8 ms·

Good riddance, PayPal

• eslachance 14y ago
  I'm happy to see that someone is not only standing up to PayPal and going another route, but also that a very good alternative is being set forth. It's not just another "Paypal sucks", and I appreciate that.
• andr 14y ago
  Does anyone have insider knowledge of why PayPal has been causing merchants so much trouble? It sure looks bad on the outside, but I'd be interested to hear their rationale.
  • patio11 14y ago
    To the extent this perception represents actual reality: You know how every time a new payment provider comes up and people kvelch that it isn't available in their country and how no provider is? This is because every payment provider which attempts to hit as many countries as Paypal does dies. They're killed by fraud. (Fraud kills domestic ones, too, all the time, but it's marginally less frequent.) Luckily, Paypal is an anti-fraud AI company which also happens to run credit cards sometimes. When in doubt, they will always come down on the conservative side. This is why they still exist. (Early in their corporate history they lost -- no kidding -- one hundred million dollars to fraud.) This perception does not actually match reality, though: most people bitten by this are unaware that similar activity would get them shut down by the fraud department at e.g. a bank. See comments by dangrossman, etc.
    • danielbarla 14y ago
      Having a large base of clients willing to buy through their services is ultimately what matters, and I think they achieved that partially by siding with the customer most of the time. Making a purchase through their services, you know that you more or less protected, and if you start jumping up and down, you will probably get your money back. Businesses put up with their less-than-fair treatment because until recently, there weren't any alternatives on nearly the same level of "respectability", as far as buyers are concerned. I'm willing to bet that in the beginning, when they were mainly trying to court businesses to implement their service, the situation was different.
    • rm999 14y ago
      My paypal account has been hacked twice, and both times I had to catch the ensuing fraud on my own. This was about 3 and 4 years ago. Two months ago they shut down my account because they think I'm high risk. I've had my Chase account frauded twice too (I know, I AM high risk) and Chase hasn't shut down my account. IMO Paypal swung quickly from being too sloppy to being too conservative. The fraud they missed a few years ago was easy to catch - it was from sketchy sites and the products were being shipped to PO boxes nowhere close to where I live. Paypal is playing a dangerous game now by shutting down people's accounts because their strength comes from a network effect within a potential monopoly (unlike Chase); every person they ban from paypal removes the legitimacy of their service a little. BTW Paypal's fraud team was only built up to a solid point in the past 3-4 years. I know this because I used to work in the industry.
    • CamperBob2 14y ago
      Luckily, Paypal is an anti-fraud AI company which also happens to run credit cards sometimes The thing is, it shouldn't take much in the way of "AI" to recognize that a company that has already been doing business for several months or even years is probably not going to wake up one morning and start defrauding people. Criminals are lazy, and running a business is a lot of work. It would take about 30 seconds' worth of review time on the part of a moderately low-paid staffer at PayPal to avoid most of these PayPal Media Debacle of the Week stories. I simply cannot believe that it's that hard to distinguish between a fraudulent user and a real one, given the presence of a significant transaction history. New accounts opened by people with no discernible history? Yes, they should freeze/ban/lock first and ask questions later. Accounts that are clearly used as part of a business? Give the customer the benefit of the doubt, or at least a 5-minute phone call.
      • ig1 14y ago
        You're wrong. A common type of fraud on ebay is for an account to build up a reputation buying/selling low cost items (or high cost items between a group of criminal partners) before using the account to scam on high price items. Criminals are perfectly willing to put time and effort to create fake accounts or just buy stolen accounts.
        • CamperBob2 14y ago
          To accept your statement that I'm "wrong," I'd need to see some examples of false business fronts that were not obviously bogus from day 1. On eBay, yes, it was pretty easy to play the "Sell a bunch of stuff for 99 cents and then pull the big scam" game. But none of the widely-publicized cases where PayPal has basically attempted to wreck the lives of startup founders fall into that pattern. These people have all had independent web sites selling actual products, and/or a background in other ventures that could be checked if PayPal were to spend 5 minutes doing due diligence on them.
          • mryan 14y ago
            It's a relatively common thing for criminals to do, and is known as a 'long firm': http://en.wikipedia.org/wiki/Long_firm http://en.wikipedia.org/wiki/Long_firm 1) Run a legit business for a few months 2) Build up credit history with suppliers 3) After a while, buy a huge amount of stock on credit 4) Sell all of the stock for cash at massive discounts 5) Disappear with the cash, leaving a pile of unpaid debt in your wake
    • arthurrr 14y ago
      This post makes me very very happy, knowing that Paypal lost one hundred million dollars. Thank you for making my day!
  • yummyfajitas 14y ago
    I have no insider knowledge, but here is the obvious answer: fraud is an existential threat to their business. Paypal's profit margin is a small percentage of the value of a transaction. The potential losses due to fraud can go as high as 100% of the value of the transaction. I.e. their losses can be 50-100x as big as their gains. Further, the selling point of Paypal is they let anyone who wants to set up shop and use Paypal for money transfers. The tradeoff you make by using Paypal is much lower setup costs (relative to a merchant account) for much higher risk.
