

How PayPal could have killed an independent conference - ailon
http://aralbalkan.com/3898

======
ig1
Paypal classes events as high-risk transactions (as they require people to pay
upfront often far in advance of the event) so you're at much more risk of
being suspended if you breach their risk thresholds.

Imagine if you're a fraudster, you've knocked up a fake event and you've sold
$10k-$20k in tickets, you could withdraw the money and disappear before the
date of the event. Now Paypal are on the hook for the money, when they get
creditcard charge-backs it comes out of Paypal's account and not the
fraudsters.

Does anyone consider it reasonable that Paypal take this risk ? - the reason
for the 90 day limit is that's the length of time most consumers have to
request a credit card chargeback. Paypal is simply protecting themselves.

If you're engaged in high-risk transactions you're much better off going with
a specialist provider (i.e Amiando or Eventbrite in this case) as they have
risk fraud models designed to handle the specific risk factors.

~~~
jarrett
That may be. But it's unethical for PayPal to blindside businesses. PayPal's
behavior often appears arbitrary and capricious; at the very least, it's
unpredictable from the customer's viewpoint. If PayPal absolutely must cut off
the cash flow to its supposedly high-risk business customers, it should do two
things:

1) Have a written statement of the criteria for freezing funds, demanding a
100% reserve, etc.. Make the criteria concrete and objective enough that
business owners can reliably predict whether this will happen to them.

2) Notify account holders of this policy in a very conspicuous way. Burying it
in the TOS isn't good enough for something like this.

It's fine if PayPal wants to be strict about business models it deems high-
risk. But they should do a much better job of managing customers'
expectations. Right now, it seems that most customers find out about PayPal's
draconian risk management practices by unexpectedly losing their cash flow or
by hearing from someone else who did. That's unacceptable.

~~~
ig1
The problem will releasing that information is that it gives a huge advantage
to fraudsters with limited benefit to legitimate users. Fraudsters will know
exactly how much fraud they can commit to stay below the radar, so they'll max
out an account while avoiding detection and then move onto another account and
repeat. Paypal will then have to reduce their thresholds to minimize fraud and
end up hitting far more legitimate customers.

They could perhaps identify the general risk categories (i.e have a list of
businesses-type which are considered high-risk). Most merchant account
providers maintain such a list and you can easily find examples by googling,
but I'm guessing most people who run businesses in high-fraud industries are
already aware of that fact.

------
Shenglong
Paypal also has terrible customer service. Every time I call them, I get
pushed around to people who barely speak English, and just repeat things they
see on a sheet of paper.

To add to this, think about charge backs. Paypal doesn't even make an effort
to fight for you, in the case of a Charge Back. I had a charge back _NINE_
months after a transaction for 2 $500 amounts. Ouch. The worst part is... if
you want to dispute the charge back, they charge you ANOTHER fee to do it.

Paypal has been an absolute nightmare - and if there was an alternative, I'd
jump on it right away.

~~~
qeorge
Do you have an account manager? If not, you may want to request one. Our
experience with PayPal has been fine since we started directing inquiries
through our AM vs normal support.

~~~
eli
Seconding that.

I certainly would have dropped paypal long ago if it were not for our account
rep.

------
timjahn
We use Eventbrite for all our Entrepreneurs Unpluggd events, and while they're
not multi-day conferences, I still think Eventbrite is the best platform for
any size event to use for ticket sales, registration, waiting list, and all
that jazz.

Never once had an issue with them on any level.

And no, I don't work for them or get paid by them in any way. They just have a
kick ass product. :)

EDIT: The reason I'm even saying this is the author mentions in his post that
he switched from PayPal to Eventbrite.

~~~
benatkin
No, he says he started up a second EventBrite listing for the conference.

EventBrite lets you use your own PayPal account.
<http://www.eventbrite.com/paypal-info>

Maybe EventBrite should warn its users about PayPal's policies.

~~~
timjahn
You're right. He said he was switching from PayPal as the payment processor to
Eventbrite.

We used PayPal for our first event, but their extra cut on top of Eventbrite's
made little sense, so we too switched to using Eventbrite's processor and
haven't looked back.

~~~
benatkin
You have to wait until the event is _over_ to get the money, right? It seemed
to me that with PayPal, if it didn't get frozen, the author of the article
would have gotten his money before the event started and been able to use it
to pay for the event's expenses.

~~~
timjahn
Yes, you get the money after the event is over. 5 days after, actually, as
that's the timeframe Eventbrite gives you to handle any refunds.

------
2arrs2ells
"So, ironically, because I didn't trust them, they weren't able to ruin my
conference."

