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The Almighty Buck

The PayPal Phenomenon 184

An Anonymous Coward writes: "Pretty interesting and thorough history of PayPal." Not really the usual fare on Slashdot, but this is a very readable account of one of the few dot-com successes. I find PayPal pretty annoying today - a lot of the anti-fraud, privacy-invasive measures which this article applauds make Paypal much less enticing to me than it used to be. And they've been accused of squatting on people's funds at the slightest excuse. But maybe that's the way to success: start off with a very appealing product, then slowly tighten the screws.
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The PayPal Phenomenon

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  • by Zach` ( 71927 ) on Saturday November 10, 2001 @08:32AM (#2548207)
    It seems to me that the problem with previous micropayment schemes was not the scheme itself, but that there was never a situation in which the convenience of using the system outweighed the risks associated with trusting an outside party with your money and transactions.

    eBay provided the fluid marketplace that created the situation where that convenience overrode the inherent mistrust of a newcomer like PayPal.

    eBay brought the idea of the auction as a sales model to the forefront of the net, they also pioneered community based trust mechanisms that let their model survive even though they don't back transactions directly (something that would have quickly invalidated their business model).

    What was supposed to be a concept that allowed high-brow concepts like online media micropayments seems to have come about largely because of the requirements of some people to sell $5 pens and beany babies.

    Probably important not to forget that no matter how large the venture capital some firm gets to change the internet, most likely it won't succeed unless we decide it will.
    • Agreed. However, you'd never hear that from eBay. They seem to like to hawk their own service, Billpoint, which I've never used, but looks similar to PayPal.
    • PayPal had a great marketing scheme to start -- they paid you something like $5 to sign up. I believe they also gave a referrer bonus of a dollar or two.

      Thus eBay sellers started hawking PayPal in their auction pages. Compared to CyberCash* who tried dotcom-style advertising blitzes, it was a genius marketing plan.

      * I don't know if I got the name right here, but there was some Internet money place that bought cheezy softporn-looking ads on half the city buses in San Francisco.
    • OK, first of all, control your use of buzzwords. A payment doesn't become a micropayment just because it's sent electronically. Neither Paypal nor eBay do much business below the US$10 mark, and most of their transactions are much higher. Also each transfer must be specifically authorized and accepted.

      Micropayments are much smaller than that. The oldest micropayment project I know of, Millicent [millicent.com] originally hoped to process payments as small as one-thousandth of a cent (hence the name), though now they talk in terms of tenth-cent to $10 payments. And obviously such small payments would not be individually authorized! A typical merchant would be a web site seeking an alternative to ads (the money's not there) and subscriptions (not enough people willing to pay in advance).

      And your description of EBay's role in PayPal's success ignores the facts. EBay has its own transaction system, remember, and do all they can to encourage buyers and sellers to use it. It says something about the strength of PayPal's service that they can steal customers from a competitor with such a built-in advantage.

  • I dunno... (Score:4, Interesting)

    by trilucid ( 515316 ) <pparadis@havensystems.net> on Saturday November 10, 2001 @08:33AM (#2548208) Homepage Journal

    I've never really had anything but a good experience with PayPal (and I've used it *heavily* for two years now). Maybe it's just my good fortune.

    Well, okay, I do have one small gripe. Apparently, their site cannot be convinced that a certain customer of ours is browsing from the U.K., and as a result he's having to send us a check (brits read: cheque ;) ) in lieu of PayPal funds transfers.

    Hopefully their money market fund will see a bit of a recovery soon (1.9% == blegh), but hey, there's a whole slew of investment vehicles that aren't doing so well at the moment. Such is the state of the economy.

    As for "overly tight fraud prevention measures", I'd like to hear from people who've simultaneously run a company basing his/her online transactions on "true" merchant account methods. Most e-based merchant account providers/processors don't place nearly the emphasis on security that PayPal does, and chargebacks are a real bitch (not to mention quite bad for P.R. if the customer who got ripped off is particularly angry about it).

    Just my brief experience in these matters. Replies are very welcome!

    • Re:I dunno... (Score:5, Informative)

      by ThatComputerGuy ( 123712 ) <amrit@@@transamrit...net> on Saturday November 10, 2001 @11:18AM (#2548498) Homepage
      It's nice to hear you had a good experience with PayPal. I've only rarely used it, but I was recently pointed to Paypal Warning [paypalwarning.com].

      The page lists all sorts of articles with negative comments about Paypal. Apparently it has gotten a 3 out of 7 on Reseller Ratings [resellerratings.com] (where everything is scored by customers). They also have a Paypal Wall of Shame with "unedited horror stories".

      The thing that grabbed my attention the most, however, was the following on the front page:

      WARNING:

      Your Paypal account can be frozen at any time, without advance notice leaving you without your money for weeks (if not forever), and there isn't much you can do about it.

      Any thoughts, folks?
      • Re:I dunno... (Score:4, Insightful)

        by trilucid ( 515316 ) <pparadis@havensystems.net> on Saturday November 10, 2001 @12:14PM (#2548614) Homepage Journal

        Thank you for the reply! I definitely see where you're coming from on this topic, and think that all cases of abuse at the hands of a financial institution (or pseudo-institution, as the case may sometimes be) deserves close scrutiny.

        However, the situation is always more complex than that. For example, a couple of quick minutes on Google yielded the following unto mine Konqueror:


        Basically, pick any financial institution or payment processing company "X" and search for a hate site associated with it. You're almost certain to "win" each time. Now, I'm not saying that these companies are blameless by any stretch of the imagination. Case in point, I actually got messed over by Bank of America while I was working on the development team that wrote their telephone banking system software. Needless to say, I got the errors corrected rather quickly.

        The problem is simple: any company doing business of any sort will come up against opposition, disgruntled customers, angry stockholders, etc. It's oftentimes difficult to weed out the "fact from fiction" in a lot of cases involving complex issues. I don't think there's a major national bank in existence that hasn't dealt with a major class-action lawsuit over policy issues.

        That's where the trick comes in. These days, almost all institutions, from banks to brokerage houses, have strict and specific verbiage allowing them to "hang on to your cash" in the case of a perceived conflict. PayPal isn't even close to the worst I've seen of that sort of practice.

        I suppose it really does come down to individual experience (and group communication of experience, very valuable). As for the sites that report on the misdeeds of these organizations, I say rock on. But, we've got to balance everything out. Frankly, PayPal has taken a heck of a lot less heat than is typical of a "newcomer" in the field, especially given the unsteady ground they started out to build their revenue stream on initially.

        I attribute their success to good management. That doesn't mean they'll always have the benefit of intelligent people at the top, but as long as that's reasonably enough the case, I'm okay with them.

        On the other hand, if they burned me badly I'd probably be first in line to register "GodIHateThoseScrewyBastards.com" too. It's just human nature to attempt to right wrongs, and I could even be in the wrong in that case without knowing it... almost makes my brain hurt trying to wrap the grey matter around that part.

        Thank you again for the thoughtful reply!

        • are federally run and regulated so you have a legal recourse. The only recourse you have with PayPal is take them to civil court.
          • Since when are banks federally run???

            And I don't have much confidence in the government keeping banks fair for consumers. If you make a mistake with your account, you pay penalty fees. If the bank makes a mistake with your account, you spend hours arguing to get it corrected, and you don't get a penalty fee. The regulations are tilted heavily in favor of banks. Maybe it has something to do with the amount of money banks spend on election campaigns, or politicians' hopes of cushy positions after they get tired of running for office.
            • Black Tuesday. They are regularly audited by the OCC, and must meet FDIC reg's to retain their charter. While I can't dispute your take on the rules slant at least there is a body over seeing them. If PayPal leaves you hanging where do you go ?
      • Re:I dunno... (Score:2, Interesting)

        by Chetmurray ( 216997 )
        3 years ago we had a fraud case with our merchant account used to process credit cards. Some seemingly Russian individual using our merchant information first fraudulently sent two $1500 charges to our accounts on stolen credit cards. Once they knew there was $3000 in the account, they withdrew the money as refunds onto two other credit cards located in Russia that we had never charged.

