Why I am always on the lookout for a PayPal alternative | Hacker News Reader

Why I am always on the lookout for a PayPal alternative

yash.info

144 pointsyashg73 comments

Can't really see how this is Paypal's fault directly - this is just Paypal bowing to regulations - and if they didn't, they'd be in serious trouble. Chargebacks are a requirement by law. No keeping money out of a bank in India is Indian law. The two of these terrible laws fit together to create an awful experience, I agree, but the solution is to fix the laws. Any competitor to Paypal would be forced to do the exact same thing in India.

He isn't complaining about the chargeback policy. He's complaining that paypal double dips on the currency conversion, even if the money never reaches his bank account.

Paypal could just send the USD directly to his bank, and the bank would convert the currency before crediting his account, so it is an unnecessary burden and loss of money for him.

>>No keeping money out of a bank in India is Indian law.

And for a very good reason.

Tax evasion is very common in India. In fact the most generally know thing is, if taxes are not deducted at the source of the transaction they won't be paid ever. Big money people are a little different, they are small in number to monitor and their transactions can be traced out easily.

But small to medium scale traders and business hardly pay taxes. Some even pride in doing so. The best case I've seen among these guys is paying some thing like paying 5% of the taxes they are supposed to pay. I've asked a few people why they don't pay, and the answer comes simple. If they pay the right taxes once, given the business growth they have to pay a little more next year. So they use every trick in the book to pay as little or nothing at all.

Now if they are allowed to freely park money in places where it can't be traced easily(like these) they will have a field day.

May be if citizens show a little responsibility and do what they are honestly supposed they will get laws that trust each other. Until then if the government has policies to curb fraud you shouldn't look too surprised. After all, laws are optimized for the common case.

Just to be clear, paying little or no taxes is only government fail to collect them. It has nothing to do with responsibilities. There is no law in the world that forces anyone to maximize tax that it has to pay, so everyone has a right to pay as little tax as legally allowed.

The difference in your arguments is that the OP is saying they are paying 5% of the tax they are legally required (not allowed) to pay. It is just by using deceitfulness that they do not have to pay the full tax owed.

There is a big difference between minimizing your tax burden and pretending you dont have assets/revenue so you straight up dont have to pay taxes on them.

PayPal's fault is not returning me the money I had before the withdrawal took place.

http://i.imgur.com/GIaP5O2.png

THIS is entirely PayPal's fault. They can avoid it easily if they want to but NO. They have an opportunity to fleece some extra $$ from a merchant so they do.

International transfers are not that simple. PayPal is not a bank in USA and cannot directly transfer money to India, they have to work with a bank. A bank is required to convert the USD to INR when transferring it. Your problem is not with PayPal, and any competitor would do the same as required by law.

not exactly a paypal alternative but if more devs outside the US could use reasonable companies like stripe, braintree etc for CC processing we would.

until good CC processing companies go worldwide, what are the choices? just an idea, but I wonder if it is legally possible for an american company to provide the services of a payment collector on behalf of non-US devs. people could integrate stripe's API to pay to this company and they could handle wiring money worldwide for a small reasonable fee.

Even in countries like Australia CC processing is expensive and potentially restrictive to small startups and devs. Some kind of company in the US that takes payment on your behalf and wires it worldwide with reasonable charges would be a boon to countless devs and startups all over the world. That or bitcoin takes off and everyone just starts using it. Until then, Paypal is your payment buddy albeit a dodgy one that rips you off every chance it gets. Thus their immense power.

EDIT: Also worth pointing out that the guy above is being given a hard time by his country's laws and it's banking system - not just Paypal.

I work in currency conversion, and honestly the conversion rates here do not look bad for an ad-hoc, small value transaction. The spread between buy and sell rates is how traders make profits. If there was no spread, or the spread was small, traders would need to take a proportion of the conversion as a fee. Some banks and third parties do this - they offer a really wide spread, and then take a proportion over and above that. Also, Paypal may not itself be interfacing with the currency markets, but may rather be using a third party intermediary to perform the actual currency trades.

I have $200 of yours with me. I initiate the process of giving the $200 to you, like I take out my wallet. Then I stop before I actually give the money to you, I put my wallet back and then I tell you "Hey you know what now I owe you only $180!"

