PayPal's Verification Wait Irks a Business Owner | Hacker News Reader

PayPal's Verification Wait Irks a Business Owner

nytimes.com

45 pointscarbocation16 comments

... asking users to “verify” their account after transferring $10,000 over the company’s network. One can get “verified” by either handing over bank account information or signing up for a PayPal-affiliated credit.

PayPal has long described this as a “risk-prevention technique,” but that makes little sense, because even customers with perfect track records must comply

Makes perfect sense to me. If having a perfect track record on your first $10k of transactions was enough to let you bypass the verification process, they'd see lots of criminals running $10k of shell transactions -- just like eBay scammers run up lots of perfect-feedback small purchases to create a good rating for themselves.

I think the fact that this system doesn't take account age into account is problematic. My PayPal account is who knows how old, but somewhere in the neighborhood of 10 years. I'm just now hitting that limit after years and years of small transactions. This is probably going to make me stop using them because I don't trust them with my bank account and I don't need any credit. This seems like a really stupid way to lose a long time customer.

Chinese credit card and Alipay transactions are irreversible, though Alibaba buyers can opt to use the Aliexpress escrow service. I think the U.S. will eventually need to stop babying the consumer. To some extent this is already happening, with banks refusing to be liable for small and medium business losses from online banking trojans. Obviously the bank can't be liable if a business loses money due to embezzlement, and its a thin line since a banking trojan would be perfect cover for an insider embezzlement scheme.

Its pretty clear that Paypal's data mining for fraud detection, which used to be considered cutting-edge and allowed them to dominate the market, now has an extremely high false positive rate that only gives too many honest merchants a reason to leave.

That or eBay(owner of Paypal) has a monopoly on online auctions and online payments and are in a position where they can do pretty much anything they want to squeeze a few more dimes out of their clientele with no one to effectively challenge them.

Just about anyone using PayPal's back-end payment notification has experienced this. The article says PayPal notifies you about a delay but I've seen cases where even that doesn't happen.

If you're selling a service, the best thing to do is to provide a grace period. So to maintain goodwill you just let 'em in and if PayPal doesn't confirm payment within 48 hours you suspend the account until they pay.

Obviously that doesn't work well for non-revocable transactions, but you have to weigh the potential for fraud against the lost sales.

If you read the book "Founders at Work" you'll see that fraud was a huge issue for PayPal, and was one of the first barriers to success. You can't downplay how quickly fraud will destroy any business that moves money around.

  In that matter, as with this current one, eBay/PayPal
  spokespeople said that preventing fraud — not enhancing
  profits, by accumulating bank interest — was the point
  of hanging on to the money.

Good'ol "plausible deniability".

I mean, I guess it can be both, but I would imagine fraud has a much larger potential impact on PayPal's business than the very meager bank interest gained for delaying payments.

I believe that PayPal views fraud as the number one threat to their business, and they are willing to piss people off and lose customers in order to keep fraud losses to a minimum.

potential fraud (without giving any reason to suspect the transaction) some how has a greater net effect of holding on to something like 1000's of transactions worth of money for 21 days. I call bullshit. "randomly" (as there is no evidence as of yet that suggests they target them for any other reason) picking transactions to hold as some way to prevent (???, nah, no sense made there either) the potential threat of fraud is retarded. Is fraud prevented? maybe. Is commerce prevented? definitely. Does Paypal make money off of this policy? Yes, and a great deal of it at that.

Ultimately it just goes back to the age old internet saying of "Fuck paypal, everyone else, their mother, and that shady guy over there are all more transparent with transactions then the aforementioned crooked lot"

You do realize that with current US interest rates the interest on a 21 day hold would amount to even less than $150[1] per $1mil held - and thats assuming that they could even get Fed Reserve lending rates, which you're not going to be getting from your bank no matter how much money you have with them [2].

Given that that amounts to less than $2600/yr - with that massive assumption that PayPal can even get that rate of interest, do you think that they're really doing it for what amounts to a rounding error for a company that size, or is it, maybe, just about possible that their operational risk might run close to that number as well?

[1] $1mil * 1.0025^(21/360) = 145.6 - assuming A/360, $143.6 with A/365

[2] Current US interest rate is 0.25% - but that's the rate at which banks can borrow from the Fed, not the rate that you'll get from your bank.

PayPal "verified" accounts draw money from users bank account, which allows them to skip the credit card processing fees. That's a huge amount of money, and that's why they keep pushing users to "verify" their account through every way possible.

I assume PayPal is able to do things that are much more interesting than just letting money in a bank deposit.

They surely gain a lot just by knowing they can control the cashflow this way.

This is one frustration with Paypal however once you are verified it is a breeze to use. Given the high volume of online fraud, proper verification has to happen.

I'm verified(bank account linked on a 10 year + old account) but have recently had eBay payments held for 21 days because apparently only selling things once or twice a year on eBay is too infrequent for Paypal, I wouldn't call this a breeze....

edit: check this previous article http://www.nytimes.com/2012/03/11/your-money/ebay-policy-lea... or this summary http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02

I feel like every PayPal article I've ever read has discussed them having double standards, holding money meant for charity for no apparent reason, and making people smash antique violins.

Why are they still a player in the market?

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