Why Is PayPal So Successful Yet They Treat Merchants Like Crap?
capitalandgrowth.org
capitalandgrowth.org
With paypal, I can buy from any random sellers, and know that in the worst case, I am risking just a purchase amount.
Security is hard, and even if someone makes great products, that does not mean they are great programmers. For a small or a medium store, I always assume that their website will be hacked and entire database will be stolen (it is really sad how often this happens). Entering credit card directly just means more problems for me down the line.
This means some sort of trusted checkout service. Stripe has no extra security, so this leaves Paypal or Google Checkout. I think the latter has died (I have not seen it for a while), so this leaves Paypal.
At a certain point PayPal is actively and knowingly participating in scams.
It's a thief's dream. Oh hey this seller has had 100,000 transactions with very minimal issues...this buyer has 1...oh well the buyer must be right.
Hopefully someone puts together a service sellers can just start blacklisting buyers.
Those merchants make money by having a pretty good statistical handle on the rate of returns, and baking it into their prices. The trick is to make sure your cost is low enough relative to your selling price. Granted, a big vendor has an advantage in access to good statistics, whereas a small business can't plan for it very well.
But I think it does create a situation where PP or any other payment processor works for some businesses and not others. You have to decide if PP is the right technology for your business.
I am not in the US and most card sales we did were debit cards by far and there chargeback is usually far more difficult, which indeed, showed us a lot better result than purchases through PP. I would never use them again as merchant.
Will that affect their standing with PayPal somehow?
PayPal is the only payment service that doesn't require me to write any code, or to maintain a server that can run server-side code. It also doesn't require me to store any customer information on a server. I download a transaction history in PDF format every year for my taxes, and I delete the customer information, just leaving the dollar amounts. I don't want your steenkin personal info. Hack away, there's nothing to steal. ;-)
Oddly enough, I'm a pretty good programmer and I love to write code, but also as a lone wolf, I think maintaining a secure website against adversaries who are smarter than me, is over my head. And it's not my business. I kinda started this business as an escape from code.
There are a few customers who really really don't like PP, so I have to offer an "out" and for my little business, they're OK with sending a money order. Oddly enough there is a strong correlation between those customers, and customers who want to talk with me on the phone. There will always be a few people who just have not gotten into the whole computer thing.
It is quite possible that I'm lucky to be in a little market niche where nothing ever goes wrong with orders. My product is a tangible physical deliverable. I am quick to refund if someone is unhappy.
We implemented Amazon Pay a few months ago and have seen a couple dozen transactions, vs hundreds with PayPal and thousands with credit cards.
It's not huge, but people do use it. Would those people have bailed if all we offered was Paypal and credit cards? Probably not. Good convenience on mobile not to have to re-enter cc info and risk another place mis-using it.
And for the sellers too. I've been using paypal for 13 years, and I've never had a single issue with anyone using a stolen card, and I don't think I've even had any chargebacks during that time. I previously used Worldpay and regularly had issues with chargebacks and fraudulent transactions.
Paypal goes to extreme lengths to ensure a transaction is not fraudulent. It can be somewhat annoying as they occasionally reject customers' cards for no apparent reason, but overall I appreciate their security measures.
Tip for anyone in Canada, Australia, EU or UK accepting US$ transactions through paypal: withdraw your money through Transferwise and you'll pay 0.5% instead of 1.5% or 2.5%.
It enables you to receive money from over 30 countries without any fees. You get bank details for:
* Australia * UK * Eurozone * US * New Zealand
So you can take payouts from any of those countries (e.g. USD goes to your US bank account attached to the borderless account, GBP to your UK bank account, and so on.)
Seller security is also shit for digital goods and services. PayPal is full of abuse with customers creating fake claims in order to get services for free. This is getting abused more and more. Worst case scenario if you create a fake claim for digital goods or a service on PayPal is usually that you don't get the money back.
It's good when it works, but they need to remove or fix the claim functionality, and allow 3D Secure to be used.
Their payment model doesn't work for contractual transactions.
My parents for one.
(I've heard that Stripe can do checkouts on it's own domain, but I haven't seen it on a real website)
And as for 3D Secure -- it has no benefit for customer, just an extra password to remember. I am not sure why banks waste time implemeting it, when other systems (like real-time notification of charges on my cell phone) would be significantly more useful.
I sell a software product. Customer generates a key to unlock the code. Once a key is generated, that key will unlock the product forever; it cannot be revoked, thus no refund at that point.
In the dispute form, I wrote “It’s like buying a DVD from Walmart — once the cellophane is torn open...”
PayPal judged in my favor and refused the chargeback of $349.
I’ve had 2 or 3 chargebacks from Visa and never won those.
This results in an instant and free transaction. They also have a network effect which is compounded by saving the buyers'payment information, meaning the buyer doesn't need to resubmit their payment information on each transaction.
The company treats its merchants terribly and treats buyers like royalty. This is a winning strategy because merchants have no choice but to use the payment methods the buyer prefers. Otherwise the buyer will simply go to a competitor who does take PayPal.
PayPal is an essential service to most merchants. The way they close and limit accounts can basically determine which businesses in a specific industry are successful. They seem to selectively enforce their own policies among merchants. This will create monopolies or oligopolies simply through having a functional PayPal account.
Considering this huge power they hold, it is unfortunate that their policies are so opaque and inconsistent. A merchant is in a constant state of fear that one day PayPal will just permanently close their account, and will have no option to discuss or appeal the decision. It happens constantly and is the reason many businesses eventually fold.