This is what it looks like - http://i.imgur.com/GIaP5O2.png

Does that look right?

Paypal has $200 of mine with them. According to the rules governing financial institutions in the country in which I reside and from which I have registered for their services, ther are required (by law, as a condition of their continued right to offer a payment service in that country) to pay that $200 into my account by close of business today.

My account is for Rupees, not USD. Because of the way the Banking system works, that currency must be exchanged so that it can reflect in my account. This exchange is performed at the current market rate, plus some surcharge of fees levied by Paypal's liquidity provider to perform the currency conversion, and by Paypal in order to cover the SWIFT interbank charges plus any backoffice administration they need to do to verify my identity. There are additional verifications they need to perform on the US side; for e.g. that my bank account is not on a Interpol, NSA, FBI, CIA or INS watch list.

That money is then sent, likely via the SWIFT interbank network, which levies a charge.

Those funds arrive at my bank, where my bank levies a charge. The money reflects in my account, and I see that 'Paypal' have given me a terrible exchange rate.

They haven't. They've likely given me a reasonable rate, because it is not in their interests to charge punitive exchange rates as it will drive customers to competitors.

My point is that there is a whole different level of processing and infrastructure hidden behind Paypal's facade that you are not privy to; all of it has people performing tasks to move the currency from a US account to a Indian account, and all of that requires a modicum of human oversight because of incredibly strict financial fraud controls.

Trust me when I say that the small markup Paypal is charging you is nothing compared to the level of bureaucracy you would run into were you to try to perform the above exchange manually.

That would hold true if the transfer had been completed. PayPal is able to stop the process and credit my account back means that money has not actually left their system. I agree the underlying mechanisms are much more complex but I also understand that what we see in that screenshot is just entries in a database and no real transfer or conversion of money has taken place as yet. If it had happened a day later then I would accept the fact that the process was well underway and some money had changed some accounts.

The point is PayPal decides right at the time of beginning with the withdrawal how much in Rupees it is going to pay me. So if it decides for some reason it doesn't want to pay me, it should again give me back the same USD.

I'm not entirely sure I follow everything that's happening here, but it seems to me that what you're requesting would, if nothing else, allow a currency trader to use PayPal to conditionally do conversion only if they were making a profit. PayPal is doing the conversion at the time at which it is responsible for the conversion rate, which seems like the "right" thing to do. Admittedly, this results in subpar outcomes for people in India, but I'm not sure they can do anything different.

In case anyone is wondering where the numbers come from, PayPal charges a 4% overhead to convert money to rupees on demand as part of an immediate transaction (such as a withdrawal). When the money was returned, he was given the more lenient "convert balance between currencies" conversion rate of 2.5%. I point this out, as the author of this article seems to equate them as PayPal's "pathetic conversion rate".

The chargeback, of course, is a cost of doing business: if anything, PayPal's chargeback rates are actually quite low (as they have such an extensive system for handling disputes internally) and as a seller of pure digital goods I've been amazed that I often win true chargebacks that are marked "unauthorized charge" (which really shouldn't happen: its really just buyer fraud) as PayPal argues the case on my behalf and can demonstrate "the user really paid for this".

What sucks, of course, is that the user got double-whammied on the currency conversion, but I really hesitate to blame PayPal for this... if anything, I blame the Indian banking system, which has decided to put in place the laws that state you aren't allowed to hold balances with your credit card processor; the result of this is that your balance in India has to be forced out of your PayPal account every day, even though that money could be charged-back at any time.

As for the money being credited back the first time and not the second, that's quite common: he didn't realize that fee existed the first time, so the customer support people there "let him slide" and credited everything back; however, the second time he really should have known that was going to happen... no one, to be clear, is forcing him to use PayPal; in fact, his country really doesn't want him to be using PayPal, and he's doing so anyway. If he were in a country that didn't have laws making it difficult to use PayPal, he wouldn't be having such a difficult time doing so.

Thankfully, this person does seem to understand that RBI is at least somewhat of a problem here: he even wrote an even angrier message about RBI making it nearly impossible for him to buy things from people online using PayPal.

http://www.yash.info/blog/index.php/entrepreneurship/reserve...