        Since in the credit card world (maybe it is different now) you don't see your statement until almost 45 days after some transactions, we had no idea this happened.

        I called the bank. They looked into it and refunded the two charges from the stolen credit cards (so there goes $3000 out of my account) froze my account until further notice. And said it was all fixed. My contact at the bank could not understand why I was upset.

        But what about the $3000 we refunded? I talked to their security guy, he said their system was secure and a red flag went off in the system when the fraud happened. When he traced it back, he reported the agent that found the fraud was Chet... my name. Yes! I am their security. That money was gone.

        Our account was frozen for over 2 months. We lost both the refunds and magically, though they could give those people their refund, they could not refund us our stolen money.

        This from a major bank, the Huntington. Paypals warning is only they act like every other bank when it comes to processing charges. The customer is right, the merchant is wrong. The merchant be damned.

        I think the paypal outcry is only louder because many of these people have tiny little business, that had never experienced this lovely situation before. Ask a merchant about credit processing and watch the veins in their forehead grow.

        Chet
  • I can vaguely recall that there was a program running on the Palm OS, where you could beam money accross.

    I was looking on the PayPal website, but could not find anything.

    Anybody any ideas ?
  • How they succeed... (Score:5, Interesting)

    by Zach` ( 71927 ) on Saturday November 10, 2001 @08:35AM (#2548212)
    Not surprisingly, a lot of Slashdoters doubt PayPal...which is understandable, since it's so difficult to believe that any pure-play dot com can survive these days.
    However, I've had the pleasure of working closely with many of PayPal's senior management over the past two years, back since they merged with X.com. I can tell you three very important things:

    1. The P2P space is actually a loss leader. Most of their profit is made in the B2B and B2C space - not pure P2P as most people believe. They do very well in these spaces and recent analysts predict that their revenue was between $80 and $100mil last year. That's a heck of a lot better than most of the not-coms we've seen over the past several years.

    2. They have an incredibly intelligent, dedicated and savvy staff that understands their market and industry.

    3. They have a business model that works.

    In my opinion, these three items equal success.

    I love their service and I enjoy working with the company. If I didn't enjoy my current job so much, I'd probably apply for a job with them.
  • by seldolivaw ( 179178 ) <.me. .at. .seldo.com.> on Saturday November 10, 2001 @08:38AM (#2548217) Homepage
    But maybe that's the way to success: start off with a very appealing product, then slowly tighten the screws

    Wow, have you thought about writing an e-commerce strategy book? No-one's ever come to that conclusion before. Incidentally, how much are those /. subscriptions going to cost?

    • I just have to give you serious props here. That reply was excellent! I wish I could say I thought of it.

      Sadly, your comment is rated as funny, and it is funny sadly because it is true. Great job!
  • by Chas ( 5144 ) on Saturday November 10, 2001 @08:39AM (#2548218) Homepage Journal

    Here's a nice outline of why PayPal's implementation is NOT very conducive to regular transactions.

    http://www.gamers-union.com/paypal.html [gamers-union.com]

    I personally have had many transactions thru PAYPAL as both a buyer & seller.

    I have had 1 bad transaction.

    The situation was resolved to their satisfaction but not to mine. I still accept PAYPAL payments but I would not recommend it.

    On March 22 I sent a person in Canada $190 payment for battletech items. This is someone I had dealt with a few times previously & had no problems with. Payment was never sent via PAYPAL before tho.

    Well he received the payment & tried to withdraw it from his paypal account. He was charged a $20 currency transfer fee (by PAYPAL). & the money never made it to his canadian bank account & was bounced back to his PAYPAL account 7 days later less the transfer fee. $170 remain.

    Paypal was contacted & all the necessary info was verified. He then tried to withdraw the money again to his bank account. He was again charged a $20 currency transfer fee & again it bounced back to his PAYPAL account less the $20.

    $150 remained So now quite upset he contacted PAYPAL a 3rd time. All the information necessary to withdraw the money was verified with PAYPAL a 3rd time. He then tried to withdraw the money again to his bank account. He was again charged a $20 currency transfer fee & again it bounced back to his PAYPAL account less the $20. $130 remained.

    After the 2nd attempt I was also contacting PAYPAL to find out what was going on. The standard reply via email was given. Or the "he needs to contact us to straighten this out" via phone. We were both trying to get the situation resolved via phone & emails. It was our conclusion that nothing had changed since day 1.

    He still was unable to get the money out of PAYPAL. We also found out he was unable to do anything else with the funds. He could not transfer them or return them to me. He was not about to try & withdraw them again. So after more than 1 months time I filed a claim to try & recover the funds. Which again took more than a month. In short on May 30th I received the email below.

    Subject: Resolution of Buyer Complaint Case #53104 (KMM10989963C0KM)
    Date: Wed, 30 May 2001 14:24:04 -0700
    From: "complaint-response@paypal.com"
    To: Ed Karl

    Dear PayPal User, PayPal has concluded the investigation of your Buyer Complaint. As our policy states, we conducted this investigation on a best effort basis and made no guarantee of funds recovery.

    Case ID: 53104
    Transaction Amount: $190.00
    Transaction Date: 03/22/01
    Seller's Email: achillies_10_2001@yahoo.ca

    Our investigation has revealed that the seller is at fault. We are pleased to inform you that we were able to recover funds from the sellers account. Your account has been credited $128.35. Please allow up to 5 days to see the adjustment on your account. This amount is the maximum we were able to recover. We value your business and regret that you have had this experience. To avoid similar experiences in the future, we recommend that you read our Security Tips on our website located at:

    http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/f ra ud-prevention-outside

    Sincerely, Craig
    Complaint Resolution Department

    So out of $190 sent I received $128.15 back. The problem? The person I sent it to did not get the other $61.85. PAYPAL has it & is refusing to part with it.

    Basically they are telling me someone who could not do anything with the money is resposible for the remaining amount. The only funds not recovered are for Currency transfres Fees where the currency transfers never occurred.

    Why I can't get the rest of the funds back? Because the funds were not in the account of the person I sent them to. But they were withdrawn for services that were never performed. & not only that but PAYPAL was contacted to verify the necessary info on the 2nd & 3rd try. PAYPAL funds were sent to a PAYPAL account which means the funds are subject to PAYPAL restrictions.

    Read the first paragraph of the copied email.

    What should I have done differently?

    If I had sent the funds I sent to be withdrawn from a credit card (or check card) I would have had the recourse to have the CC co reverse the charge in full.

    Other info I have learned. NEVER LEAVE ANY MONEY IN YOUR PAYPAL ACCOUNT! Just 1 complaint locks up the account & you do not get to do anything until they decide you can. In the meantime any funds sent to your account will be returned with a notice that the account is frozen. This may take MONTHS!

    Why have I decided on PROPAY?

    http://www.propay.com

    PROPAY is a credit card processing company, not a money transfer company like PAYPAL. Only the seller needs to be a PROPAY member. PROPAY can be used to for face to face personal transactions. (garage sales, conventions, etc) PROPAY can be used with PALM & other forms of PDAs PROPAY will very shortly have a setup similar to PAYPAL's Web accept feature.

    In summary; PAYPAL has $61.85 for services that were not performed. PAYPAL refuses resposibility for the $61.85 PAYPAL acknowledges that he was not signed up properly to withdraw or do anything with the funds in his account but he was signed up enough for them to Charge him 3 times & deduct $20 each time. PAYPAL refuses to do anything further to recover the funds

    Other info. PAYPAL is unable to get a BBB seal of approval do to the amount of complaints against them.

    My story is minor compaired to some. Do a web search under "PAYPAL COMPLAINTS" You will be surprised at how much you find. I used http://www.dogpile.com for this search. (dogpile searches thru 40 search engines including all the big ones.)

    Also interesting to note, a few days after this page went up, PayPal yanked service on the W3 storefront they'd been providing for this individual.

    And now he will no longer accept PayPal transactions.

    Unfortunate, but very necessary to protect himself and his customers.