  • saurik 14y ago
    My impression is that the barrier to entry of working with PayPal (in comparison to having a meeting with a bank and going through formal underwriting) is sufficiently low that people begin working with PayPal without knowing much about how financial systems work: they don't know how holds work, they don't understand how the credit system works, and in general they believe that the system should work identically to cash transactions (as in, the money is yours immediately when it hits your account). The result is that the system is treating them identically to how a bank would treat a more organized company; however, with an accountant on hand and an understanding of the rules, the organized company is much less likely to make silly mistakes (such as selling people a product that is shipped more than 48 hours later, already in violation of VISA's rules, to a third-party's address and then claiming that it is a "donation" and not a "purchase" <- an example from earlier this year). There are also simply more players, as we are now talking about a bunch of couple-person companies that are using PayPal to accept credit cards, and even individuals who may not be incorporated at all but are using it to launch and sell products on their websites. These kinds of people are also much more likely to decide to attempt "lynch-mob" as their primary means of recourse against a company doing something they disliked, so we are doubly more likely to hear about situations. However, as a merchant who operates something that many people (incorrectly) call sketchy, and one who has spent much too long learning all of the relevant tax regulations, reading up on credit cards, talking to people with real merchant accounts, and having meetings with banks about possibly using their service instead, my opinion is: PayPal is not that difficult to talk to and they are not actually unreasonable; there are things they are incompetent at, but this isn't one of them.
  • dangrossman 14y ago
    Considering they have a quarter billion active users, a "horror story" once or twice a month is an amazingly, amazingly low dissatisfaction rate. I don't think PayPal is actually causing that many merchants much trouble. It just appears that way, because: * At most merchant services providers, underwriting happens up front: you have to describe your business, what you're selling, expected volume, etc. on an application, and go back and forth with the bank, before you are allowed to accept credit cards. PayPal lets you start immediately, and only gets the information from you once you've started transacting some meaningful volume. So the risk problems are weeded out with other processors right at the start, where with PayPal it can come up suddenly. * These people have never even thought about underwriting and risk assessment. They treat PayPal as if it's a consumer service, when PayPal has to treat it seriously -- they're essentially making a rolling loan in the amount of 6 months of your transaction volume -- because if you disappear, they're on the hook for the chargebacks for all your past payments. People do stuff no other processor would let them do -- like taking massive donations with no prior approval, selling pre-orders to software that hasn't been written yet -- and PayPal isn't OK with it either once they find out. * PayPal merchants are disproportionately more often individuals than actual businesses compared to what other processors see... because it's so easy to open an account, and everyone that's used eBay already has one. * Because the merchants are individuals, and have no experience with underwriting at other processors, and have previously used accounts suddenly limited or frozen, they're confused and surprised. Add to that customer service that won't really tell you much once an account's been closed, and you end up with a couple really angry people a month: cue blog post about how PayPal is evil and if only it were a bank, they couldn't do this.
    • wpietri 14y ago
      Even given that, I think PayPal has done a poor customer service job. They long ago could have introduced some sort of premier business account that drags serious merchants through a proper vetting process. Then they could have made the "we're scared of you" experience for non-premier users much less confusing. They clearly have a lot of internal structure and rules. They want to keep some of that hidden, to minimize fraud hackery. But they could expose the broad strokes to users, make clear what state they're in, and offer them the opportunity to upgrade to properly vetted merchant accounts at any time. People aren't upset about the restrictions; it's their arbitrary, opaque nature that makes them seem so unfair. I think the real problem here is that PayPal is owned by EBay. I hear EBay is getting better, but the place used to be a nightmare to work at, and one glance at their website tells you how thoroughly they're focusing on exploiting their existing model at the expense of trying anything new. With that kind of ownership, I figure anybody with a desire for innovation long ago left PayPal.
• pytrin 14y ago
  Paypal to me is the classical example of the incumbent growing stale and detached from its consumer base on which it built its business on. Sellers like Eliot are the bulk of Paypal's business - small businesses who needed a (relatively) easy way to start accepting payments online. Paypal is just giving every opportunity for someone else to come and get their market share. Hopefully it will happen sooner rather than later.
  • Irfaan 14y ago
    If PayPal is so very terrible (and I believe it), Is there a reason Amazon Payments or Google Wallet haven't overtaken PayPal in this market? If neither Amazon nor Google's brand recognition hasn't convinced folks (buyers or sellers) to start pushing it instead of PayPal for Internet purchases, I can only hope it's because their solutions are equally terrible - otherwise, I have a hard time seeing how a new player will make headway in this space. And I'd really like a new player. :/
    • patrickk 14y ago
      "If PayPal is so very terrible (and I believe it), Is there a reason Amazon Payments or Google Wallet haven't overtaken PayPal in this market?" eBay would account for some of it. Also, payments is a relatively highly regulated market globally, as evidenced by Stripe trying to expand internationally.
    • mattmanser 14y ago
      When Google Checkout launched it was in a right mess. I remember trying to use it and it silently crashed without an error. It was bizarre, all over the forums, no Google response. It also had an even worse payment flow than paypal. Which is saying something. You can't ignore early adopters like that so no-one switched. Also seem to remember it didn't take payments from a lot of countries. Could be wrong.
      • dennisgorelik 14y ago
        Google Checkout (now Google Wallet) is still a mess both technically and with customer support.
• hkolk 14y ago
  Small nit-picky thing: Paypal has bank-status in Europe.
  • chris_wot 14y ago
    Also in Australia.
• verelo 14y ago
  Thank you for writing this, reiterates everything i feel about Paypal as well! We use Stripe and I couldn't be happier. Started with Paypal, wanted to shoot myself on a regular basis.
