

PayPal's Verification Wait Irks a Business Owner - carbocation
http://www.nytimes.com/2012/04/22/your-money/paypals-verification-wait-irks-a-business-owner-haggler.html

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cperciva
_... asking users to “verify” their account after transferring $10,000 over
the company’s network. One can get “verified” by either handing over bank
account information or signing up for a PayPal-affiliated credit.

PayPal has long described this as a “risk-prevention technique,” but that
makes little sense, because even customers with perfect track records must
comply_

Makes perfect sense to me. If having a perfect track record on your first $10k
of transactions was enough to let you bypass the verification process, they'd
see lots of criminals running $10k of shell transactions -- just like eBay
scammers run up lots of perfect-feedback small purchases to create a good
rating for themselves.

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smhinsey
I think the fact that this system doesn't take account age into account is
problematic. My PayPal account is who knows how old, but somewhere in the
neighborhood of 10 years. I'm just now hitting that limit after years and
years of small transactions. This is probably going to make me stop using them
because I don't trust them with my bank account and I don't need any credit.
This seems like a really stupid way to lose a long time customer.

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kylebrown
Chinese credit card and Alipay transactions are irreversible, though Alibaba
buyers can opt to use the Aliexpress escrow service. I think the U.S. will
eventually need to stop babying the consumer. To some extent this is already
happening, with banks refusing to be liable for small and medium business
losses from online banking trojans. Obviously the bank can't be liable if a
business loses money due to embezzlement, and its a thin line since a banking
trojan would be perfect cover for an insider embezzlement scheme.

Its pretty clear that Paypal's data mining for fraud detection, which used to
be considered cutting-edge and allowed them to dominate the market, now has an
extremely high false positive rate that only gives too many honest merchants a
reason to leave.

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joenathan
That or eBay(owner of Paypal) has a monopoly on online auctions and online
payments and are in a position where they can do pretty much anything they
want to squeeze a few more dimes out of their clientele with no one to
effectively challenge them.

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dmethvin
Just about anyone using PayPal's back-end payment notification has experienced
this. The article says PayPal notifies you about a delay but I've seen cases
where even that doesn't happen.

If you're selling a service, the best thing to do is to provide a grace
period. So to maintain goodwill you just let 'em in and if PayPal doesn't
confirm payment within 48 hours you suspend the account until they pay.

Obviously that doesn't work well for non-revocable transactions, but you have
to weigh the potential for fraud against the lost sales.

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andrewpi
If you read the book "Founders at Work" you'll see that fraud was a huge issue
for PayPal, and was one of the first barriers to success. You can't downplay
how quickly fraud will destroy any business that moves money around.

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rollypolly

      In that matter, as with this current one, eBay/PayPal
      spokespeople said that preventing fraud — not enhancing
      profits, by accumulating bank interest — was the point
      of hanging on to the money.
    

Good'ol "plausible deniability".

~~~
eli
I mean, I guess it can be both, but I would imagine fraud has a _much_ larger
potential impact on PayPal's business than the very meager bank interest
gained for delaying payments.

I believe that PayPal views fraud as the number one threat to their business,
and they are willing to piss people off and lose customers in order to keep
fraud losses to a minimum.

~~~
chives
potential fraud (without giving any reason to suspect the transaction) some
how has a greater net effect of holding on to something like 1000's of
transactions worth of money for 21 days. I call bullshit. "randomly" (as there
is no evidence as of yet that suggests they target them for any other reason)
picking transactions to hold as some way to prevent (???, nah, no sense made
there either) the potential threat of fraud is retarded. Is fraud prevented?
maybe. Is commerce prevented? definitely. Does Paypal make money off of this
policy? Yes, and a great deal of it at that.

Ultimately it just goes back to the age old internet saying of "Fuck paypal,
everyone else, their mother, and that shady guy over there are all more
transparent with transactions then the aforementioned crooked lot"

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elemeno
You do realize that with current US interest rates the interest on a 21 day
hold would amount to even less than $150[1] per $1mil held - and thats
assuming that they could even get Fed Reserve lending rates, which you're not
going to be getting from your bank no matter how much money you have with them
[2].

Given that that amounts to less than $2600/yr - with that massive assumption
that PayPal can even get that rate of interest, do you think that they're
really doing it for what amounts to a rounding error for a company that size,
or is it, maybe, just about possible that their operational risk might run
close to that number as well?

[1] $1mil * 1.0025^(21/360) = 145.6 - assuming A/360, $143.6 with A/365

[2] Current US interest rate is 0.25% - but that's the rate at which banks can
borrow from the Fed, not the rate that you'll get from your bank.

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DenisM
PayPal "verified" accounts draw money from users bank account, which allows
them to skip the credit card processing fees. That's a huge amount of money,
and that's why they keep pushing users to "verify" their account through every
way possible.

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sparknlaunch12
This is one frustration with Paypal however once you are verified it is a
breeze to use. Given the high volume of online fraud, proper verification has
to happen.

~~~
joenathan
I'm verified(bank account linked on a 10 year + old account) but have recently
had eBay payments held for 21 days because apparently only selling things once
or twice a year on eBay is too infrequent for Paypal, I wouldn't call this a
breeze....

edit: check this previous article [http://www.nytimes.com/2012/03/11/your-
money/ebay-policy-lea...](http://www.nytimes.com/2012/03/11/your-money/ebay-
policy-leaves-some-sellers-fuming.html) or this summary
<http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02>

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brokentone
I feel like every PayPal article I've ever read has discussed them having
double standards, holding money meant for charity for no apparent reason, and
making people smash antique violins.

Why are they still a player in the market?