What I find ironic about this other article is that in this piece on PayPal he's angry that he can't just let his Indian bank handle things for him, but in his other article he's slamming the Indian banks and wishing he could use PayPal.

> Every time I spend $$ for something where I could have used my PayPal balance I have to give a cut to some worthless Indian bank for using the credit card!

To be clear: if he were in some other country, he'd be allowed to store a balance at PayPal in relation to his outstanding chargeback risk. Additionally, he'd be able to store his balances in his native currency. If he wanted to convert the currencies back/forth, he'd be able to do so on his own schedule and be able to do it to his outstanding balance (as opposed to while immediately moving funds), giving the flexibility to get the 2.5% rate (which really isn't that bad) for all conversions. In fact, he'd probably not have to do the conversions at all, as he could sell the software in his native currency and have the buyers do the conversion from whatever currency they have, rather than doing it from dollars on his end.

PayPal really does go to great lengths to make this stuff work and generally work well, but everyone is being screwed here by RBI's policies (which, to be clear, might have some underlying good reason I just don't understand because I'm not privy to India's political requirements): I mean, let's put it this way... he's still using PayPal, and yet he hates it that much? PayPal's not doing that badly here...

The problem is simple isn't it. Even if PayPal is doing nothing wrong here, they are the ones through whom he experiences wrongs done by every one in the hierarchy. May be the RBI is directly at fault here, and may be the banks are screwing him indirectly- It's through PayPal those policies are enacted and its through them the customer experiences it. So the customer simply thinks PayPal is to blame.

This is like blaming your company for deducting taxes at source from your salary.

No, it's like blaming your employer for paying you in a different currency so that they can take a cut of the currency conversion. He says in the article that he would prefer to get USD and convert (or not convert) when and how he wants to, but Paypal won't let him. Upthread in a comment it's described how Paypal doesn't allow this. https://news.ycombinator.com/item?id=5669064

I am the author and yes RBI and PayPal both are to be blamed here. I would like to hold balance in My PayPal account only because of a possibility of a chargeback or a dispute. I lament RBI for not allowing me to do that.

I lament PayPal because when they take $200 from me, they should return me $200 and NOT $180. I have not said anything about the chargeback charges. I did not pay anything for chargeback because I refunded the transaction. I DO understand that chargebacks are a part of business.

My grouse is with the ridiculous pretense under which PayPal duped me out of $24.99 (over two cancellations) in the name of currency conversion charges.

Take a look at this - http://i.imgur.com/GIaP5O2.png

Does it look like a fair deal from any angle?

//he's still using PayPal, and yet he hates it that much?//

Yes because I don't have any other options - at least for now. Indian Payment gateways won't allow me to charge in USD, and I can't use Stripe/Dwolla or any half decent system because I am not in the US or Europe.

No way is the RBI ever going to allow parking funds in a non-banking institution in a country where tax evasions are so high.

By the way they are not be blamed here, the fraud prevention policy is in place because fraud happens.

Right, so they'd rather have companies incorporating in other countries for the sole purpose of being able to collect money from their customers! Seems legit.

For instance - http://blog.freshdesk.com/how-to-incorporate-a-us-corporatio...

That's an even better way to save taxes. Delaware has 8% tax. India has 30%. People won't even bring the money in India.

RBI is treating PayPal as some swiss bank account. Keeping all the USD balance in PayPal doesn't make sense. I have to bring the money in India because I need to pay the bills and salary and all. And the PayPal balance doesn't earn any interest. But when I have to pay the hosting charges or domain registration charges which are in USD why should I not be able to use some money from my PayPal account which is already in USD? RBI insists that money first come to an Indian bank and then used for paying abroad. Again costing me conversion fees every time the money crosses the border.

Its not just the black money, its consumer protection that the Government is keen on.

India Government just wants Paypal to behave like a bank if they are going to hold consumer;s money. If Paypal follows the regulation, they will end up paying interest on the money they hold. And they will forced to insure the amount.

And paypal works around this issue by pushing the money to consumers bank when it reaches the legal limit.

You can't blame the Government for this mess. Its Paypal that is working around the system.

Paypal is not working around the system: they are simply not a bank. They are a payment processor. Just think about what would happen to the fees that he already complains about if they had to insure the deposits.