  • axefrog 14y ago
    Unfortunately for Elliot, myself and the countless other non-Americans in the software development world, Stripe is not available (yet) outside of the USA. Stripe have stated that they're working very hard on breaking out into other countries, but I suspect it must be an immense job, what with all of the various existing bureaucracies and regulations present in each country. Hopefully we'll get some good news in the not-too-distant future...
    • someone13 14y ago
      Stripe currently has a Canadian beta going, if you happen to be based there. Send them an email and ask!
    • dangrossman 14y ago
      Even when it becomes available to merchants in other countries, it still won't let you accept payments from the dozens of countries where people use PayPal but don't have major brand credit cards. There's really no equivalent service.
      • autophil 14y ago
        I think Skrill Moneybookers http://www.moneybookers.com http://www.moneybookers.com is as close as you'll get to PayPal. They accept pretty much all credit cards, banks etc.
    • verelo 14y ago
      We're in Canada using Stripe, we actually managed to get in before they even started their Canadian beta. You dont need to be in the US, you just need a US bank account and postage address.
    • 14y ago
• kevinconroy 14y ago
  There's been a lot of PayPal hating on HN. I'm not trying to defend the horrible things that I've heard, but I, for one, am a happy PayPal customer. We've regularly moved thousands upon thousands of dollars a day for the last decade without any major issues. #YMMV
  • jakeonthemove 14y ago
    They seem to really hate any and all pre-sales, plus they have a list of "risk items" - if you're lucky not to fall into one of those categories, it's a happy life with Paypal for you :-). Then there's their automated fraud prevention system that is just too trigger happy. As an example: I bought an item on eBay the other week and they refused to process the payment. A couple of days later I decided to try again before buying from another seller and it went through without issues.
    • kevinconroy 14y ago
      Based on what's said, it seems that businesses/groups that raise large sums of money sporadically trigger the most problems. If you're running an on-going business that has multiple to many transactions everyday over long periods of time, then I suspect that you're less likely to trigger these problems. But again, YMMV.
  • bradddd 14y ago
    There are countless tales of eBay parties having their funds frozen. I've personally had around a dozen influxes of a couple hundred dollars at a time be frozen for 4-6 weeks before I had access to their full balances. Additionally, many have issues with the fees. Going back to eBay, you get hit with fees for both services, and I think many just see it as being too much given other emerging comparable services.
    • DanBC 14y ago
      > There are countless tales of eBay parties having their funds frozen. "I used ebay, something went wrong, here's my post" vs "I used ebay, everything went smoothly, here's my post". Obviously you're going to have many more posts where things go wrong, but that doesn't tell you anything about the total number of transactions, nor the successful transactions.
• shanelja 14y ago
  I refuse to deal with Paypal, 6 months ago, I had a charge refused by my bank and before I had received a letter 5 days later Paypal had already backcharged all the payments I had made since to my account, stating that my account was now £65 in the negative. The result of this is Paypal saying I owed them £65, but that once paid they would not return this to the companies and the companies sating that I owed them nominal amounts each. I repaid the companies in cash through the post (I even converted it to the correct currency) and have squared things with them, and Paypal is still saying I owe them £65. I have told Paypal that as they paid out £65 and then took it back, they are currently level and are not owed any money and informed them to cancel the outgoing payments as I have paid them myself, but they continue to persist with the idea that I owe them money. They refuse to let me add another card to my account to pay off this amount (the card I originally used is Spanish and I don't use it anymore, the balance on it is, however +£0.47) and I refuse to lose money having it converted over to Euros. As a result I have cancelled all existing usage of paypal and now pay from a credit card instead and I refuse to either pay Paypal the money I supposedly owe them or add more funds to my old account to have them take it away (leaving them £65 in the green and me in the minus) My experience of Paypal customer services is poor service and automated responses, if it was possible to talk to a human this would have been sorted months ago, but as a result of their ineptitude they have lost a customer who was doing daily business with them in the order of £100 - £200 incoming and outgoing. It's not much income to them, but I will no longer use their service and if enough people follow suit it will make a difference. And for the record, the freeze they placed on my account over such a nominal amount cost me around £750 in lost sales before I began re-routing to my credit card, but I doubt very much they will offer to refund this.
• dangrossman 14y ago
  The premise of his "vehemence" is untrue: banks can and do have the exact same policy regarding terminating merchant services accounts. They can terminate you at any time, without reason, and when they do so, hold any undisbursed funds in a reserve account for exactly 180 days. There is no regulation banks are subject to that PayPal isn't that would have an affect on that. PayPal did not make up this policy; it's based on Visa and MasterCard's Operating Regulations, which predate PayPal's very existence. I have first-hand experience that not only is this in virtually every merchant services contract at every bank in the US, but it's actually enforced, exactly the same way PayPal enforces it. 8 years back I had a sudden influx of chargebacks from a single scammer that used a bunch of different cards on one of my websites to buy services, back before I knew how to spot that kind of activity. My real, regulated bank (First National Bank of Omaha) terminated my merchant account and held several thousand dollars for exactly 180 days with no recourse for me. They never saw another chargeback against my account, but I still had no access to that money for 6 months. Exactly the same as PayPal does when it terminates an account for activity it deems high risk.
  • mattmanser 14y ago
    Just to note, the's author's not in the US, he's in the UK and Paypal's a regulated bank over here. I always have mixed feeling on these stories. On the one hand, if you operate almost entirely online, you're in amidst a mass of scammers and conmen, it's a much higher risk, hence everything being more draconian. So there's always problems. Brick and mortar businesses are much less as there's a real presence, etc. On the other hand, this is a long established business. Are they really that high-risk any more? Why are they treated like someone who's just started? Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing?