    • So are you going to file a small-claims suit against them, or just whine? I have no patience with people who say "ABC corp ripped me off to the tune of $X" but who then sit there and take it. People like that are the reason the behavior continues. Get a judgement against them. Get evidence of wrongdoing into the public record. Create a FACTUAL web page detailing your experience and see to it that a search for "PayPal" turns up your page.

      If you're unwilling to do this, I can only assume you're in the wrong.
      • Paypal doublebilled my CC, and it took me a TWO MONTHS for them to credit the right amount back to me. I ultimately did a whois on their domain, came up with some bizarre business name in CALIFORNIA, called and called that company and eventually I socially-engineered my way to a PayPal manager (damn, i'm good) and HOUNDED them till they sent my money back. I called at all hours of the day and let them know what I thought. I was pissed. Hey! I deal with Qwest and Verizon's frame groups all day (when a telecom vendor cries, an angel gets his wings....), so I can get a little direct.
        There was NO procedure to rectify the situation in a timely fashion-they blamed their software, of all things.
        I was double-billed over $500.
        I will ***NEVER*** use Paypals again.

        Vinylone.
        • Did it not occurr to you to call your credit card company and simply say 'Observe this transaction. Two of the same value. The second one is fraudulent (which it is)'. They would have reversed it immediately and left the onus on Paypal to prove they needed to charge you.
          • Other people have tried this.

            I suggest you _read_ their agreement. You cannot refuse a charge from Paypal, you agree to settle it on THEIR terms.

            People have reported in the past that PP just recharges their CC - as they are allowed to do per your contract.

            Addison
            • I suggest you _read_ their agreement. You cannot refuse a charge from Paypal, you agree to settle it on THEIR terms.

              Did you read the article? As it notes, they can't enforce that term due to their contracts with VISA/MC (and, probably, legal requirements). If they could, then any other merchant could do the same thing by printing such language on a charge slip.

              That said, there's nothing to prevent PP from coming after you for a legitimate charge that you've disputed. For that matter, there's no guarantee that a chargeback will be resolved in your favor--if PP can convice your card issuer that the charge is legitimate, it stays.

              • Exactly.
                Paypal is concerned about people, say, depositing money from credit card, paying an auction with it, then, because they feel they are getting scammed or something, cancelling the credit card charges (which they should NOT do, because, as far as the transaction with paypal goes, the charge was completely legit.)

                All PP would have to show is that you deposited the money (as opposed to, say, your account being stolen and the card being abused). Period. Because if you did, regardless of what happened after, the transaction was legitimate.\
        • If you're unwilling to do this, I can only assume you're in the wrong.
        Or maybe, just maybe, the cost to rectify the situation through legal channels just isn't worth it. By costs, I mean time invested (several hours at a minimum), financial costs and the frustration of dealing with the system. Couple that with the fact that you don't know if you're actually going to get your money back, let alone any compensation for having to fight the system and all the heart-ache, its little wonder that most people don't resort to doing the right thing. Just because you're morally right, doesn't mean the system is going to back you up.

        From your arguement, I can only assume that you have righted every wrong through all necessary channels, and that you are hiding behind your real name, which is Super Man, Buffy or Mr T.
        • Just because you're morally right, doesn't mean the system is going to back you up.

          Oh my goodness, how right you are! NOW I've learnt the error of my ways. I shall never again fight injustice, nor implore others to do the same. I shall sit in my little veal stockade, moving three inches forward and back and two inches side to side. I will thank the farmer for the alfalfa hay, and silently bow my head when they bring the humane killer.

          Not.

          Look, I'm fully aware of the FACT that sometimes when you go up against the big boys, you lose and get bruised. You need to be aware of the FACT that your actions and inactions have repercussions beyond your own life. So forcing someone to acknowledgte that they're wrong is a hassle. Deal with it. The more you do so now, the less you (and others) will have to do so in the future.
          • The point is sometimes it just doesn't seem worth it. It's like voting in a way - some people don't vote because they don't see any tangible benefit out of one vote in a sea of a million others. Similar here - you may get a judgement, but will they pay up? Maybe, maybe not. Will it be worth the cost? Maybe not. Why take that risk? To protect other people in future? Some people may choose to, some people may not. Which I think is fair enough.

      • file a small claims court case about an inter state commerce situation ? Good luck....
    • by mindstrm ( 20013 ) on Saturday November 10, 2001 @09:37AM (#2548305)
      Well.. does paypal have it? That's between you and paypal.

      I would say the person you sent the money to should be sending you the remainder of the cash, or delivering the items.
      The fact that he couldn't get his money out of paypal is between himself and paypal.

      Paypal is *very* clear that bank transfer fees will not be refunded if you do them wrong (because it costs paypal money if you do it wrong). This includes transfering to a bank that doesn't exist, or won't accept transfers, etc (I believe). It costs paypal money to attempt a wire transfer, and to sort it out later. There's a reason they charge money for this.

      Also.. why did this guy try again adn again? after it failed the first, time, he should have been on the phone to paypal to sort it out properly.

      This is not a failure on paypal's part. Paypal is not a credit card. Paypal is not there to 100% protect you. They are there to factilitate transfering money.

      Also... this guy needs to contact paypal to sort things you. It's HIS account that's having the troubles.
      • by Lumpy ( 12016 ) on Saturday November 10, 2001 @02:48PM (#2548979) Homepage
        on the phone to paypal? that phone number is a closely guarded secret and noone at paypay will give it out.

        you cant call them or email a live person. you only get their automated responses..

        Sorry, but any bank that ignores all it's customers is a scam, and Paypal is a scam, plain and simple... If they want to prove to me they aren't then have a live human respond to my email instead of the canned computer responses.

        I reccomend to everyone I know to avoid paypal like the pleague and expect to get money stolen from them by paypal with no way of ever getting it back.

        Paypal can fix that, Hire people to answer email and publish a phone number.hn
        • You can call them. I checked out their IPO data and just dialed their phonenumber to verify it worked. I am sure you could get an operator or just pick someone at random from the directory until someone listened to you.

          Paypal Inc

          1840 Embarcadero Road

          Palo Alto CA 94303 USA

          Phone: 650-251-1100 Fax: 650-251-1101

      • I tried to call Paypal several times. It seems they have let go most of the staff. You get an automated machine that suggested using their web site. In my case, the issue was a problem with their web site server giving a stupid error message, so I could not use the web site. And these guys dared to spam me because there's an account I could not close?

        They may appear to be a dot.com success, but in my mind they are a failure. And I do expect to see them go bust at some point, given the degrading quality going on there. As you may see below, my /. signature tells more.

  • Starting out with a great product, and slowly trimming features and service, and cutting out support for the fringe customers who risk needing unique attention or service, is pretty standard these days.

    Service doesn't factor into the equation the way it used to -- People buy pretty much exclusively on price or market presence.

    To satisfy either, you've got to spend every available dollar on advertising until your competitors are gone, or you need to operate with little profit (or at a loss) to start with.

    Getting a foothold in big business today is pretty much a starving contest. <overgeneralization type=slight>Quality products and customer service only work when you're pitching to old folks and the rich.</overgeneralization>

  • expertise (Score:2, Troll)

    by Alien54 ( 180860 )
    With no background in financial services but with a deep understanding of the nature of the Internet, [...]

    I don't know about this.

    Maybe that is where they started, but they obvious developed a sophisticated understanding of how finance works, just for things like their internal fraud detection software, for example.

  • God in Heaven... (Score:5, Insightful)

    by Accipiter ( 8228 ) on Saturday November 10, 2001 @08:55AM (#2548236)
    I find PayPal pretty annoying today - a lot of the anti-fraud, privacy-invasive measures which this article applauds make Paypal much less enticing to me than it used to be.

    Michael. Do you look for reasons to bitch? I swear to God, wannabe privacy advocates piss me off. How do you expect PayPal to do business such as it does (WITH ACCESS TO YOUR CREDIT CARD) without a modicum of personal information, hm? Do you think it would make good business sense for PayPal to say "You know, we don't need any of your personal information. Just give us your credit card number, and we'll base our business on the honor system."

