Comment by ComputerGuru | Hacker News Reader

Comment by ComputerGuru | Hacker News Reader

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This is going to be a largely unpopular opinion here, but PayPal actually works really hard to limit fraud. They froze my account and "robbed" me of around $2,000 dollars (and I complained about it here) maybe 2 years ago, holding that cash for around 8 months until I got them all the paperwork they needed (it had to do with a non-501c corporation accepting donations).

But when you suddenly start making real money, the game completely changes. You start getting personal phone calls from real people, you have actual phone numbers that you can call, they contact you at your cell phone, and they tell you things like "Due to rule xyz, we would technically have to freeze your account, and the next time you log in, you'll message saying if you don't provide information a, b, and c, you'll get locked out of your account; don't worry, that's not going to happen, but please work with us to determine what we can do to meet our technical requirements for donations coming in to non-profit organizations" and "We've been noticing customers filing chargebacks, however we do recognize that your chargeback rate is far below the usual x% [I'm not allowed to disclose this number] so we'll just front you the money until we rule the dispute; we also noticed you're no longer bothering to dispute the chargebacks, is there a particular reason? Is there something we can do to help you improve the process?"

You get personal phone calls like "We noticed your sales volume this month has dropped by x%, is there something we can do to help?"

Basically, I have come from hating PayPal and searching desperately for an alternative, to recognizing that they are doing their best and working very hard on a very difficult problem. I have worked with startups that are loved here on HN that have tried to solve the same problems, and I must say that though I was initially impressed with their work, they did not know what they were getting into, and I now actually prefer that my customers check out via PayPal than via my credit card processor alternative that I initially set up to spite PayPal (but, of course, it's important to have both PayPal and a traditional credit card processor for checkout).

EDIT

Yes, of course. Downvote me for providing some insight that puts PayPal in a positive light. How dare I.

I'm interested to know at what point Paypal starts doing this. We have around 100k per month of turnover through them and we don't seem to get any special treatment.

In fact, they put a 40k fixed reserve on our account and a 10% 90 day rolling reserve as well. This is despite our chargeback rate being low. (The performance benchmark page reports 0.00%)

That said, I do concur that Paypal is much better at preventing fraud. We get perhaps 1-2 chargebacks per week on Paypal and more like 10 per week using Stripe. This is also with us fairly aggressively refunding payments that we suspect are fraudulent on Stripe also.

> Due to rule xyz, we would technically have to freeze...

This leaves me wondering, how clearly are PayPal's rules spelled out (I've just avoided PP like the plague, since I can) to help merchants avoid gotchas? Are freeze-worthy violations presented boldly ...or only buried in tiny TOS-like legal documents?

These are not just paypal's rules, but VISA/MC/national government rules and laws.

Your story is no different than what PayPal sent in their email to a select number of account holders; that they will continue to freeze accounts (or as you put it, "rob" people) until you have an outstanding account performance (or as you put it, start making real money).

Never mind having had a clean track record for years, your reputation, credit history, no chargebacks, no disputes, you will still be held to the same scrutiny until you start performing "outstanding".

Your experience only shows they've always made exceptions and the email they sent out is just to make that fact public which doesn't change a single thing.

Paypal has two big problems.

One problem is their own, their customer service is, in a word, shitty. That's their grave and it's up to them to dig themselves out of it or wallow in it.

The other big problem is one of expectations. Unfortunately, they have trained people into believing that transferring money back and forth is frictionless and painless. Which, at a small scale it generally is with paypal. However, once you get into the range of taking a significant amount of money via paypal (defined as around median US income or higher) then everything changes. When you start using paypal as a processor for your personal business then all sorts of financial regulations come into play and all sorts of business rules imposed by VISA and MC come into play as well.

And then people do stupid things like take pre-orders for something that won't be shipping for months (a VISA/MC/legal nono) or take donations without being registered as a non-profit org. and you mix in a good helping of problem #1 and a lot of people end up having more than a few bad days.

However, the thing that many people don't appreciate due to their ignorance is that with a merchant account a bank is going to do all of these same things for all of the same reasons. They are going to "steal" (read: put a hold on) your money while they spend the time working out whether or not your questionable business activity is not actually fraud, or money laundering, or simply sufficiently risky as to require a higher balance to be maintained in case of charge backs.

Now, the more business you put through paypal the more it makes sense for them to dedicate real-live human oversight to your account, which can lead to leniency if they see that you aren't a fraudster/mobster/etc.

Make no mistake though, every single day paypal has to deal with those folks too, only we don't hear about it because no fraudster, phisher, or mobster is going to complain on the internet about being shutdown legitimately by paypal.

I agree that PayPal does a good job to deal with a very, very hard and very real problem of fraud but that's not the issue. The issue is the part that comes after the account freeze, the part that frequently seems to take a large amount of internet frenzy to get PayPal to pick up the phone and go 'we're really sorry, we'll sort it out today'.

They're getting better, and taking steps in the right direction but they really need to step up the processes for dealing with the aftermath of it, blocking something for fraud is a good thing, making someone run around for months and months is a bad thing.

(Upvoted as it was a genuinely insightful post)

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