    • DanBC 14y ago
      > On the other hand, this is a long established business. 8Faces has been in print since 2010. That's a great start. It's not a really long time. Issue 5 is ready to pre-order. (Weirdly the author claims that they don't really do pre-orders, but on the website there is a huge banner telling people that they can pre-order issue 5.) Magazine publishing is notoriously tricky, especially in the UK. > Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing? This is an excellent point. I can understand why Paypal don't have customer reps for every little nickel and dime trader, but a magazine doing £15,000 per issue is reasonably substantial amount of money. It'd be great if Paypal could establish identities (interviews? documentation?) and build relationships with the honest traders that use the service.
• unkoman 14y ago
  Any good alternatives?
  • autophil 14y ago
    I started using Skrill Moneybookers because it's used internationally. I can't use Amazon or Google Wallet because I'm in Canada and its taking them bloody well forever to get here. Oh, and I just signed up for Zoompass.
  • michaelfairley 14y ago
    Braintree: https://www.braintreepayments.com/tour/international https://www.braintreepayments.com/tour/international (Disclosure: I work at Braintree)
  • 54mf 14y ago
    Stripe. http://stripe.com http://stripe.com
    • eloisant 14y ago
      That's US only, so it wouldn't help the OP.
  • tessr 14y ago
    I don't know how well it would work for commercial things, but for personal payments between people you know, Venmo is awesome. https://venmo.com/ https://venmo.com/ (Still U.S. only though.)
• mherdeg 14y ago
  Does the oft-lionized "PayPal gang", famous for their successes in the tech community, bear any responsibility for the company's customer experience being sometimes so terrible? Maybe this just happens to all payment companies at scale, but it seems like PayPal has a lot of stories from ordinary-sounding, reasonable-sounding people who were just trying to sell something and ended up losing all their money. Who's responsible for those service delivery failures?
• tylerrooney 14y ago
  Perhaps someone who runs their own company can answer this question for me: If you don't use PayPal, how do you receive payment from customers who don't have credit cards? Are your customers exclusively in North America? Or do you just write those customers off (which is a valid option if PayPal integration would be that painful)? Adding PayPal as a payment option has been an enormous pain for us but a non-consequently amount of our revenue comes from customers either without credit cards or with cards which always fail on international transactions. I see no alternative to PayPal for these customers.
  • adrinavarro 14y ago
    There are debit cards out there! In fact, everyone I know has at least one debit card (either MasterCard or VISA), aside from the number of people who have an AMEX/VISA (credit type). And debit cards work everywhere. I've used my VISA Electron (debit) pretty much everywhere in the developed world, both online and travelling abroad.
    • raverbashing 14y ago
      Yes, because there are no security issues in giving out a debt card number that is directly linked to your bank account.
      • onli 14y ago
        As you can always get the money back with a simple order, it is a very minor issue.
        • jellicle 14y ago
          Huh? Debit transactions are not easy to reverse, at all, and in the U.S. at least are covered by much less generous consumer protection laws than are credit card transactions.
          • onli 14y ago
• reitzensteinm 14y ago
  The customer service angle sucks, no question, and I'm worried about getting into similar trouble (I sell downloadable games via PayPal). But I actually think holding an issues worth of revenue in reserve is a decent enough compromise. If the company goes bankrupt before an issue ships, for whatever reason, PayPal themselves are going to be on the hook for refunding every single payment, as well as chargeback fees that may apply. PayPal's fees are around 5% - what's their gross profit on each transaction, 1-2% at most? So if there's a 2% chance of an issue going awry and angry people starting chargebacks, a magazine 50 issues old could turn into a net loss for PayPal overnight, which is why even merchants with long and clean track records get stung by this. PayPal's freeze on that money means their end is covered, and you can still bring the sales to a bank and get a line of credit to cover the printing costs. The way PayPal handles the customer service end rightfully earns their horrible reputation. But too many people act like the risk itself is not there, or that there's a clear, obvious line between fraudulent businesses that con artists start and solid trustworthy businesses that we start. If PayPal wasn't as aggressive with their fraud prevention, they'd be skinned alive. And, as other people are pointing out in this thread, standard merchant accounts are not immune from the same level of shoot first, ask questions later fraud prevention.
  • scottshea 14y ago
    > PayPal's freeze on that money means their end is covered, and you can still bring the sales to a bank and get a line of credit to cover the printing costs So your suggested way around this is to incur credit charges & pay for the credit risk baked into the interest rate all so that Paypal is covered?
    • reitzensteinm 14y ago
      Frankly, yes. The merchant is, if I understand the post correctly, taking orders, using the money to print a run, then shipping them. The risk is caused by the merchant's business model. It may not be high, but it certainly exists. Either the merchant, PayPal or consumers themselves must pay for it. Who would you pick?
• Greynum 14y ago
  This is why Bitcoins was created.
  • Karunamon 14y ago
    No it isn't. Bitcoin's killer feature is anonymity. It has no underwriting, no risk prevention, and worst of all, no ubiquity. Once you pay someone with BTC, your money is gone. It's that simple. Unless you involve a third party of some kind, and then it's PayPal all over again... though I assume it's a great deal easier to become a BTC middleman than a middleman of any established currency, due to lack of idiotic government red tape to jump through.