    Yeah. Right.

    I strongly recommend you have a look at Paypal's Privacy Policy [paypal.com]. Since you're obviously doing some blind, ignorant whining about subject matter with which you have absolutely no clue, I guarantee you've never even clicked on the privacy policy. PayPal does their best to explain what information is gathered, why it's gathered, and how it's used. If you don't like it, don't use the service. But don't complain.

    Michael's comment absolutely reeks of "I'm with Stupid", "follow everyone else's opinion" mentality. "Wow. The community is really for individual privacy! It's time for me to attempt to gain acceptance with my (cough) peers by complaining about privacy-invading goons!"

    Yes. Privacy is important. However, when you choose to conduct business over the internet with a credit card, bitching about a company doing its best to protect yours and their asses only serves to make you look like (more of) an idiot.

    Personally, I've had nothing but excellent service with PayPal. It's nice to be able to accept credit cards, or use credit cards to pay for something without a whole shitload of messy paperwork. I've got to give PayPal a lot of credit. They've become a very successful online transaction service, and pretty much the standard auction payment system on eBay. (Ah, no need to worry about sending checks or money orders through the mail. Instant payment rocks.)

    • I normally try not to be overly critical of most people I run into online (at least not in a bitchy way, moderators included), but I've got to agree with you on your stance concerning Michael's apparent delusional expectations of total privacy in the area of online transactions.

      As a case in point, I'd like to mention that I know several folks personally who run small to mid-size online businesses. The majority of these people have access to (and use) "true" merchant account processing systems, some online and some offline (via batch at the end of the day). Even so, again and again I hear the same general sentiment when it comes to PayPal:

      "When I have doubts about the nature of a large transaction or have concerns over fraud, I use PayPal in lieu of ordinary merchant channels."

      To all who might support Michael's (seemingly ill-informed) stance on the issue, note that that's not me speaking, it's a LOT of people I talk to routinely. PayPal has built a reputation on taking exceptional care to prevent online fraud, through a variety of verification mechanisms. Not only that, those mechanisms are easily configured through the browser by accountholders. You can make fraud passing through you account as easy or difficult as you want, depending on your needs and the relationship with your customers.

      Thank you, Accipiter. Micheal, please research this stuff more before you go off on one-line rants. Of course, you could always talk to the folks over at ThinkGeek; I'm certain they would be happy to impart their experience in transactions processing to you (I mean this in all seriousness, education really is a Good Thing).

    • by icknay ( 96963 )
      Privacy is not always a good thing, and PayPal and ebay are great examples.

      Would you hire a babbysitter who would not tell you their name? The more truth you know about someone, the more trust you can have to participate in a transaction with them.

      Privacy is great for some things, but building a community of trust is not one of them. We need to move beyond the knee-jerk privacy=good mindset to a more balanced view seeing the costs and benefits of privacy and transparency for particular situations.
    • Re:God in Heaven... (Score:4, Interesting)

      by danb35 ( 112739 ) on Saturday November 10, 2001 @10:20AM (#2548398) Homepage
      It's nice to be able to accept credit cards

      Unfortunately, as of 11/13, you won't be able to receive credit card payments any more with a personal account. Copied from their Policy Updates page:

      Notice Date: October 11, 2001
      Effective Date: November 13, 2001

      To reduce the costs associated with credit card processing, the ability to receive credit card funded payments will become a feature reserved for Premier and Business accounts. Personal Accounts that receive credit card funded payments after 11/13/2001 may accept the payment by upgrading to a Premier or Business account, or they will have to deny the payment. Personal accounts will continue to be able to receive non-credit card funded payments for free. Once upgraded, Premier and Business Accounts may receive unlimited credit card funded payments.

      • Re:God in Heaven... (Score:1, Informative)

        by Anonymous Coward
        That's because it costs Paypal 2-4% of a transaction every time someone uses a credit card. Now if you are willing to pay that amount for them, I'm quite certain Paypal would be willing to do credit cards for you.
      • Re:God in Heaven... (Score:3, Informative)

        by compwizrd ( 166184 )
        Now, what happens for someone like me, a Canadian, who isn't allowed to link their bank account for sending money to people?

        I can no longer use PayPal, without anyone I'm sending money to, upgrading to a Business account.

        Nice way to force everyone to upgrade
      • PayPal was originally used (and mostly still is) a settlement service for eBay. eBay was originally a trading service for collectables and other junk owned by individuals. PayPal has since migrated to a system intended to transfer money from individuals to merchants, and eBay has migrated to a collection of retail outlets more like a flea market.

        Note the transition from peer to peer systems to one/many systems. There's something important to be noted from this.

        • Not really... (Score:2, Interesting)

          by Kelson ( 129150 )
          Actually, this change just puts them on more-or-less equal footing with eBay's own payment system. You can still accept credit cards as an individual with a PayPal account, you just can't do it for free.

          Am I annoyed at the change? Yes. But at least they haven't blocked me out completely. All they're doing is taking a cut - same as eBay does.
  • Anti-Fraud Measures (Score:3, Interesting)

    by hubbabubba ( 309496 ) on Saturday November 10, 2001 @08:55AM (#2548237)
    I've read several interviews with Peter Theil, one of PayPal's founders, including this one [efinanceinsider.com] where he points out that fraud was the primary reason behind the failure of many online payment services. A quote from the interview:


    What are your barriers to entry? Technology? Network economics?


    The nutshell answer: Security & Fraud.

    The network effect will get bigger and bigger over time. Until recently, we did have all these copycat competitors and they did have difficulty gaining network traction, but their ultimate downfall was fraud. There were a number of these companies - from Payme, Payplace, Paypro, ExchangePath - that went out of business because of the fraud issue. They didn't run out of money, or not get investors to invest. They got killed on fraud.
  • "Fraud Prevention" (Score:3, Interesting)

    by EvlPenguin ( 168738 ) on Saturday November 10, 2001 @08:57AM (#2548239) Homepage
    Up until recently I've never had a problem with PayPal. However, that's because I never came near the $1000 limit for "unverified" users.

    I recently bought a high-priced item over eBay and wanted to pay for it through PayPal. Unfortunaly, the item's cost was $20 over my "unverified" user limit. In order to continue getting use of my account, I must give them a bank account number? Are they insane?

    I ended up just sending the guy a postal money order. I was willing to verify a home address, but a checking/bank account is going too far. I guess I'll just sign up for another account...
    • by rewter ( 189441 ) on Saturday November 10, 2001 @09:28AM (#2548283)
      You give your account number to everyone you pay with personal check, it's printed on it. Do you consider that as a security breach too?

      Other than that, you're not allowed to have two personal Paypal accounts. Once they find you doing that (and they seem to have some krad-sophisticated-systems for that) you'll end having both accounts suspended and banned from using their service.

      Tom
    • In order to continue getting use of my account, I must give them a bank account number? Are they insane?

      Are you?

      Paypal is certainly not all light and puppies as others here are saying (ignoring Michael's knee-jerk rambling for a moment), but what do you expect them to do?

      You did read their terms of service before you got started, right? You did know that that was their policy for transactions over $1,000? If the answer is no, then it is your fault for not knowing.

      And two, how do you expect them to secure large transactions? Fraud is probably their primary source of loss. How is an easily-faked address confirmation going to do anything if you walk off after a $2,000 buy? Seems a reasonable policy to me. If you don't like it, don't do business with them.

      If you're that concerned about giving that information out, I'm sure you never write a check or use your debit card for purchases.

  • Paypal is a decent service for the price. You're gonna have to cough up some personal info when you do such a business transaction (I mean there is money involved they want to know who they're dealing with in case you try and screw them).

    The biggest problem limiting paypal in my opinion is the lack of integration tools with websites. You either have a manual process or trust a URL send back that the user can readily see. They need to have some kind of b2b hook up that you can read transactions off of or something. (just stuff like bob2@domain.com went through for X dollars...no cc#s necessary on that side).

