraudulent was going on they would not allow people to deposit money in either.
If anything that's a concession ("your business can continue, we aren't going to make your website shut down while you jump our hoops").
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.
Is that this frequent?
"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.
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.
Edit: mattmanser got there first.
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.
It seems like the latter, but that seems to indicate that the legal systems of the world are fundamentally broken.
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
It's simple to explain: Paypal isn't a bank.
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?
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.
Epassporte is in trouble by the way, best to stay away from them.
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.
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.
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.
Edit: Sorry, I'm not trying to make a counterpoint, I agree with your statement.
Jason Rohrer
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.
It sound suspiciously like they just want to keep the money for as long as possible. Collecting interest on your assets is a clear profit motive.
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.
Now think of the amount of money going through paypal or sitting in paypal accounts, that is a fair chunk of change.
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.
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.
So glad we're free of them.
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)
I never understand why people still use Paypal. There are so many horror stories and so many alternatives. Just don't use them.
...but their contact page wasn't working.
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!
I'm not a developer/coder/anything close to one, or I would do this myself.
Come on, guys! Get on this!
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.
If all goes well, Paypal is generally by far the best option.
If all goes poorly... not so much.
But for most, it goes well.
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.
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.
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?
From my previous post: "keeping the money for yourself (as per the link)"
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?
There's a reason why the hold explanations are vague but it has nothing to do with questionable intentions.
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.
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.
Unfortunately there doesn't really exist a good alternative outside the US.
Anybody knows how to start lobbying against paypal?
Unfortunately, we don't do international (non- U.S.) transactions...yet
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.
Good idea or am I off?
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.)