    • ihsw 14y ago
      Actually Bitcoin's killer features indeed includes removing banks/other intermediaries from the transaction process, in addition to making state-sponsored inflation impossible. Bankers hate BTC because it removes them from inter-mediating people and their money, statists hate BTC because it nullifies their socialist dreams of gathering funds at will (printing money). Anonymity is just a nice bonus.
    • Karunamon 14y ago
      state-sponsored inflation ..which is just replaced with built-in inflation. At least the rate is predictable and static.
      • mrb 14y ago
        No. Bitcoin is deflationary, not inflationary. (The value of a coin increases much faster than the coin supply. About half of the 21M coins have already been generated.)
        • Karunamon 14y ago
          Err, deflation, right. Not sure why I conflated the two there.
    • 14y ago
• happywolf 14y ago
  One of the reasons why PayPal so paranoid is to prevent money laundering. In fact this could be _the_ factor because any mis-step would land PP itself in big trouble and could be fined a lot of money. My guess is PP would rather err on the side of its own safety. Another cause that it will freeze an account is when it suspects the account is used for illegal activities (e.g. selling fake goods). Please note I am in no way implying the OP is involved in any of these. I am just making some guess on why PP may shut down/freeze accounts.
  • Daniel_Newby 14y ago
    I doubt it. Money launderers never do chargebacks and never make complaints. They are _the_ ideal banking customer, which is why the tax man hates on them.
    • dennisgorelik 14y ago
      Money launderers launder money from stolen credit cards. Chargebacks are filed a month or two later by owners of these stolen credit cards.
      • Daniel_Newby 14y ago
        You are describing fraud. Money laundering is the redirection of the proceeds of illegal business to make it look like legitimate income.
        • dennisgorelik 14y ago
          Fraud IS illegal business. Purchasing goods using stolen credit cards is part of a process of making it look like legitimate income.
  • speleding 14y ago
    Money launderers typically like to avoid leaving a trial and I would think PayPal keeps a very accurate trial of where its money flows. And since they are regulated as a bank (at least in the EU) I suspect PayPal will simply need to hand over that information to the authorities when asked.
• 54mf 14y ago
  "Yeah, but, merchant services are hard!" Bullshit. If you're going to process payments, you have to solve hard problems like fraud prevention, and PayPal is doing a dreadful job solving them. Freezing accounts isn't the problem; the problem is that PayPal is a giant black pit offering no way to resolve any issues. This is customer-hostile behavior. Shoot first, ask no questions later.
• Lasher 14y ago
  Lots of comments here are focusing on the mechanics of credit card processing and why Paypal might have to hold funds, but to me the entire article was really about the customer service angle and how Paypal handle this. They freeze accounts and make it next to impossible to get valid feedback on why. He might have argued the point, but in this particular example a simple explanation of "We are concerned about liability if you cancel an issue before the physical version is delivered. The hold on funds helps protect us in that event". The Paypal model fits small transactions and small volume. As soon as you are big enough to feel like you deserve / expect such an explanation it is probably just time to move on.
• robomartin 14y ago
  I fully understand Paypal's need to protect itself from scammers. I get it. The loss potential is huge. I think the problem here is that they really don't have any kind of a real relationship with their customers. As an honest business person --not a scammer-- when this kind of thing happens to you it is horribly disruptive and demoralizing. As honest people we should be spending time on our business rather than trying to get our money out of a company that has totalitarian control over it. It could, and has, sink a business. That said, I feel the OP may have triggered the freeze by clearing the account of nearly all funds a couple of days after the phone interview. If I were looking at that data I would see it as a potential red flag. It would almost be irresponsible not to interpret it that way. I've had sales in excess of $20K (meaning, the invoice for that particular purchase was $20K) come into one of our Paypal accounts and have never had any issues. Then again, the money tends to stay in the account for months. I don't think they've ever seen us clear large amounts of money out of the account immediately after a large sale. That, I am sure, builds trust, even at the algorithmic level.
  • nmcfarl 14y ago
    My company empties our PayPal account 2x a month, at which point it's well into 5 digits, and we've been doing this for ~5 years. If emptying accounts is a red flag, it's never hit us.
    • robomartin 14y ago
      > My company empties our PayPal account 2x a month, at which point it's well into 5 digits, and we've been doing this for ~5 years. Right, but you've been doing that with regularity. It's all about patterns. In addition to that, you are not doing this a day or two after having a probing conversation with a Paypal representative who obviously called with concerns about your account. Huge difference. I can take almost any amount I want out of our Paypal accounts and it has never triggered so much as a warning email. Our track record (~10 years) is pretty solid.
  • iProject 14y ago
    >the OP may have triggered the freeze by clearing the account of nearly all funds a couple of days after the phone interview. It would be very helpful for someone to post (from experience and/or inside knowledge) a "How work with PayPal and avoid problems" FAQ
• noirman 14y ago
  In Asia, you have no alternative (at all). You either use PayPal (which suck), or 2CheckOut (suck less).
• brutuscat 14y ago
  Last night I was thinking, how many of you/us would take a PayPal insurance policy that cover cases like this?
• jusben1369 14y ago
  PayPal charges substantially less than a traditional merchant account and payment gateway. Particularly in the UK. It would be interesting if the OP touched upon that. They're also easier and faster to set up than a merchant account/payment gateway. In return for being cheaper and faster there are trade offs. As stated in the article, this person's business model is a "high risk" one in general and to PayPal in particular. This is a great example of where a merchant account with a bank really is the better option. They need to met you, understand your business and why it works the way it does. Once done, you're less likely to have ongoing issues. So, you can keep your "higher risk" business model and change from PayPal or you can change your business model to better fit with PayPal. I don't think you can have both. PayPal is a family sedan. This guy is lamenting that his vehicle doesn't perform the way he wants it to at high speed on twisty mountain roads. Seems like an unfair car review in that sense. As others noted - it would look very strange to PayPal if you basically pull all your funds two days after that call. Who knows what else he inadvertently did to raise suspicion.