    -Andy
    • Re:Paypal (Score:3, Informative)

      by clifyt ( 11768 )
      Actually, there are a few APIs that PayPal will give ya if you just ask. Things such as a way for PP to send an SSL Enabled Verification back to a CGI on your website so that you can be sure the user did do exactly what they said they did.

      I had actually started building a commerce site around PayPal before I discovered RedHat's (Akopia's) Interchange and decided to do things right (ie., real CC processor). The problem with a 'real' CC processor is that the user now has to trust you and your employees with the security of their cards. This means, did ya close all the holes, have ya shut down SQL Access to the outside world (you'd be supprised how many MySQL machines I have been able to access since switching to this software and playing around with it), if ya DO use things like card storage, ya then need to (if you are a responsible sort) encrypt the data, and not just with a ROT13.

      Its a LOT of work for someone designing a site on their own. You'd be supprised how many people have their sites email them the #s in plain text. Too many 'geeks' think that just because they can write a PHP site, they understand programming and security (geeks in quotes as I wouldn't consider most PHP 'programmers' real geeks...even though I'm starting to use it myself).

      PayPal does most of this for you, and if you aren't willing to put the time to learn everything ya need and verify that it does what it is supposed to do, then PayPal is PERFECT for these folks even if it didn't have the 'secret' APIs to do the verification -- which the users will not see because they are sent by the PP server to your computer, NOT from their server to the users computer to your own computer...which I think it does that as well...but only for simplicity...think about it as secure as a Javascript CC Mod13 Verification system (was it Mod13? I haven't written one of these in years).
      • Who at Paypal do you have to ask about those APIs?
        • Heh! I'll have to check as I can't access my mail right now. I was on a ecommerce mailing list and had mentioned the fact that I would like to use PayPal in my personal app, but didn't think that it could work well and one of their programmers emailed me and asked if I wanted the info.

          Sent me a 40 page PDF with all the details and some examples. Actually got most of it to work under ASP which was a pain in the butt as there are like no comm objects that deal with sending secured HTTP stuff that doesn't cost a grand or more. Dealing with this in Perl was MUCH easier, but then I'm stuck with an app written in at least 2 languages (and sometimes more...usually do ASP as my clients are all M$, and then PHP and / or Perl to take care of the crap that I can't take care of on ASP...yeah don't ask why I don't just program EVERYTHING in one of those...client specs and stuff...)

          If I remember to look, I'll see if I can find a URL on this as I believe it had one embeded in the doc...and I did find it on their networks once searching on specific terms...
  • you to give them money and let them pay online distributors. They want to be your bank. Paypal is setup to issue money you have in your account to in via check or direct deposit. They do, however, hope you'd let them hold on to it (like a bank) so they can make money on it from the interest. It would be interesting to see how many people leave money in their paypal account. Just a thought.
  • How about the fact, that early in Paypal's history, their business model was built on profiting from the "float", the interest that they earn while money is in their possession? Sounds great, they make money, give us a service we all want... until they decide, not that many months ago, that they'd rather fee us to death. I only buy and sell a few items per year, but now with their bait-and-switch tactics, this is no longer practical. I might as well get a real banking business account, they'd let me accept MC/Visa too, and if there were too many illegit chargebacks, I could go straight to their office and complain to someone in person. Doesn't cost much more, it's a _REAL_ bank, and they've already fee'd everything they can, no more suprises.

    Oh, and I'm pretty sure I could keep a real bank from spamming me mercilessly.
    • I might as well get a real banking business account, they'd let me accept MC/Visa too

      How bad are the fees? Credit Cards are scary expensive to accept. First you pay the discount fee, anywhere from 2.5% to like 3.75% or worse if the address verification fails. Plus you have to pay the processor (the place that processes the transaction. Either via a monthy fee ($25 to $100/month), transaction charge (like 25 cents or so) or both. Then you have to pay the bank that maintains your merchant account - they charge you $10 just to send you a statement each month. Then they charge you the minimum discount fee - usually $20 or so which means if you only have a couple transactions that month and the discount charges are So is paypal this bad? Credit cards are nice - no doubt. Easy to challeneg, etc. But you also have to realize they are clamping down on online merchants HARD. They now have VERY detailed security policies in terms of where CC info can be stored, how its encrypted, etc. This is a good thing, but it adds to the cost.

      So don't assume it'll be a cake walk with credit cards.

  • Paypal sucks (Score:1, Informative)

    paypalsucks.com [slashdot.org] has quite a few horror stories dealing with paypal. Stories of paypal freezing people's accounts, well... after just checking it, it seems like they have taken a good number of them down from pressure from PayPal's lawyers. In any event never have more money in paypal then you could afford to loss. Paypal is not a FDIC member, thus if the company goes under, decides to freeze your account, are any other number of wrong actions, you could simply be screwed. Always send money to the seller via the US postal service, if the deal goes bad you can file a mail fraud complaint against them with the usps [usps.com], with paypal.. well... good luck.
    Kenny
  • I recently got burned on an eBay auction I paid for through PayPal and learned the hard way just what PayPal considers fraud.

    I was putting together an old laptop for a friend of mine and tried to buy an old retail copy of Windows 95 to put on it. Color me strange, but I was actually trying to do things the legal way. To make a long story short, I paid for retail and got OEM.

    After trying to talk the seller into a refund for a week or so, I gave up and took the matter to PayPal. Blah blah blah retail was pictured but got OEM instead blah blah blah violates Microsoft's license blah blah blah claimed to be "fully legal" but wasn't... (I didn't point out that if I wanted to use Windows 95 illegally I wouldn't have paid $35 for it)

    After a few days of their "investigation process" I got a form letter from them telling me that, because I actually got something, they won't get involved. To quote it:
    Our Buyer Complaint Policy does not apply to disputes about the attributes or quality of goods received. As a result, we cannot reverse the transaction or issue a refund.

    PayPal is not the venue that lists the item and we do not act as an escrow service. Because the item is not advertised or listed by our service, we are not in the position to verify the quality of an item delivered as opposed to what was advertised. We recommend first contacting the seller's customer service email address, which is listed above. You may wish to contact your auction site regarding the dispute; as the venue that lists the item, they may be able to help you, or contact a third party mediator, such as Square Trade.
    So even though the attribute in question was "legal/illegal," it's Somebody Else's Problem (TM).

    I could understand their position on this if it weren't for the fact that, if I had mailed a money order instead (ie. used a competitor), this would have fallen under the category of mail fraud. But instead I'm now stuck with waiting for eBay's manditory 30-day waiting period to end so I can complain to them and see if anything happens.

    Right now it seems that PayPal is working hard to make sure I get my shiney, over-priced, drink coaster with the Windows logo on it, while my best bet to get most of my money back would be to take the guy to small claims court in New Jersey. Thanks PayPal!
  • PayPal sucks (Score:2, Interesting)

    by avonnieda ( 259117 )
    I think they suck. I opened an account and it was instantly locked "due to unauthorized activity". The thing was, I hadn't done any transactions yet.. (?!) I still don't know why they did it. Email after email after email for a week. No replies. Finally I set up a cron job to email them every hour. 130 emails later they opened the account up with no explanation. Have not used them since. I'd already sent a check.
  • When dealing with paypal, and you're a foreign user... you're guilty in their eyes first... and it's *your* responsibility to *prove* to them you're innocent.

    I've had to deal with Paypal twice in regards to this... and thus I will never do so again... though I did *prove* to them I wasn't committing fraud.

    It's a great service, if you want them to hold onto your money and never let it go.

    Great service until you think about what they do...

    they take your money, and charge you service fees, banks take your money and no fees.

    banks give you interest on your accounts.
    paypal, no.

    banks don't charge you a service fee while closing your account.
    paypal does!

    summary, paypal is a ripoff.

    Just think about it, before using their service...
  • Fraud Sucks (Score:5, Interesting)

    by pjrc ( 134994 ) <paul@pjrc.com> on Saturday November 10, 2001 @10:25AM (#2548410) Homepage Journal
    Together with Robin, I run a small e-commerce site [pjrc.com]. We have a conventional visa merchant account with our bank. I can say from experience that fraud really sucks. When a fraudlent transaction occurs, somebody is going to lose money. With a conventional merchant account, most of the time the merchant is the one who will end up bearing all the loss.