I think it used to be this way but now with the concentration of e-commerce with Amazon and Shopify (and most other sites using Stripe / Braintree), it seems to me that Paypal is becoming more and more irrelevant.
Go to your bank and ask them "I'd like to accept donations on the internet via credit card. No, I'm not a registered charity" or "I'm planning on holding an event next year. I don't have enough funds to cover the cost of running the event, so I need to pre-sell tickets." See if they offer you a merchant account.
Paypal aren't perfect, they aren't the best fit for every business, but they offer a genuinely unique service.
PayPal makes that very easy and last time I looked they made it clear that's what they expect.
In their defense, I don't think I can or should expect them to arbitrate a claim for a refund and I can certainly understand why they wont.
Paypal really only has two options. They can either say the money stays with the vendor and buyer beware, or the money always goes back to the buyer and the vendor must deal with any issues that arise from a complaint.
I have a PayPal debit card so I also use PayPal to make purchases. I like having that protection.
Care to elaborate on this?
This is, supposedly, one reason why PINs on chip cards weren't adopted widely here. The customer can, with relative ease and usual success, reverse the charge so what does it matter if someone makes off with a card?
The key is credit cards instead of debit. Your chargeback rights are much more limited with a debit card and a debit card means your money has been held up, not the card issuer's.
Many people only have one credit card so having it temporally unavailable due to fraud issues is a hardship. If you're not good with computers it can also be a challenge to reconfigure all your automatic payments.
If you don't have language skills or phone skills reporting the fraud can also be scary.
"Get the Amazon card and get A% on your Amazon purchases." "Get the X card and get X% on your X purchases."
The average American has 2.6 credit cards. People with less money typically have more credit cards. So that's generally not a problem if you're making a purchase in real time.
And they're pretty good about turning your card back on once you sort out the issue, and will actually notify existing merchants of your new card number if it changes, so it's basically the same level of inconvenience sorting it out with the credit card company as sorting it out with Paypal.
Indeed, and this is purely my own personal opinion, there's precious few reasons to use one if not for the consumer protections, and subsequently, i hardly ever use paypal because its just too much of a hassle and I can't see the point in doing more work for less convenience...
Because doing charge backs, getting a new CC and updating everything which is using the old CC is an annoying use of time.
For a number of the most successful e-commerce fields (those having a large market that can be served in an almost completely automated way), the answer to the first is probably yes, but only in a tiny fraction of all transactions, and only by spending a lot more on human customer service. Consequently, the answer to the second question is probably no.
There is also the asymmetry with regard to whether PayPal leans towards the customer or the vendor in a dispute. The former attitude tends to lubricate commerce, while the latter applies the brake, so it is actually to the benefit of vendors as a group, as well as customers (and also, of course, itself), if it does the former. If customers regard PayPay as the preferable way to do business, the pressure is on vendors to use it, while vendors who spurn it in favor other methods risk losing business to competitors.
Because PayPal made a number of smart choices, it offers benefits to both sides of a transaction in the vast majority of cases, and that is pretty unusual (compare it to, for example, the credit rating agencies.) It is in a sweet spot where it would be difficult to compete either by reducing costs or by improving service, and that sweet spot is defined by what it is currently technically feasible to automate. That sweet spot will move with technological developments, and PayPal will need to adapt accordingly to stay in it.
I have had multiple people come to me asking why their PayPal payment was rejected, or why PayPal closed their account, or myriad other questions. My answer to them is always the same: PayPal does what PayPal wants, and (in practice) users have little to no recourse to that fact.
I remember getting a PayPal account in like...1999 or 2000. That's a long time. Only within the past 5 years have processors like Stripe and Square have really gained visibility, and they each have their own niche (developer-friendly and small-shop-owner-friendly, respectively).
If there is Demand (people willing to pay), there will most likely be lots of folks happy to Supply (merchants willing to sell).
The opposite is not true. If you ramp up Supply (add more good merchants), it's hard to ramp up Demand to match (getting more customers).
Hence, "the customer is always right".
And the fees are at least towards the bottom of entry level fees with the traditional method, if not lower. Nowadays there are many more options (ex Stripe, Amazon payments, Google payments, probably more), so maybe pick the one or two that are the least terrible, until you have enough volume to get a better deal?
It makes sense, too… PayPal was the only payment processor that stood out as having their own currency and balance system. I can see why that would save them a lot of money.
When your payment services have lower bars to entry for scammers and lower margins, you're going to flag a higher proportion of possible issues with your merchants and not handle them as smoothly.
The convenience must never be underestimated. Paying with PayPal is just _easy_.
>“That’s why we created a PayPal debit card. It’s a little counterintuitive, but the easier you make it for people to get money out of PayPal, the less they’ll want to do it.
Though technically the first answer didn't answer the question it seems.
https://www.ccn.com/190m-gone-how-canada-biggest-bitcoin-exc...
Traditional banks do not have the "one person died/ran away to the Bahamas/whatever and now everybody is out their deposits" problem. Banks have other problems! Banks have loads of problems. But banks have to exist in a world of piles and piles of regulations, and you have to realize is that most of those regulations exist not because regulators are bastards but in response to someone screwing over someone else in the past. Banking regulations and banking practices have evolved for reasons, and if you don't understand those reasons and try and invent banking from first principles like all the people in the wild west of crypto have been trying to do, you are going to learn real fast that there are things you did not account for.
Just think about it: unless you drink the libertarian kool-aid, you know in any given business transaction there's a minimum of 1 (one) sucker. I'd rather the merchant be the sucker.