• milesskorpen 14y ago
  In Europe, PayPal actually is incorporated as a bank, so all normal rules apply. Merchant accounts for digital goods are subject to a lot of risk! Stripe et. al. are the credit unions of the card processing world -- they can offer more personalized service. But they also can't really scale and meet all demand, or handle the very largest accounts, without putting many PayPal-esque structures in place.
• hezekiah 14y ago
  Good riddance, hacker news. This site sucks.
• superjesuspants 14y ago
  I had PayPal freeze my merchant account while I was registering it. I didn't even get to sell anything, because their broken, confusing interface made me fill out something wrong, and when I tried to correct it they froze the account. I believe every word of this article. I've been hearing a lot about Stripe lately, but haven't used it yet.
• redm 14y ago
  "PayPal have all the power of a bank and yet none of the responsibility." That is precisely the problem, PayPal is on the hook for any credit card charges for 6 months so they are much more willing to protect themselves then to try to understand a specific situation. They are a black box when it comes to these types of issues, you feed lots of information in but you get almost nothing in return. Banks usually transfer funds nightly and they don’t hold subscriber information hostage. It would be one thing if PayPal was amazing to use but they are just one technical or customer service blunder after another.
  • milesskorpen 14y ago
    No, its not. PayPal is a bank in the European Union.
    • redm 14y ago
      From a purely end user perspective, PayPal does not operate like any of the Merchant services I've worked with. I'm sure its partially related to the additional liability PayPal takes on for processing a CreditCard that they do not issue but, in the end, the way they operate is not pleasant in any sense.
• qeorge 14y ago
  Anecdotal, but maybe helpful: we had a customer purchase software from us almost a year ago, who paid via PayPal but using their Visa. They've now initiated a chargeback. When that occurs, Visa takes the money from PayPal, who takes it from us, immediately - Visa presumes their customer is "innocent" if you will. It makes no sense, but if you don't like it your option is to not accept Visa. They own the customer so they make the rules. It doesn't matter if its PayPal, Stripe, or any other merchant - if your buyer initiates a chargeback, you'll lose the money until its resolved (~6 months, usually). As such, PayPal/Stripe/any other merchant account will hold your money for a period of time, until they are comfortable that either: 1) its been long enough that a chargeback is unlikely 2) they'll be able to get the money back from you if a chargeback occurs later. FWIW, all the credit card companies behave this way, and allow their customers to initiate chargebacks for variable lengths of time (sometimes depending on the card type - richer clients can chargeback later.) My understanding is that AMEX has no time limit on chargebacks. Also relevant to this specific case: its against the TOS of Visa/MC/AMEX/etc to charge the buyer before shipment. You're supposed to authorize at time of purchase and capture only when you actually ship the goods. The OP seems to blatantly violate this, and I suspect they'll have to change the practice regardless of their choice of merchant account. None of this excuses PayPal's lack of customer support. But Stripe et. all may not be the panacea you're hoping for. Credit cards are where these crazy policies originate, and unless you're prepared to stop accepting them, you'll have to play ball.
  • alttag 14y ago
    > its against the TOS of Visa/MC/AMEX/etc to charge the buyer before shipment There are some FTC rules about this too, IIRC, that a product must ship within a certain period following payment. I once worked with a company where this was an issue: they had to provide a great deal of data to the FTC to plead their case.
    • icelancer 14y ago
      Generally 7 days, though it depends on the card issuer.
  • petercooper 14y ago
• simonswords82 14y ago
  PayPal do themselves no favours by not coming forward with explanations similar to those that see in this thread. Their deafening silence plus the bullshit automated responses are what appear to be driving customers away in droves. I certainly wouldn't set up any of my businesses to rely on PayPal to take payments, and I expect many others feel the same way.
• Shenglong 14y ago
  From my experience and that of others who’ve suffered the same, it’s clear that PayPal are interested in buyers, not sellers. Why else would they provide customers with refunds at the drop of a hat, but withhold money amounting to thousands — literally thousands and thousands and thousands — from buyers without any valid reason, when not even your bank is legally allowed do that? The best part about them giving buyers refunds is that if you, as a seller, want to dispute their chargeback, you have to pay Paypal an administrative fee ^_^
• mratzloff 14y ago
  I don't think this guy realizes the extent of how correct he is. PayPal is not a bank. They are basically a giant merchant account. Wells Fargo backs them, even while they compete with them (clearXchange.com). So PayPal doesn't have to operate by the same rules. When you use PayPal, you are putting money into PayPal's bank account and hoping they act in your best interests. A reasonable person (I feel) would conclude PayPal is a de facto merchant acquiring bank, especially given the volume, and therefore should be required to operate under those laws. Of course, PayPal knows the real money is in becoming a card scheme, so it's only a matter of time before we see that (not co-branded with MasterCard). At least they'd have to operate under existing card scheme laws, but I sure as heck wouldn't use one.
  • onli 14y ago
    That is not true in the UK, where the OP is operating in. Paypal is a bank here and subject to regulations.
    • mratzloff 14y ago
      Ah, I missed that he was in the UK. Thanks for pointing it out.