    It's easy for guys like our infamous slashdot editor to comment:

    I find PayPal pretty annoying today - a lot of the anti-fraud, privacy-invasive measures which this article applauds make Paypal much less enticing to me than it used to be.

    Well, that's an armchair critic opinion if I've ever heard one. PayPal is now less enticing to "michael of slashdot".

    The cold reality of the world is that there's a small number of crooks out there who will commit fraud, given the opportunity. Any party in the transaction who may be exposed to the potential for a loss would be acting irresponsibly by not taking reasonable measures to detect fraud before making the transaction.

    In the conventional visa merchant world, the consumer is protectedby the fact that their bank will handle their dispute with the merchant and issue a chargeback to the merchant to recover the funds.

    The bank is protected by their ability to issue a chargeback to the merchant. If the bank believes the merchant may not have the funds to cover chargebacks, they will hold a "reserve", which basically means they won't give the merchant some portion of their money for many months, sometimes even a year or two! (we had this shitty situation when we got started and consquently had to carry quite a bit more debt than we expected as we weren't getting the money for most of the products we sold!)

    The merchant isn't really protected by much of anything in the conventional visa transaction, other than their own efforts to verify that the buyer really is the legitimate cardholder and that the goods are shipped to the correct destination. Actually, a card swipe and signature are more-or-less proof that the buyer received the goods, but with internet and mail order sales, it's a risky business for the merchant.

    PayPal is in a tough situation, being in the middle of a transaction. It's really amazing that they can make this work at all, built on top of the conventional infrastructure which puts most of the risk onto the seller's side. They really need to do everything they can to detect and prevent fraud... even if it doesn't appeal to michael's tastes.

    PS: I will agree that it's very un-cool to take personal customer information and use it for any purpose other than the reason it was provided. We don't do this, partly based on ethical grounds, partly because we're so small that there's no incentive, but mostly because nothing is more important than satisfied customers.

    • It's posts like Paul's that make reading Slashdot worthwhile.
    • What is needed is a better way to transact safely over the net.

      A mechanism where a buyer can confirm his identity to his payment source (credit card company or bank) would help eliminate fraud on the part of buyers (e.g. stolen cards and such). When the buyer goes to some shopping site, and checks out with their full shopping cart, they get a transaction code with a link to a central clearing house. That clearing house then lets them select their financial institution and passes the (possible remapped) transaction code to their site via another link. Now at the site of their financial institution, the buyer provides his identity and confirms request to pay the transaction. Actual payment goes behind the scenes, but can be tracked using those URLs and transaction code. When the seller gets the code on his server, the transaction (shopping cart) is updated to reflect payment and the order can be shipped.

      Now this does protect the merchant against fraud on the part of buyers ... to a certain extent. If the buyer has a legitimate account, and made an actual payment, and then uses the complaint process to claim they never received the goods, or received the wrong goods, or broken goods, the merchant can still be screwed. That is, unless it was the merchant doing the nasty and actually not sending the goods.

      A truly secure, both-ways verified, transaction system perhaps could be done, but it would cost a lot of money. Still, a stronly verified payment system could be useful when the parties do trust one another already. But then, if a merchant trusts a buyer, they can ship now and get a check later. The problem is, establishing such trust is uncommon.

  • ...it's not because they always treat the customer right. My bad experience was made worse when they would never return a phone call or when they would feed me a line of BS about how they are working on the issue I had with them. If you are a seller, say on eBay, and the buyer decides he wants to screw you out of product and money, they will find that Papal is a good way to help them do that.

    Papal will seize your funds and never look back. The only way you can protect yourself is to make sure you use a shipping service that will let them check delivery of the item ONLINE. They are too lazy to pickup a PHONE or read a FAX.

    Competition for Papal wouldn't be too difficult. Simply provide the same service but have some competent customer care people there to resolve issues. If you think my diatribe is unique, check out http://www.paypalsucks.com.
  • by Gendou ( 234091 ) on Saturday November 10, 2001 @11:14AM (#2548482) Homepage
    I personally have had nothing but good experiences with Paypal, but I was shocked to learn that there was a dark side to it that many, many people have been burned by. It seems the fact that I've had no problems with Paypal is the exception rather than the rule -- many people haven't been so fortunate.

    Some of the problems can just be attributed to "shit happens," but in many cases, Paypal is guilty of out-and-out theft: when they receive a complaint about a single transaction, they often freeze the accounts of everyone involved, and then do everything possible to make themselves inaccessible by phone or e-mail so that the accounts can never be unfrozen. They've just walked away with someone's money. Good job.

    Anyway, here are some useful links that have many, many testimonials of bad experiences:

    Paypal Warning [paypalwarning.com]

    Testimonials [paypalwarning.com] from above site.

    PaypalSucks.com [paypalsucks.com]

    Based on the testimonials I've read, here are a few ways I can think of to make the Paypal experience as safe as possible.

    1. NEVER leave money sitting in your Paypal account. Withdraw it IMMEDIATELY. They will freeze it, or steal it, if they get an excuse to do so -- any excuse will do. Don't be tempted by their "Paypal Money Market Fund". That 1.2% APR isn't going to make you rich. You'd be better transfering your money to your bank where it can't be stolen. They can't steal what isn't there.

    2. Try to avoid setting up a bank account on Paypal or giving them your checking account number for any reason. They do everything in their power to convince/force you to set up a bank account, which should give you cause for suspicion. If you give them your checking account number, they can (and will) withdraw the money from your bank account at any time without permissions.

    3. If you must set up a bank account with Paypal, contact your bank and tell them NOT to allow Electronic Funds Transfers from Paypal without your approval. Unlike with a credit card, there's no way to dispute EFT charges. Get this in writing from your bank.

    4. Check your credit card statement carefully each month, and chargeback any mysterious charges immediately -- but not if you have money sitting in your Paypal account or they have your bank account number, because they will take your money away from you if you do a chargeback. Get your money safe first, then call the credit card company to do a chargeback.

    5. Try to avoid using a debit card -- you have no fraud protection, and if the debit card draws from the same account as the bank account you have set up in Paypal, you might run into some problems because of the way Paypal does things. If you have $600 in your bank account, and you try to make a $500 Paypal payment from your bank account, it'll bounce! Why? Since bank transfers take 3 days, Paypal wants to avoid finding out 3 days later that there's no money in the account, so they use your credit/debit card to "secure" the transaction by "locking" $500 on the card and then releasing it after the bank transfer clears. So now, when you've tried to pay $500 from your bank account, Paypal has locked $500 of the $600 in the account, leaving only $100 in the account which will make the $500 bank transfer bounce. The bank will charge you a bounced transfer fee, Paypal will charge you a fee, and you'll be unhappy with the whole situation. Sometimes even when the transaction DOES complete, they still don't release the "hold" on the card for days, weeks, months, or ever.

    6. Do not use Paypal for large transactions. Use some sort of escrow service. With the incredible fees Paypal is charging now, it wouldn't be much more expensive.

    7. As an alternative to Paypal, consider using E-Gold [e-gold.com] instead. Instead of dealing in a national currency like Dollars or Pounds, it uses actual physical gold as currency: you actually own a stake in the vault of gold that the company owns, and you can send/receive electronic gold from others as payment. It's very expensive to get involved, though: getting money into an E-Gold account requires you to go through a currency exchange service (E-Gold does not offer this service directly) which generally charge a 15% conversion fee, and 1% of your balance is deducted per year.

    The cool thing about E-Gold, though, is that if you buy 5 ounces of gold, you'll always have that 5 ounces of gold in your account no matter what happens to the value of gold or to your national currency. If you spend (for example) $200 on 2 ounces of gold, but six months later the price of gold has risen from $100/ounce to $300/ounce, you'll still have that 2 ounces of gold -- but it'll now be worth $600. Pretty nice, eh? A lot nicer than Paypal's 1.2% APR mutal fund.