And a payment processor should not hold the customer's money for a longer duration. That is what the Government is trying to push them into complying. Just like any other payment processors operating in the country, Paypal can also keep the money with them for just enough duration that is required to process the payment. After that they need to TRANSFER the amount and not hold it with them.

If the India Govt relaxes it for Paypal, multitude of such payment processors would start operating and one day you would see them disappear with people's money. Then again you will blame the Govt.

>>Right, so they'd rather have companies incorporating in other countries for the sole purpose of being able to collect money from their customers! Seems legit.

Software companies != Entire Indian economy. Software is relatively recent and accounts for a little part to move economic conditions of larger Indian masses.

Also at a time when every one is coming to India to set up shops here, no one is going to move out. That was a good Idea probably in the 1980's. Not any more.

Given say 20 years of future from now. The Indian market has more room to grow that the US. I would even go to extent to say, any one who is moving out of India now is making a very big mistake.

Can you not get a USD bank account in India? Paypal would then not need to do any conversion and you could do the transfer yourself from USD to INR using your preferred exchange.

I can. It's called Exchange Earner's Foreign Currency (EEFC) Account but PayPal converts the money before they send it to my bank account. So even if I had that account, they will still send me INR.

Because RBI's policies have given them another way to make some extra money.

Correct.

I'm in Canada and my PayPal is USD because i use ebay a lot. My attempt to set up a "US Funds" account for Paypal at TD Canada Trust met with them converting money from a Canadian buyer to US then to CAD just in time for TD to convert it to US to go into the account.

Clearly, I halted that after a day.

PayPal insists that it's impossible to transfer money in any currency except the one related to the address of the bank's head office.

If you use RBC's US routing number for your USD account it is possible to withdraw USD from Paypal Canada directly into your USD funds account. I confirmed that this works:

http://bradt.ca/blog/transfer-from-paypal-to-a-us-dollar-acc...

"What sucks, of course, is that the user got double-whammied on the currency conversion, but I really hesitate to blame PayPal for this... if anything, I blame the Indian banking system, which has decided to put in place the laws that state you aren't allowed to hold balances with your credit card processor"

This is clear, but does the law also force PayPal to do the conversion themselves (and charge the vendor for both conversions in case of chargebacks?) It looks like they saw the law as an opportunity to screw vendors.

//they saw the law as an opportunity to screw vendors.//

Precisely! It would be in PayPal's interest if people keep the money in their PayPal account because they don't pay any interest while they themselves can earn an interest on that sum. Now that RBI forces them to clear the account by the end of the day, they resort to whatever means they can make an extra buck.

Is it really a fault of RBI or is it paypal? See this for the real facts: http://www.hacktrix.com/paypal-rbi-fiasco-who-is-the-real-cu...

The linked article strikes me as pretty misguided. Here's the issue: PayPal's goal is to profit by providing a mechanism for different parties to pay each other. Its goal is not to make a profit by acting as a bank. There are various upsides to both PayPal and their customers if PayPal acts "bankish" in some ways, but that is not their purpose.

PayPal is not "dodging" regulations by not acting as a bank anymore than I am; neither of us are banks.

I agree with most of your assessment but how is a 2.5% charge for a (forced) conversion reasonable?

I live in Europe and get hit with the 2.5% conversion fee every time I receive USD (on top of the ~3.6% "cross border transaction" fee). I have a USD PayPal account and a USD denominated bank account but PayPal refuses to send the money to a USD bank account unless you are US based. They insist on converting it to EUR simply to get the extra 2.5% as far as I can tell.

I say it is "reasonable" because my understanding is that the industry average is 2.8% (although I hadn't researched it that long). I really doubt that PayPal is trying to obtain a currency conversion fee there... there's probably some regulation about being unable to give you money in a foreign currency directly without being regulated as a different kind of entity.

I couldn't find an industry average but my credit card gives 1.8% above IBLR (interbank lending rate), normal currency conversions for transfers from my bank account are even lower. But that is beside the point since I don't WANT to convert it (and neither does OP) there are lots of things you can buy with dollars.

Since they do allow you to transfer USDs if you happen to have a USD bank account with a US bank it is very unlikely that regulation says they cannot do that for non-US banks (they are registered as a bank in Europe). As a foreign national you can only have an account with a US bank if you opened it before 9/11, so most people are stuck. IMHO they are simply taking a few extra percent because they can.