    • Silhouette 14y ago
      Whose regulations, though? They're not a UK bank, and it doesn't seem clear that UK courts have any practical ability to help if a UK merchant has a dispute with PayPal and feels they need to resort to legal action.
• ryguytilidie 14y ago
  Had a similar experience with Paypal about a year ago. I reported them to the Better Business Bureau for unethical business practices and Paypals response was basically "well its not illegal so we're going to keep doing it". Great, and I will keep not using your site, and I will keep filing complaints through every forum possible until we eventually end up on a new site and the circle of life of useful startup--->gets an ego and stops caring about customers--->replaced by new useful startup continues. EDIT: The best part was they accused me of three things: 1) Being a newer member (I opened my account in 2000 so I'm not sure I agree.) 2) Not having enough account history. (In the 12 years I've been a member I tend to make 1-2 transactions per month). 3) The transaction being "abnormally large". (I get paid rent and pay rent through the account for thousands of dollars at a time, the transaction in question was for $400 dollars) basically paypal can diagf.
• davidmarcus 14y ago
  Hey, everyone — I'm David Marcus, and I've been running PayPal for the past 5 months. Hard for me not to comment on this thread. PayPal brought a lot of goodness to millions of merchants, and hundreds of millions of users around the world. But yes... as the company grew exponentially we were met with growing pains. And developers, merchants, and consumers sometimes had to pay the price for it. I still want to stress that when you manage money at such a scale, you always attract bad people with wrong intentions. Our intention has always been to protect our customers. Not to mess around with our merchants. I want to share two things with all of you: #1 — there's a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it. #2 — you have my commitment to make this company GREAT again. We're reinventing how we work, our products, our platforms, our APIs, and our policies. This WILL change, and we won't rest until you all see it. The first installments are due very soon. So stay tuned...
  • TomGullen 14y ago
    I have to say I do like the new business phone number which every time seems to connect me to a friendly and helpful person each time. That's where the positives end for me however. For Paypal, I fear it's too little too late. You've done too much damage to yourselves. I get the reasons why you do things, but the communication over the last years has been atrocious. We're in the UK and are just waiting for Stripe to come over. I think a lot of other businesses are thinking along the same lines as well. Your fee structure is pretty expensive as well. There's also a lot of hidden costs: - We're on an upper tier so should have a reduced commission rate. However, after scratching my head for ages as to why a majority of our sales are not at the lowered rate I finally find the link about cross border fees or whatever reason you use to charge us more. As an example, some of our $119 USD sales have $4.35 fees which is ~3.7%. Our current rate it says on our account should be 1.9%. Your fees structure is not as clear as it should be. - Have you tried issuing a refund in a different currency? You have to draw money from your bank (even if there are available funds), which is converted to the correct currency which because your spreads as so expensive means sometimes refunds cost us money. I phoned up about this and they told me to open different currency balances which I did and which fixed the issue, but again, bad communication and a broken process - Related to the previous point, your spreads on foreign conversions are high. I think they've improved a bit over the last couple of years but I still consider them an expensive hidden cost. I contacted Stripe asking what spreads they offer, and they told me they would consider it a hidden cost and they offer customers the same spreads the banks give them. Also, your website is mind bogglingly slow. See this support ticket I opened: https://www.paypal-community.com/t5/Access-and-security/Why-is-the-Paypal-website-so-slow/td-p/415889?profile.language=en-gb https://www.paypal-community.com/t5/Access-and-security/Why-... The support person didn't do anything about it. I didn't expect them to though, as Paypal is an impenetrable behemoth that doesn't seem to care about these sorts of things. Your website being as slow as it is, mind numbingly slow, is honestly enough reason alone for me to move service. Trying to find transactions just is a huge waste of my time waiting for each page to load. Try using your sandbox with pages that load that slow. > there's a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it. So can you make your website faster for a start?
• code_duck 14y ago
  Unfortunately, PayPal has reached the point in the market where it is truly useful. A merchant account solves one angle of the problem of finding a replacement for me - the other side is paying people, and I've been finding more and more lately that almost everyone I encounter or hang out with has a Paypal account - if I wanted to pay by CC, it's difficult - even most of my small business friends can't do this conveniently - but when I offer to settle up with someone by Paypal, they almost always have an account and it takes only a minute. Square would solve the problem for many, but... would the average person carry around a hardware device so their friends can give them money by cell phone? Probably not.
• foxylad 14y ago
  One of the comments in the article mentions gocardless.com for UK payments. This seems suspiciously good - an end run around credit card companies and much lower fees. Has anyone used it? Is there a catch? How do customers react?
  • Silhouette 14y ago
    We're looking into it at the moment. They seem like decent people. Their integration set-up isn't bad. As far as we can tell, there is only one catch, but it's a big one: you can only take payments from bank accounts within the reach of their direct debit system. That means UK-only today, and they've announced their intent to expand across Europe in "mid-2012" [1], but it's not clear when they might go any further. [1] https://gocardless.com/faq https://gocardless.com/faq
  • georgespencer 14y ago
    We introduced GC as a route for customers because PayPal is slow and onerous for us to deal with. Some customers need persuading but mainly they really love it. We also work from the same office as GC and they're good guys. Always on the phone with customers, helping out and listening to feedback.
• EGreg 14y ago
  http://reviews.ebay.com/Paypal-Loophole-SELLERS-BEWARE?ugid=10000000000071688 http://reviews.ebay.com/Paypal-Loophole-SELLERS-BEWARE?ugid=...
