I've heard nothing but bad things about PayPal and how they often hold your own money hostage. Why don't people switch to alternatives? Are there no good ones?
I've had them be annoying to me before. My favorite PP fact I found out the hard way: never put the string 'aleph' in the note field. Apparently that's flagged as a Terror-Word(tm), and it held up a transaction of mine for over a month.
I still use them, but only under modified-casino rules: never play with money you can't lose. Have a separate bank account just for them, so they can't get up to shenanigans with more than you intend; never depend on them for anything time sensitive; and never send money anyone depends on for anything important.
I started accepting donations from a community gaming website via PayPal and I was very hesitant about using it due to the bad stories I've heard. A couple of months and a couple of hundreds of dollars later, no problems yet.
The biggest 'problem' I've had with PayPal is moving to a new country. You can't add International cards to your account, and you can't change the country of your PayPal account. The only solution for me was to create a new account, which is fine I guess.
But then I guess you never have a bad experience until you do.
How is that not a bad experience for a buyer who never got an item he paid for?
No postal system is without risk; that’s why they offer package insurance, registered post, etc.
Every real merchant who deals with the public at scale accepts this and refunds in such cases. Presumably they eat the cost or THEY purchase insurance for the shipping and roll this into the cost so they don't have to tell customers I'm spending YOUR money on drugs and hookers and don't care if you actually got anything for it.
Such interactions absolutely destroy relationships with customers and the customers bank is likely to issue a charge back to protect their relationship with their customers.
In my personal life on the other hand, I'm regularly prompted at checkout to decide between registered post with insurance, or regular post without. If I opted out of insurance, I wouldn't blame the seller for the package not arriving or any damage (presuming of course that it was packaged appropriately), and I'd fully expect Paypal to resolve in their favour after verifying that the package was actually sent.
It's true that this would ruin the customer relationship which is why some businesses may offer to make things right anyway, but I personally wouldn't expect it.
That said, the consumer protection laws in my country (Australia) are fairly strong so I may well be entitled to redress; this is just my personal attitude.
The buyer kept emailing me after it, 'updating' me on the situation, which I mostly ignored. I believe he was in some smaller town and he knew the postman and had a very strong suspicion that he stole it, or something like that.
I wrote about it here: https://www.cogini.com/blog/paypal-know-your-customer-failur...
As far as alternatives, customers seem to love PayPal, because they side with buyers effectively 100% of the time in any disputes. So even if there were a convenient PayPal clone (which there isn't, at least in the US), you still wouldn't match the conversion rate that PayPal has, as many people will only use PayPal.
So, you can either accept a lower conversion rate by going with something like Stripe (because users don't want to enter their CC information directly on small merchant sites), or you can accept PayPal and be essentially guaranteed that at some point your account will be closed and you'll be screwed out of a significant amount of revenue. Currently, these are the bad choices that merchants face.
I've won disputes on PayPal as a seller.
Companies have been using PayPal for over a decade without their accounts being closed.
You're talking nonsense.
There are exceptions to every rule, but in the vast majority of cases, they side with buyers. I once had someone that admitted in email that they were trying to extort me into refunding them. PayPal actually wrote back saying they were going to go to bat for me with the card issuer after I showed them these emails, but the card issuer didn't budge. I have no idea if PayPal sent the card issuer the emails, I just know that I wound up being out the money.
So you aren't just fighting with PayPal, you're fighting with card issuers as well. PayPal will side with buyers in most cases, and in the few instances where it is obvious that the merchant is correct and PayPal tries to do the right thing, then the card issuer will pick it up and screw the merchant from their side of it.
Regardless of who does the screwing, the merchant is the one that suffers in the end by accepting PayPal.
Companies have been using PayPal for over a decade without their accounts being closed.
Very large companies have nothing to worry about from PayPal, but small merchants have a very high percentage chance of being screwed by them. See http://www.paypalsucks.com/
Now suppose it turns out I have misrepresented the items I sell. When your item arrives, you find that my site was pretty much fraud. You try to contact me to demand a refund...but no one answers the phone or responds to email. That's because I took all the money from you and the rest of the people I deceived and moved far away, to someplace safe from extradition to the US and that won't enforce US civil judgments.
So you call up your credit card company, tell them what happened, and they quickly refund your money. As do the credit card companies of all the other people I took advantage of.
Where does the credit card company get the money for all those refunds? They aren't going to get it from me. They certainly have no interest in eating those losses themselves.
What they do is require a business that accepts credit cards to have an account at a "merchant bank". When someone pays that business by credit card, the credit card company does not pay the business directly. They pay the merchant bank, which pays the business.
In order to be allowed to do this, the merchant bank has to enter into a contract with the credit card company that says that the merchant bank will pay the credit card company for all refunds and chargebacks. The merchant bank will try to get the refund money from the business, but if they fail they have to make up the difference.
The way merchant banks do this is they hold back some of the money they receive from the credit card company for the business, to build up a buffer to cover refunds and chargebacks. As the business establishes a track record and the merchant bank becomes more confident in its estimates of the refund/chargeback risk for the business, they will adjust the amount they hold in reserve.
I don't know exactly how it works when a buyer uses a credit card to pay PayPal, but somewhere between the credit card company and the seller there is an entity taking the role of the merchant bank and guaranteeing that the credit card company won't be left holding the bag if the seller can't cover refunds/chargebacks.
I suspect that the entity is PayPal itself, and most of the incidents you hear about of them holding some seller's money is them increasing the reserve because there was some change in his selling pattern that suggested the current reserve was no longer in line with their estimates of his refund/chargeback risk.
I think people don't switch to alternatives because the alternatives, at least the ones that provide strong consumer protection, almost all have the same or similar mechanisms to try to make sure that if the seller is bad it is the seller who pays.
They could switch to alternatives that do pay the seller directly with no mechanism for a refund other than asking the seller, such as most cryptocurrencies, but then they would probably lose a lot of buyers unless they were very well established businesses with outstanding reputations. (But if that were the case, then they probably could accept credit cards without their merchant bank requiring a large reserve).
Presumably someday cryptocurrencies will be able to fill the PayPal niche, but that requires a more robust buyer-merchant ecosystem than exists at present.
As a buyer, I don't care for that feature of Bitcoin.
Why will this be any cheaper, or safer, or fairer with Bitcoin? All the incentives in this business align with the buyer. 90% of the time, I have a choice between many equivalent merchants, all of whom want my business. I will go with the one that supports my cash-back credit card - whose issuer will almost always side with me in a dispute.
Once these escrow services become popular in the crypto world, you're back to square one. The reasons for why PayPal sucks for some of its users have nothing to do with fiat money, and everything to do with the nature of the escrow business. It would be just as shitty for said users if it transacted in Bitcoin, Dogecoin, or silver bullion.
The mediator can decide against your case just like Paypal or Visa can. Even worse, now I have to find some random mediator the seller trusts.
How is that better than plain bank transactions or paypal? The fees are not even cheaper for that "privilege" of having some random mediator play paypal-on-the-blockchain.