Why does PayPal have such enormous power? What's stopping other initiatives from getting enough traction?

> Why does PayPal have such enormous power? What's stopping other initiatives from getting enough traction?

They have a huge amount of inertia because the average guy of the street has heard of them and can trust them to some degree.

Trying to get people to sign up with a new, unknown payment processor during checkout will have a strong negative effect on your conversion rates.

Sounds like a trust-issue. Perhaps that's it? Startups often fee they don't have do spend money on marketing. But a trust-issue is a good problem to have, branding can take care of that. First thing to do is convert 'trust -> faith & confidence'.

"...there is also growing evidence that increasing numbers of people today are unwilling to engage in social or economic contracts based on trust. Globalization has arguably contributed to a loss of social connectedness in many developed and undeveloped nations by disrupting traditional employment patterns, and people who have seen their social networks disrupted may be reluctant to trust others.

Meanwhile the traditional family has been under assault by other social changes, and young people may find it difficult to even learn to trust. For many people, relationships based on faith or confidence may feel more comfortable than those based on trust. Source (2005): http://www.brandchannel.com/features_effect.asp?pf_id=263

http://en.wikipedia.org/wiki/Network_effect

Google blew it with Checkout a long time ago, and they mostly gave up on it until a year or so ago when they launched Wallet. But they wasted 5 years on by not even moving the needle in the payment processing market.

Not having Checkout/Wallet as a popular payment system has also been (and still is) a major obstacle in getting people to buy apps and content from the Play Store. If Checkout accounts were as popular as iTunes or Amazon accounts at least, things would've gone a lot more smoothly, and I'm sure more merchants would've preferred it over Paypal, too.

Agreed. I'm sure people would trust/have faith in Google to do 'purchase and checkout' right. No idea why they can't seem to get it right. Even if it was just for their Play Store...

Because PayPal is the only one that actually works in 150+ countries worldwide. No service offering US or US+CA+UK only service could compete with PayPal effectively, even if it were 1000 times better in technical, UX or business terms, because something that works with a lot of pain is still infinitely better than someone that doesn't support your country.

Essentially, because Paypal has the best anti-fraud measures in the world, by a factor of lots. Every payment processor in the world is in a four way footrace: their opponents are organized crime, individual scammers, and their local government (who will want to shut them down to prevent scams and moneylaundering). The prize for second place is your business imploding.

Someone needs to ask this question to the likes of Stripe. Why is their fabulous service limited only to US/UK? Is it laws? Is it fraud? What prevents them from extending their service to other countries?

Mainly because the "simple" act of a user in one country transferring money to a user in another country, where both users deal in their native currency, is incredibly complicated. Currency conversions, banking laws, high fraud risk, etc.

Perhaps offer a variety of payment options to your customers and add a small fee to the methods that give you problems (like PayPal).

This will give feed-back to the customers about the convenience of these payment options and will give them an incentive to use a different method. (people love discounts)

We used PayPay for our product http://justmigrate.com

It is a night mare if someone asks for refund after auto withdrawal and never change PAN details unless you are okay with 7 days downtime.

You missed another important point, we also got few users from India and thanks to RBI regulations using paypal we cannot accept payments from another Indian. Well just offered them free migration.

Also if you are targeting consumers in US they are little more confident paying with PayPal vs asking for credit card details. This is an important point, always keep PayPal as an alternate when accepting payments from US market.

Today I received an email to dispute my authority by sending in them a proof of my indentity, address and statement of my bank or credit card.

What I found rather obnoxious was that they had records of my credit cards which I had deleted from their system years ago. The email clearly listed all the last four digits of all credit cards I had ever had on them, even though I currently have no more than one linked to my account.

Top of that my account is linked to a profile of some Chinese personel, even though I'm Finnish, leaves me without words to say.

Does anyone have a good background on why PayPal is not subject to the same regulations as banks? Is it because they don't lend?

In the EU they are regulated as a (Luxembourg) bank. I assume you're talking about in the US?