• jcjc 14y ago
  Just my yow cents...I received 3+k in my PayPal acct around 3mon ago. I was shocked next day that my acct was freezed and when I called PayPal I was told to provide PROOF OF DELIVERY to have mt acct unlimited...ok, so I did...the misery just started...a week later my acct was still frozen and I decided to call again...another chick with a distant,lazy voice stressed I would need PROOF OF RECEPT to unlimit my acct...you know how long it takes for a sea freight from china to the states I escalated to a inexperienced supervisor...to no avail of course...so I have to wait another month for the shipment to arrive, and then I called again in urgency...guess what? No luck, I went thru a few more chicks only to realize they never wanted to be honest with me to unlimit my acct because THEY WANT THE MONEY FOR FREE FINANCING! My acct was still frozen 45days after receiving the payment...I had enough...I refunded the money and closed my acct last month...I ask all my friends, partners,and biz associates to stop using PayPal...this is what I tell you PayPal you do not suck, that doesn't apply to you,you are sleazy cheap
• kristianp 14y ago
  Great article, but does anyone else have the irritation of the links looking like the words have been crossed-out with green line through the middle?
• tit4tat 14y ago
  I agree whole-heartedly. I have a personal and business account. I stopped usin PayPal when it froze my account after they made a refund to to an eBay customer who stole my merchandise but demanded a refund after claiming to have not received the item. I produced the receipt signature from the USPS but was simply told that it was not good enough. I told their customer service rep that I would never use them again and that I look forward to PayPal suing me so I could have my day in court. they never sued me, but they also never unfroze my account. Totally unprofessional! -G. King
• emilysviolins 14y ago
  I hate PayPal with a vengance. I used PayPal with my small online music business a few years ago. But when there was one dispute by one customer, they froze my account, not just for that one transaction with that one customer, but for all transactions with all customers. And they refused to answer my calls or help me resolve the problem. They sided with the customer, even though she was wrong (it was about a disputed shipping charge), and I ended up not only losing the sale, the cost of shipping and insurance, but subsequent sales and deals with other customers. My rating on Ebay went from 98 to 65 over night with angry posts from other customers. It was a horrible scene. I ended up refunding everyone that had their money frozen, even though PayPal never refunded me! I switched eventually to Google Wallet and have been happy ever since.
• joe_littlebiz 14y ago
  OMG! I thought I was one of the Only ones this happened to!!! I had nearly $40k (ALL of my upstart company's capital) held for 180 days, and I almost went out of business. My products unexpectedly sold better than we had planned for, and we received a few chargebacks, that we had asked Paypal how we should handle before they occurred. The chargebacks were a very small amount, but they held the ENTIRE BALANCE. I couldnt pay for any of the inventory, which led to a chain reaction of chargebacks. What made it even worse - THEY NEVER REFUNDED the customers on time and did not allow us, the merchant, to process the refunds --- IT WAS THE ULTIMATE BUSINESS NIGHTMARE!!! We started out as victims of our own sucess. Instead of helping us, we almost became victims of Paypal!
• bugmenot 14y ago
  Just close your accounts now. Paypal and it's parent company ebay are notorious liars! They are also well known for abusing their members with ridiculous requests for info which cannot possibly be provided, and doing whatever they can to snatch and grab the money. One other thing, they have a crew of hideous paid shills who's job it is to harass anyone speaking out against them. These shills know no boundaries when it comes to what they may try to do. Paypal has a horrible reputation! If they ever do change, you can open your account back up then.
• Safarijack 14y ago
  I wrote about my experience with Paypal a while back. http://mydl.itweb.co.za/index.php?option=com_easyblog&view=entry&id=1061333&Itemid=350 http://mydl.itweb.co.za/index.php?option=com_easyblog&vi... What a truly horrible and useless company. I've informed every online merchant not to use them since and make sure all my friends know.
• thomasyuen 14y ago
  David, I used Paypal in the past. but last year, I said goodbye with PAYPAL. Paypal still hold my money about $20000 dollar and never released to me more than 365days. it is legal for PAYPAL, when not even your bank is legally allowed do that?
• thomasyuen 14y ago
  we have the same problems on amazon.com Amazon have all the power of a bank and yet none of the responsibility. AMAZON, you are the scourge of the internet. Please see : http://joeyuen.posterous.com/good-riddance-amazon http://joeyuen.posterous.com/good-riddance-amazon
• eBam 14y ago
  Lately its been all about PayPal horror stories... Many merchants are just simply turning to the ACH Platform.
• rockynate 14y ago
  My business also suffered many of the same indignities, concluding with the freezing of my account and a 6 month hold on thousands of dollars. Our paypal account had an 8-year track record of perfect customer service - all issues handled immediately. We sell website construction software and marketing training services. We were taking in 28% of our income via paypal, with the rest through a standard merchant account. Losing this much of our business, along with having the funds held, was enough to collapse everything. The company is now in the process of being sold. I'm not saying it's all paypal's fault - we obviously should have had contingencies in place for such a circumstance - but they obviously had a huge part in the failure. I'm no longer angry about it; I'm just really sad. We posed no risk to paypal (years ago they placed a $5,000 reserve on our account which I was happy to comply with) and they couldn't give any reason for why they were doing this to us. 8 years of successful business is an eternity on the Internet. That track record seemed inconsequential to them. Causing this level of pain and heartbreak "because our TOS says we can" seems nothing short of... evil.