    Anyway, use Paypal if you have to, but be safe. Minimize the opportunities for them to steal your money. Don't use them as a bank. They're not a bank; they're not regulated as a bank, but they want you to use them as a bank so that they'll have more chances to take your money.

    Play it safe, and you should be okay.
    • 2. Try to avoid setting up a bank account on Paypal or giving them your checking account number for any reason. They do everything in their power to convince/force you to set up a bank account, which should give you cause for suspicion. If you give them your checking account number, they can (and will) withdraw the money from your bank account at any time without permissions.
      Another alternative to this would be to get an extra basic no-fee bank account that you use only for Paypal stuff. When you transfer the money from Paypal, you can just transfer it out of the extra account to another account you have. That way, they can't grab the money out of the account.
    • by kindbud ( 90044 ) on Saturday November 10, 2001 @02:14PM (#2548908) Homepage
      Try to avoid setting up a bank account on Paypal or giving them your checking account number for any reason.

      You can also setup a new checking account just for use with PayPal. If you do it at the same bank as your main checking account, it should be a piece of cake to transfer money between the two as needed.
      • A separate account may not protect you from unauthorized withdrawals. I had an experience with a large bank (Bank of America) where they took a substantial amount of money from my savings account to cover a check that was much larger than the balance in my checking account. The problem was caused by a data entry operator at another bank who misencoded the amount of the check by shifting the decimal point to the right, transforming a $500 check into a $5000 check. It took several months to get this straightened out.
    • If you spend (for example) $200 on 2 ounces of gold, but six months later the price of gold has risen from $100/ounce to $300/ounce, you'll still have that 2 ounces of gold -- but it'll now be worth $600. Pretty nice, eh?

      If you spend (for example) $200 on 2 ounces of gold, but six months later the price of gold has fallen from $100/ounce to $50/ounce, you'll still have that 2 ounces of gold -- but it'll now be worth $100. Pretty nice, eh?
    • I wish I had known about how they work with debit cards, as you pointed out in tip number five.

      I've ended up having a large sum of money locked in my checking account over a weekend while PayPal processes it for a few days. I was paying my rent through PayPal, and had twice it taken out (half of that temporarily as a 'lock' as mentioned before). Needing some cash that weekend, I was suprised to see my account so low. After dealing with my bank, I attempted to get a hold of someone at PayPal for hours. Finally getting someone to help me, the person on the line explained the situation, explained his inability to do a thing about it, and accused me of threatening him when I asked for his name. I was upset but understanding until that accusation came out. Didn't know asking for a name, so I could deal with him again in the future, would be mistaken as a threat.
  • X.com (Score:4, Interesting)

    by GodWasAnAlien ( 206300 ) on Saturday November 10, 2001 @11:16AM (#2548488)
    They didn't mention that paypal bought their competition, x.com, which included banking, mutual funds and stocks, then discontinued all of its operations.
    • Yea -- that really sucks. A friend of mine was using x.com as his primary bank, and really liked it. When, as he put it, "my bank decided it would rather just be PayPal," he had to get a brick-and-mortar bank and isn't nearly as happy.

      I've been using paypal for several years now, though, and haven't had a single bad experience. It makes my life a lot more convenient.
  • They own'em. Their real competition is http://www.c2it.com.
  • I've discussed this with plenty of people, online and off, and we all come to the conclusion that Paypal would rock if they simply worked on a few serious fallacies in their withdrawal system. You basically can't know if your numbers are right, until you actually receive a payment and try to send it to your bank account. If there were only one huge bank to run the world, this would be easy, but there are thousands of banks worldwide, with thousands of similar yet different standards for account numbers and whatnot.

    It really is a pain when you've got 1800$ in your Paypal acct, and it refuses to withdraw to your chequing acct even though you've input the info to the best of your knowledge. It would be great if Paypal's support staff were a little less anal and a little more patient in trying to help you spot the error. Even after faxing them a void cheque, they still couldn't tell me what was wrong in my case. In the end, my problem was a leading zero that was missing from my routing number.

    I don't know about you, but where I'm from, 1800$ is more than enough to get someone whacked over such a stupid problem, using either a lawyer or a big-guy-with-a-gun. I would have expected their procedures and policies to improve over time (this was over a year ago), but they obviously have not, since I still hear similar stories every few weeks.
    • I thought part of the process of setting up the bank account was having them deposit a couple of random sub dollar amounts which you would then confirm to verify that you were you and everything worked fine. At least this was the process of setting up the account when I did so long ago.

      I have been pretty dissapointed with their dealing with various credit card issues and bank account issues for Canadian customers though.

  • Paypal is bunk. It was a nice novelty to begin with but the amount of people with negative stories about them is astounding. The are evolving into something with a heart of pure evil. Or was that Microsoft.

    Bugger it, anyway, gold baby gold. e-gold [e-gold.com]is the biggest electronic gold clearing house at the moment.

    It's much more fun to pay in gold rather than dollars. And talking about ounces of product gets some great reactions :)
  • Anti-fraud features (Score:2, Interesting)

    by Ibanez ( 37490 )
    You can bitch about the privacy invasive features and the anti-fraud procedures, but if you get swindled out of $2000, then you will be bitching about them not being effective enough. I know several people who have been frauded out of that much money, on a seemingly good trade, and PayPal has done NOTHING to help the matter. It is incredibly easy to defraud people over PayPal, so you can bitch about the procedures, but when you get jacked, you won't.

    Blake
  • Acording to what i've been reading on this I think that the SEC (securities exchange comission)needs to be in on this. What PAYPAL appears to be doing is borderline money fraud, not to mention unsavory business tactics bordering on the edge of being a outright theif.
    If someone does get a wild hair, contact the SEC as well as their lawyer and see if they can make heads or tails out of what PAYPAL is doing with their $$$ and is it considered to be a violation of US law.

    As usual, IANAL, but knowledgable in in public law. It keeps me from being bothered by telemarketers.
  • But maybe that's the way to success: start off with a very appealing product, then slowly tighten the screws.

    I remember way back when ebay started you could sell most anything and not give them a credit card number. When they started making profits, they started banning things because they were "immoral"(aka we dont want to take a risk when we are losing money but now that we are making it....). They also used to require almost no security check for anything. Now they require a credit card number, and 10+ feedback for using certain features(hey, I am totally glad they have it). It seems that it just might be a good strategy, start a service thats easy to get into, and once you get people hooked, clamp down.

  • I tried to sign up for a PayPal account, but the form asked me to copy letters and digits from a noisy GIF image to a text input. I know they do this to keep bots from signing up [kuro5hin.org], but such a technique fails to distinguish these users from bots:

    • visually impaired users (does the Americans with Disabilities Act apply in this case?),
    • other users on text terminals (such as those whose internet access is through a shell account),
    • users who routinely turn off images (such as those whose internet access is through a dial-up modem), and
    • other users who otherwise cannot view GIF images (such as those who live in jurisdictions where Unisys owns a patent on reading LZW, but note that in the USA, patent 4,558,302 covers only writing LZW).
    • by dvdeug ( 5033 )
      If you noticed, they have a link to a wav file of the letters and digits, for the blind. Nothing requires them to really care about the other groups; if you want an account, turn on your images or get on a computer with a graphical browser.
  • " The lessons learned from PayPal can be distilled into six simple rules for developing new payment services:

    * Focus on the customer. Understand the market; be responsive to real-world needs; act with an obsessive customer orientation.

    * Keep it simple. Keep it understandable; make it easy to use; let simplicity itself be the key competitive edge.

    * Exploit the Internet. Play by Internet rules; develop new features that leverage the Internet; use the Internet as the dominant go-to-market channel.

    * Design for adoption. Eliminate as many adoption dependencies as possible; make it easy for target customers to become registered users; keep providing compelling reasons for registered users to increase their use of the service.

    * Think incrementally. Start small, get market feedback, and then incrementally make it a little better. Remember that big things grow from lots of little things.

