PayPal releases Mailpile’s $45,000 (updated)
arstechnica.com
arstechnica.com
But... am I the only one that wishes I had the megaphone that is Hacker News and Ars Technica to right wrongs? I get into these situations and find myself fighting the situation alone because my business is not that much interest to a mass audience, and therefore, those in the media who can shine a light on it don't have interest in relaying my plight.
So, while a few folks can get the limelight and get THEIR problems solved, the rest of us fight in vain against the machine knowing full well that the odds are stacked against us and we can't get the world's attention in the same way.
TL;DR - Yay for MailPile, that's good, but I still feel kicked and not able to get the same sort of help. And in the end, it's Paypal solving a PR problem and not something that might be more systemic.
Not saying this is the case here, but I can see how it happens.
The reason I think this might not be the typical corporate waffle is that they actually have been admitting that their market dominance made them soft and lazy, but that since Square, et al, are now kicking their ass, they have woken up to the problem: http://pandodaily.com/2013/08/12/if-its-not-broke-break-it-h...
Definitely interesting to see the higher-ups insert themselves like this, but I honestly don't think the temperature between users and PayPal is going to remain at subzero.
Do you care to elaborate on this? Have you had problems specifically with PayPal, or with other unaccountable corporate bureaucracies?
Not really. Banks establish reserve holds (i.e. you keep processing credit cards but the money is not reaching your bank account) all the time. They also freeze accounts and keep that held money for 180 days, all the time. None of it requires any exceptional circumstance nor is there any way for you to dispute the decision to establish a reserve or to close your account and hold the funds. Don't confuse savings accounts with merchant accounts; they are not treated the same even at banks.
I speak from first-hand experience. I had to continue providing service to customers while their payments for that service were held for 6 months by the largest private bank in the country (FNBO, $17 bn in assets). That was an interesting time cashflow-wise when bootstrapping one of my earlier businesses. It was all triggered by a single incident of fraud where someone made 6 separate purchases through my website, which were all charged back at the same time. As a relatively low-volume merchant at the time, that made me look like a huge risk the bank wasn't willing to work with anymore. I've considered fraud screening from the start of everything I've worked on since.
In addition, Anti Money Laundering (AML) compliance requires significant expense, process, staff and training investment from financial service providers. Know Your Customer (KYC) rules also increase the overheads.
Any large business such as PayPal is essentially between a rock and a hard place: eiter allow government spying and perform proactive account seizures and lock-outs which create these issues, or wind up targeted for removal and find partner relationships pressured away and severed.
The problem is US dot gov and their existing 'regulation'. While I agree that better consumer-protection laws in financial services might help here, ultimately the government's right hand will cut off their left to maintain spy and seizure capabilities. As Schneier said: we're the technologists, we made the problems, and we have to fix things.
The free market will kick in here and decide if Paypal's service is no longer acceptable.
As just proven by PayPal releasing the funds after Ars ran a story.
I'd still use IndieGogo, just not Paypal. The only alternative, however, is to use IndieGogo's own credit card processor, which charges 3%, but it might be worth it because funds are automatically ACH'd and you don't have to deal with Paypal... and the customer feedback is more direct.
But the big downside of this is that you don't get ANY of your money until the campaign is over (and up to 15 days after that), while with Paypal, you get your funds immediately (minus a 9% IndieGogo fee) if you elected for Flexible Funding. See http://support.indiegogo.com/entries/20578596 for more.
Given they only have two options: Credit Card from Indiegogo, which means no Paypal (yay), but also no money until the end (maybe boo) or Paypal (boo), but money right away (yay), it forces many folks to Paypal. They need to look at Stripe or Balanced or Braintree or something else.
That changes nothing. Indigogo has that policy to protect themselves from fraud. Any money they can't recover from a fraudulent project (or fraudulent charges because someone funded it using a stolen credit card, for example), comes straight out of Indiegogo's pocket. That's true whether they use a bank, Stripe, Braintree or anyone else.
This is exactly what PayPal was trying to control, and they got criticized for it.
At the end of the day, no payment processor wants to be on the hook for 100k+ that they get less than 1% of in profits, that goes to fund a project with no clear timetable, no guarantee of delivery to the customer, no budget, etc, etc, etc.
Someone could demand a refund because:
1) Their credit card was stolen and used to fund a project. They never agreed to the charge,they're entitled to a refund.
2) The project was fraudulent. The creators never intended to fund the project using the money. They ran off with it instead. Those people were deceived, and are entitled to a refund (in general, but also under the credit card associations rules).
Some potion of transaction on Indiegogo will be fraudulent. Paypal or Indiegogo must have a way of recovering that money.. if they don't then they will have to cover it themselves. That's the way it works. That's why payment processors create reserves for high-risk businesses.
With stories of fraud on Kickstarter, due diligence is your friend! So with Kickstarter (and IGG, I don't know their policy) taking 5% and no responsibility, users only have chargebacks as a course of action. I don't think it is the $25 donationsusers that care, what about the users who donate $2500?
http://www.polygon.com/gaming/2012/6/27/3099051/backers-righ...
http://www.dailydot.com/business/why-kickstarter-ripe-scams/
Your bank recoups that money from PayPal/indiegogos processor, and that processor will recoup the money from Indigogo, and indiegogo recoups it from the project. Whoever can't recover their money in that chain, is where it ends. That company is out of luck.
Saying, 'Oops.. we let one of our customers commit fraud, too bad for you'... isn't a permitted excuse.
And this applies to PayPal as well.. since consumers get their money into a PayPal account using a credit card or bank transfer. So PayPal is no different than any other processor in this case.
If it's a credit card, you might not pay your debt. That's a risk borne by Visa and MC.
If it turns out to be a stolen card, all parties on the receiving end might be obligated to return the money. If Mailpile is honest, they will comply, but if Mailpile is responsible for the fraudulent payment, they just successfully laundered some stolen credit into their bank account.
Maybe they can't get the whole $100k in cash, so it's not realistic since AML says they can't have more than 10k at a time. I would be very suspicious if I was mailpile's bank and they came in to close the account tomorrow. But, I don't think that's how AML works.
Nota Bene: PayPal also charges roundabout 3%. So the financial loss you're alleging doesn't exist, at least not in that magnitude.
Plus, why doesn't Paypal give you the interest if they "need"to put a hold on your funds. The last time I used Paypal, I had to wait--21 days in order to withdraw? (I vaguely remember they claim to hold the money in a non-interest account, but my point is I'm still out 21 days interest(interest will matter again), and use of the money. Simple answer; Don't use Paypal, and stop complaining. Answer--I try not too, along with Ebay. (While I'm on the box--I've noticed too many people paying close to retail on Ebay--especially on laptops.)
If you're going to make the decision to SEIZE $45,000 of a vocal entrepreneur's hard earned cash - you are much better off keeping it and justifying your actions, then not acting so aggressively next time.
The word for this is INEPT.
Next time something like this happens and PayPal is trying to get ok with the media, it's not gonna work.
So i sure damn hope they are truelly changing some things for the better for countries outside the USA...
What about the smaller groups that cannot get this attention.
PayPal needs some serious government scrutiny, the kind corporations fear.
Missteps create opportunity - e.g. does stripe facilitate crowd-source payments?