Paypal is a bank in the EU

In the US, it's supposedly because they don't accept and hold deposits. That is, you can't give PayPal $1m of your money to hold, you can only use it to make business transactions. The FDIC also justified this in a hearing on the matter by saying: "PayPal does not physically handle or hold funds placed into the PayPal service"

It's this kind of bullshit from paypal and the banks generally that is providing wind beneath the wings of alternative payment systems which charge the true (much lower) cost of international money transfer... Great! Bring on a bitcoin future.

Enough with this nonsense. Take the plunge and start using Bitcoin. Whatever risks and uncertainty Bitcoin may have for vendors is miniscule compared to the daily fleecing handed down by the likes of Paypal.

Does anyone know a good alternative to PayPal?

Depends on which market you target. In Russia and some of the other former soviet countries there is WebMoney which has low fees (0.8% for transactions, unknown for withdrawals from WebMoney) and as far as I know does not screw over its customers as much. In Sweden there is Klarna for letting ordinary people pay with invoice. In many countries there are options where you can use your internet bank to pay.

And if it is credit card payments you wish to receive it is worth looking into a getting an account at a payment processor.

So, I'm an asshole if I purchase your product and decide later to do a chargeback (you don't even have a chargeback policy or a policy at all).

Apparently, you are not the nicest person to deal with on earth, and you are complaining about PayPal because your country laws are complicated?

Also, exchange rates are indicative. There is always a middle men when you are exchaging currencies, and he makes money by charging that rate.

I wonder if you're confusing refund for chargeback. Chargebacks are often used by people who a) use the product for a while, b) decide they want their money back, c) know the vendor won't return their money as there's no real reason to so d) call up their credit card company instead, dispute the charge, get their money back and see the vendor lose that sale + get hit with a $25 chargeback fee.

That's a bit one-sided, don't you think? They're also often used when companies fail to provide the product/service that was paid for, or when the charge was unauthorized. That's what it's there for. The author doesn't say why the chargeback was made so I'm not sure why we're assuming it was fraudulent. The software site promises a lot of features and it's entirely possible that the buyer required one that didn't work as advertised. It's also possible that the credit card used was stolen, which would make the original buyer, not the person doing the chargeback, the "asshole".

@yashg FYI your blog prevents zooming on tablets and small devices; could not read.

Yeah, need to change the theme...

Just remove the < meta name="viewport" ... > line.

Easier solution:

Have a US based paypal account.

Yes it works way better, it is not a safe haven from chargeback but the service and US laws are more stable.

More stable = the laws does not change so much as the non-english countries. Maybe it is the common law, I do not know. But there is a reason the whole bank system power is in common law powers.

Wouldn't you need a US bank account & US taxpayer ID to make that happen? Good luck getting those from India in the wake of the Patriot Act, etc.

Not that difficult. People are already doing it and I too am seriously considering it. http://blog.freshdesk.com/how-to-incorporate-a-us-corporatio...

If you REALLY understand what the Patriot Act is about... You will see it is easy and doable. No need to break the rules, it is Common Law, follow the rule and they WILL have to give an account.

What would you do if PayPal wasn't in India?

I imagine he'd have to use a domestic merchant account, and post his prices in INR instead of USD. He'd lose customers who don't understand non-USD prices or think it looks scammy.

Yes. When I say the price is $29, people expect to see $29 on their credit card statement. $28.xxx will make them suspicious.

There's a reason why Apple rounds prices on App store to nearest .99 in local currencies so people pay exactly what they see.

Venmo.com

that is all

Venmo is doing what PayPal started off doing: mobile payments between users.

PayPal, in this lament, however, is acting as a payment processor for someone selling something. Venmo doesn't seem to do that.

dont use it ... end

Whats the complaining about for fucks sake! Our company had 7000 euro frozen for 6 months while those skullheads were deciding whether to give us our money and not telling us why they are doing this Then they proceeded to close my personal account simply because I was the company director

Thats for a 6-7 year old or so hosting company that has always been in profit

Maybe more Indians like the above guy start using bitcoin, the world would be a fucking better place without Paypal

I guess you won't complain when I cut off one of your arms, since some other guy lost all four limbs in a car accident...

Unfortunately, even if he accepted bitcoin, probably less than a tenth of a percent of customers would pay with bitcoin. I agree though, that would be better.

Reply on news.ycombinator.com