    * Costs matter. Price the service to reach critical mass first; adjust the pricing for profitability later; obsessively drive down internal costs at every opportunity.

    There is nothing magical about this approach; others in the financial services industry should be able to follow the philosophy behind these rules--and the many lessons learned along the way--as they develop and introduce new online payment services.
    "
  • Seems to me a lot of people are dissatisfied with PayPal, but I haven't seen anyone yet say how to cancel an account. So how would one go about doing that?
    • Apparently the only way to cancel an account is to email support.
      I've had nightmares with them as a Brit living in the US, I have both UK and US addresses and credit cards but they have no way to support that whatsoever. I just don't buy from people who want Paypal anymore, it's too much hassle...
      The international account stuff drives me nuts 'cos there is lower credit card fraud in Europe anyhow yet they require all this confirmation shit - then when that card expires you have to do it all again...
    • On your PayPal profile page, there is a link to "Close Account". Duh.
      • I don't see any link. But that's because of some strange server error (claims my cookies are not on, but they are, and I know they are because I use cookies at other sites just fine) where I can't even get logged in. And yes, I was trying to close my account after getting spammed by them. And I didn't want their spam anymore because I quit using Paypal due to not being able to login and not being able to get any response from support at all, and not getting any live people on the phone.

        I understand the legal and financial conditions they have to operate under, and I'm not opposed to them (or anyone else providing this service) from taking a cut, and having to freeze accounts when something goes wrong ... PROVIDED ... you can actually communicate with someone there who can comprehend what is going on and help solve the problem. The reason I quit Paypal is the lack of support. And my servers are now rejecting all mail from Paypal, so if you decide to bribe me, I'll never even know about it.

  • Well, there we were. All set and ready to buy a whole bunch of Webplayers from the defunct Virgin Connect operation. The deal with the supplier was struck by a volunteer, and funds were transferred into his PayPal account. More than $10.000,- in total, as there were several hundred machines ordered by more than 300 people.

    Then PayPal decided that there was something bad about this transaction, and froze the account. Mind you, they froze it for our volunteer, but they did not freeze the incoming stream of funds which now piled up on his account.

    PayPal sat on this money for three months, all the while collecting interest on it. The volunteer had complied to all of PayPal's requests, but they just kept on repeating them.

    Eventually, more or less at the end of the 'allowable' freeze period, they released the funds and our transaction with the supplier (Boundless Technologies) could go through.

    It is quite clear that PayPal did not have fraud in mind when they froze the account. What they did have in mind was the illegal collection of three months worth of interest on OUR funds, not one cent of which has been given back to the group.

    In essence, while PayPal might provide a useful service, the company behind it is not to be trusted with your funds. Once bitten, twice shy, PayPal is not on the shortlist anymore...
  • Wired magazine had a (imho good) article about PayPal, how and why it worked while other initiatives of big banks failed on internet money transactions:

    The Money Shot [wired.com]
  • There's no way they have 650 employees. Their service (in terms of trying to reach someone there) sucks. So they can't be operating any big in-bound call center. What they do have running can be done by a dozen programmers and a few admins. Add in a bunch of accountants, lawyers, and VPs, and perhaps at most 100 employees.

  • A large number of people here have complained about how PayPal refuses to handle complaints about merchandise either not being sent or arriving in poor condition. While PayPal politely handles some of these cases, they are no means obligated by their terms to handle them all.

    The fact of the matter is that PayPal is a money transfer agent. They are the electronic version of Western Union [westernunion.com]. Money transfer agents basically take money from one person, charge a fee, and then give the remainder to another. While they may have some fraud guarantees, they do not normally handle merchandise disputes. They just move money from one place to another, and then their job is done.

    What people here seem to consider PayPal to be is an escrow service. An escrow service takes money from person A plus a fee, and then notifies person B that the escrow service has money from person A meant for them. Person B then sends the merchandise, which Person A inspects. If Person A is not satisfied, they send the merchandise back to Person B. Otherwise (ideally), Person B gets paid.

    Escrow services endure a lot more risk than a money transfer agent does. They deal with a higher risk of fraud, and take more measures to compensate for this. PayPal does not consider themselves to be an escrow service. PayPal's own FAQ says so [paypal.com].

    Examples of *real* online escrow services include Escrow.com [escrow.com] and Tradenable [tradenable.com]. Note that I have not used either of these, so buyer/seller beware.

  • The referenced article doesn't contain a history of PayPal exactly. There was a brief history in a recent BusinessWeek article (sorry, past archives are fee-based and it was from a few weeks ago).

    To paraphrase the article...

    PayPal was developed by Confinity with backing by Nokia. It was intended for use with making payments on mobile phones. That didn't pan out, so Confinity sold out to X.com in March 2000. X.com was doing other stuff besides PayPal, but that didn't pan out either. X.com changed their name to PayPal, shut down their other stuff, and here we are today.

  • by omnirealm ( 244599 ) on Saturday November 10, 2001 @07:44PM (#2549538) Homepage
    As I take a careful look at this new community being formed, what I see forming is a globalized, fluid, largely anonymous culture. Then I look at my local neighborhood and my city. I see people who know each other by their faces and their first names. There is a feeling of trust among everyone here. Joe, who runs an electronics shop down the street, knows that Renee is not going to try to take advantage of him or steal from him. First of all, she has a sense of responsibility toward Joe as one of her neighbors. Second, there are several rings of authority around her that keep her from wanting to do something wrong. If she gets caught shoplifting, what the government will do to her is the last thing on her mind. She will first feel responsible toward her parents and her close friends and relatives. She will then worry about what the people she goes to church with every Sunday will think of her. She would be concerned about her employer finding out "through the grapevine" that she shoplifted.

    This sense of community helps foster individual restraint in the face of self-interest. While everyone would like to take everything they can get their hands on, they have a sharp sense of responsibility toward those around them ... and many feel such a responsibility towards God. In economic terms, this keep the "transaction cost" down.

    On the Internet, this community is virtually nonexistent. People can distance themselves from the world around them and become immersed in a sea of IP addresses. For some, a sense of responsibility leaves also, and they take the opportunity to take advantage of nameless, faceless people around the world. They don't know these people, and so their natural human inclination to deal virtuously with these people declines. And for many, the only potential repurcusion of their actions would be from the law (the government is a weak authority figure in the minds of the people ... and I think that the government should be the *last* entity we should be worried about when we do something wrong!)

    The result? Again, in economic terms, transaction costs go up. Without trust in the virtue of those around us, we need to hire middlemen to keep us all in line. PayPal finds itself in such a situation ... so don't be surprised when you find PayPal's service substandard (and more costly) to that of your local community bank.
  • Witholding Funds (Score:2, Interesting)

    by timshea ( 257474 )
    I have used PayPal for about one year, selling shell accounts - yes, a high-fraud product. Although I *always* redeposited fraudulent funds back into my PayPal account, and repeatedly responded to PayPal's emails indicating fraudulent transactions with 'product not shipped, I sell services and fully accept the risk and responsibility for fraudulent transactions' I was still placed in the mysterious 'restricted' situation which allowed me to continue to *receive* fraudulent funds but not withdraw legitimate funds from my regular customers. Blah! This happened for approximately 60 days, until I contacted them inquiring about their relationship with the banking system (ie can't hold funds unless they are suspect) at which point they magically 'unrestricted' my account.

    I contacted their support line (via voice) and turns out that I only need to send a 'login card' (similar to a phone card) to cover my ass on their Seller Protection Policy - I get to keep the funds even if they are fraud! Even though I told them I didn't want it, the only way I can do business using PayPal is to accept fraudulent payments! They don't have an option to refuse payments 'on a hunch'.

    Anyhow, I've rambled. I've spoken my peace. Thanks for looking. :)

  • Before you accept PayPal as a success story, please take a look at this warning [paypalwarning.com].

    Some people have had nightmarish times getting money, and some peopl ehave had their businesses and good names destroyed by PayPal.

"I got everybody to pay up front...then I blew up their planet." "Now why didn't I think of that?" -- Post Bros. Comics

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