Paypal Rant (was: Re: questions for steve regarding group purchases)

[Stroller]

On 10 May 2008, at 22:51, steve wrote:

> I’m not sure about the paypal. A long while back when I suggested  
> paypal there was a backlash from concerned people who thought that  
> paypal was evil because it was American. I’ll check on that.
>
> ( not the evil part, the paypal part)
>

Typically people dislike PayPal because of their business practices.

In the event of a dispute they can freeze funds held in your account,  
and even withdraw money from the bank account of a wounded party in  
order to reimburse a scammer. Their "payment protection" doesn't  
mediate disputes properly, but tends to side with one party based  
entirely on an arbitrary set of rules which rarely happen to coincide  
with the true circumstances of the sale. PayPal seem to have some  
funny ideas about shipping and proof of delivery. People prefer them  
for their perceived "protection", but in reality they exclude many  
transactions from this cover and it is especially galling to find  
that one would have been covered for a transaction had it been  
initiated on eBay, but that one is not because one has found a  
bargain outside of PayPal's monopoly.

In the UK - and I am sure it's the same many other places - PayPal  
acts like a bank or a credit card company, but without the oversight  
or regulation that consumers enjoy from those "other" types of  
entities. When one government regulator declared that, due to a  
specific act of law, such online payment methods did fall under its  
remit, PayPal took the matter to court, in order to contest this and  
to stay free of fair policing of their processes & decisions. Also:  
http://tinyurl.com/3bnvfb

Whilst most of us agree that one should be able to enter into a  
contract on whatever terms one wishes, typically one joins PayPal for  
the express purpose of sending or receiving a specific payment, and  
one does not scrutinise their small print as part of that process.  
It's unAmerican to bitch about monopolies, but PayPal have an unfair  
advantage in the online-money-transfer marketplace.

Consumers have long memories, and I will not forget how we were  
screwed out of a choice of providers shortly after the PayPal / eBay  
merger. When I first started using these services PayPal had  
competition - they had 60% of the market, perhaps, but they had a  
couple of competitors giving them a decent run for the money. Here in  
the UK "NoChex" was a popular alternative, and had lower fees for  
many (most?) transactions - now they do other other online payment  
business, but back in those days they were a genuine send-a-couple-of- 
quid-to-Dave-by-email PayPal-alternative. Most people making frequent  
transactions through eBay, usenet adverts and other forums had  
multiple accounts - one with PayPal, because it was the most common  
choice of other people, the dominant "brand" - and typically you also  
had an account with another provider who you preferred or who offered  
lower fees. In those olden days sellers on eBay used to offer at  
least a couple of alternative online payment methods and typically  
stated that "buyer pays fees" - if a buyer had money already held  
with one of his account providers then he might choose that one, or  
he might choose the one he trusted more, or he might simply have an  
account with only one of the providers favoured by the seller, but  
there was a financial incentive for buyers to use the cheaper payment  
provider (in this free market, some eBay sellers differentiated  
themselves by advertising "no PayPal fees"). After the PayPal / eBay  
merger, eBay instigated a rule that sellers were not allowed to  
"discriminate upon payment type" - basically, they were no longer  
allowed to pass the fees incurred by online payments onto the buyer -  
and suddenly, this incentive (to choose the cheaper payment provider)  
was removed. Remember that many people had two accounts - one with  
PayPal and one with another of the handful of alternatives - and that  
many people were used to having to accommodate their transaction- 
partner's choice of payment provider - PayPal were not by any means  
the cheapest provider, but suddenly they flourished. Perhaps  
marketing was causal, perhaps first-mover advantage, but everybody  
had a PayPal account and - especially because they were now well- 
integrated with eBay ("you have just bid on this item - would you  
like to pay with PayPal?") - suddenly PayPal just wiped the floor  
with the competition in the send-a-couple-of-quid-to-Dave-by-email  
payment marketplace. Consumers may have long memories, but perhaps  
the Internet's memory is selective - I've talked to at least one  
friend who was making online payments at this time who doesn't  
remember any of this. I guess he perhaps was not as active on  
secondhand computer-parts forums as I was at the time, but I recall  
the upset & furore as sellers realised they were going to be stiffed  
with higher transaction fees - perhaps double? - as they would now  
have to take PayPal instead of their favoured provider. It's kinda  
late here, and I don't know if I've explained myself very well - I  
wouldn't blame you at all for reading this paragraph as all very  
anecdotal - but take it from someone who watched it happen, this eBay  
payments rule which shifted the cost of fees from the buyer to the  
seller is _directly_ responsible for PayPal's present monopoly. The  
UK has a body called 'The Monopolies and Mergers Commission" and the  
conjunction in this name is SO apt for describing the events of the  
PayPal / eBay buy-out, and it is a criminal neglect that this was not  
investigated & regulated. We no longer have a free market in these  
matters, and there is no longer any competition to prevent PayPal  
stiffing its users on fees (or on anything else, for that matter).

Having said all this, PayPal are pretty good for online shops. Most  
everyone has an account, and those that don't can choose to use a  
credit card instead of opening one. They're probably comparable in  
cost to a dedicated payments processor and anyone can setup and  
simply start using PayPal for an online shop. Nevertheless, it's not  
surprising that many geeks don't like them.

Stroller.