PayPal Shuts Down Secure Messaging Service ProtonMail’s Crowdfunding Account
techcrunch.com
techcrunch.com
All the raised funds are at risk, for PayPal, for the 6-12 month period they can be reversed. Even if donors do so without a valid reason, PayPal gets hit with chargeback fees and needs to maintain a <1% reversal rate company-wide just to do business with Visa and MasterCard. They're willing to let their algorithms evaluate small risks (the typical eBay buyer/seller), but a human steps in to do the underwriting for larger volume accounts, just like at every MSP and bank.
The account got flagged for manual review, answered some questions, and was open to accept payments again within the same day. That's better than most banks I know which will take at least a few business days to approve a merchant account. If you're going to be accepting hundreds of thousands of dollars with PayPal, it might be smart to call them in advance instead of waiting for them to call you.
Doesn't PayPal urge you rather strongly to connect a bank account with your PP account? I regularly advise clients on creating these accounts, and bank account confirmation is typically the next thing they do after account creation. Does this not apply worldwide ... or do some people actually trust PayPal to hold their money?
From a PR perspective, I would think it would be better to say "We wanted to unfreeze immediately so they could start take donations again." rather than "We kept it frozen until we had time to write an apology."
Not saying we're definitely going to get one, but I could see why it might not come immediately.
I defy you to find a single other financial partner who'd let this kind of behavior slide without review. (And Bitcoin doesn't count ... not if you want to accept donations from any reasonably large number of people.)
[1] https://protonmail.ch/blog/paypal-freezes-protonmail-campaig...
Honestly, I think they've improved vastly on most of this since, but their bad reputation is entirely deserved.
I used paypal because I thought it provided me some protection.
I purchased web hosting using my paypal account. Then one day, the company doing the hosting folded up and disappeared. Since I had just prepaid a month of service, I filed a claim with paypal for services not received.
12 hours later, they had completed their research and determined that they would not proceed to charge this back against the merchant. No further details provided to me, and case was closed.
It seems to me that if a company is advertising itself as protecting its customers (which are both merchants and purchasers), then it should do so. In my particular case, I provided ample documentation to show that a) I had paid the charge and b) the company I paid closed up shop and had no intention of providing the service I paid for. Yet without explanation or transparency, they were able to shut my case down. I later learned I"m far from alone in this experience.
So perhaps the dislike of paypal for the reason in the article isn't warranted - but they have a long history of problems completely unrelated. That's what happens when you want to have all the profits associated with being a credit card processor, and yet be constrained by none of the regulations.
An account gets a lot of money from different funding sources (credit cards, ACH, etc.), the velocity is high, and most of the sources didn't have prior transaction records with this said account. To the RM team, they cannot tell if this is a legitimate transfer, or a massive transfer of booty by hackers.
Nevermind how famous this startup maybe, if your credit card were stolen, and PayPal shows you an HN article "well, I thought you wanted to donate to this startup X", how impress would you be? On top of that, the chance of CC customers with hefty chargeback is something that no sane business entity can take lightly.
PayPal may suck, but I don't see how a company with similar scale and footprint will do better. Doing differently very likely will mean losing so much money that it has to go out of business, or, have to partner with some foreign company that sells products of questionable quality.
https://developer.paypal.com/docs/classic/lifecycle/crowdfun...
Also, I don't see how they qualify for PayPal donation status as a nonprofit, so the outcome of this was predictable by day 1 and entirely their fault.
That's kind of a show-stopper, then. Saying that Bitcoin is an alternative to Paypal for these kind of Kickstarter-like efforts is just disingenuous and exposing your "customers" needlessly.
Well, in this case, they're using one of those central agencies (PayPal). So using PayPal as the central agency on Bitcoin would be exactly the same, and using a different central agency is a change independent of the use of Bitcoin.
"The real power of Bitcoin would be to be able to do this in a trust-less manner. It hasn't been implemented yet, but exists in the Bitcoin Protocol. You're welcome to take a shot at it, by the way, the core developer team is always looking for new developers."
I don't know that 'Bitcoin has X if you write code to let Bitcoin do X' is quite the same as 'Bitcoin has X.' Lots of things can do X if I put in all the work to do X.
Bitcoin has its own issues -- see "Bitcoin crowdfunding sites find funding difficult" (http://www.coindesk.com/bitcoin-crowdfunding-sites-find-fund...).
Even if the legal/security issues are worked out, it will take a lot of convincing to get mainstream users/potential crowdfunding donors on board. People don't trust what they don't understand, and the fact that the value of BTC is so unstable is a giant red flag. Would Joe Shmoe plunk down fiat for X $BTC, with the knowledge that the exchange may fail or the value of his investment may plunge the next day?
Yeah, because having exactly zero recourse when the crowdfunded thing turns out to be a scam is totally what people are looking for.
Paypal is can be quite a pain in the ass with fraud prevention etc, but pretending that switching to a system with NO dispute resolution is better is ridiculous.
Otherwise, their is Braintree, Stripe, and more similar services.
EDIT: Seems like Braintree is owned by Paypal. So not really an alternative.
If you're looking for something similar to the payment integration, Stripe is pretty similar in terms of development effort and can even run a form on your (static) web site. You still have to do a bit of processing on your end, but we're talking about a few hours of work tops.
We ran a subscription business for a few months without a real backend or a database (validating that there is a demand) using stripe and JotForm. Jotform is a very simple forms builder and server online that can handle a trivial product selection, collect custom information, execute a payment workflow and send the customer and you an e-mail at the end, optionally showing the customer a confirmation page. Yes, all this is doable by a good programmer in a day or two, but it costs next to nothing on JotForm and allowed us to play with the process until we got it right. Their site can run paypal and stripe (and a few other things) so in case paypal blocks you it's easy to switch to a different provider without customers noticing anything.
Stripe doesn't offer seller or buyer protection - which is another benefit of PayPal. I don't know anyone else who does that.