This is not in the least bit ironic.

------
ChuckMcM
Seems to be another case of 'Paypal isn't a bank.'

And while the Author seems to understand that (and hence didn't keep a lot of
money under their control) it is something a number of people 'miss.'

What I find most interesting is that a lot of people would _like_ Paypal to be
a bank (or certainly more bank like) and complain bitterly when it comes up
short, and yet few actual banks seem able or willing to extend their business
model to include a lighter weight payments services.

The discontinuity in the market (a demand for services served poorly because
the best entity to serve it doesn't enter the market) is one of those things
that makes me wonder if anyone is paying attention or not.

------
pavel_lishin
> "I knew PayPal couldn't be trusted, but I used them anyway, and they shafted
> me, just like I thought they would!"

He only froze my money because he loves me, he won't do it again, I promise!

~~~
jpallen
> WHY

From my experience in the UK it's the only option for accepting payment that
doesn't have the serious admin and financial outlay of getting set up with a
proper merchant account. Perhaps in this case going with EventBrite from the
beginning would have made more sense but that's only an easy call to make in
hindsight.

Edit: You seem to have changed your comment. Consider this a reply to the
underlying message of your sarcasm.

~~~
pavel_lishin
(Sorry, I thought I ninja-edited quickly enough.)

How serious is the admin and financial outlay? I want to say that it would be
worth it to avoid the risk of Paypal freezing your funds (or worse), but
that's a hard call to make without knowing exactly what the costs would be.

~~~
jpallen
It's difficult/impossible to get a merchant account without a previous trading
history and money to show off. The financial spend isn't too bad, but from
what I can tell you need to have some sizeable accounts before you can get
one. Basically they're aimed at the larger business end of things, which makes
small projects that need online transactions a non-starter.

(I tried and failed to set up a merchant account and instead had to settle for
PayPal as the only other option)

------
nhebb
It's been said before, but it's worth repeating. Conferences are a high risk
business operation. For every SXSW, there's a thousand "Learn to Buy Real
Estate with No Money Down" conferences at the Ramada Inn next to the airport.
Paypal is not in the business of assuming your risk. They are in the business
of processing payments while mitigating their own.

~~~
pavel_lishin
Whatever happened to "caveat emptor"? If you're attending a real estate
conference at a Ramada Inn, you weren't defrauded - you're just an idiot.

~~~
mikeash
What happened to it was that credit card companies discovered that they could
gain additional customers by removing that risk. The end result is now that
most or all credit cards cover the cardholder in the event of a fraudulent
purchase.

Feel free to run your own conference where "caveat emptor" is the rule for
buying tickets, but you won't be able to take credit cards or various other
forms of payment for it.

~~~
jellicle
> What happened to it was that credit card companies discovered that they
> could gain additional customers by removing that risk. The end result is now
> that most or all credit cards cover the cardholder in the event of a
> fraudulent purchase.

What happened was that after defrauding customers became common practice,
Congress passed laws regulating the credit card industry and putting the fraud
onus on the party with the most ability to prevent it, the credit card issuer.

~~~
mikeash
I didn't look into it deeply, but from the law I could find, it appears that
liability is only limited by law in the event that the cardholder never
authorized the transaction.

For this particular case, the cardholder authorized the transaction, and just
didn't get what he expected to get. Maybe that's covered by a different law I
didn't find?

~~~
jellicle
The Fair Credit Billing Act, a revision of the Truth in Lending Act,
specifically covers this:

"(3) A reflection on a statement of goods or services not accepted by the
obligor or his designee or not delivered to the obligor or his designee in
accordance with the agreement made at the time of a transaction. "

Basically that's saying that if you ordered it, but the vendor didn't deliver
properly, that counts as a billing error and must be handled like any other
billing error - the credit card issuer must conduct an investigation, in
writing, document everything, and can only bill the card holder for the amount
in dispute if the card issuer is fully satisfied that the goods were provided
as ordered. So the card issuer is in the business of adjudicating fraudulent
disputes, whether they want to or not, which gives them a strong incentive
(because they're going to be stuck with the fraud) to reduce and prevent fraud
in the first place rather than passing it off to the card holder.

~~~
mikeash
Thanks for the info. Did credit cards not provide any such protection before
this was made law, then?

------
alexmunroe
I've been running an event in the UK for around 4 years now. We have around
1200 attendees and push around £55,000 (around $90,000) through each year.

We had a few small issues the first year where paypal froze our account until
additional verification had taken place but since then and three years of
continuous use we haven't had a single problem. However we've also never had a
chargeback so I would imagine that's heavily worked into their risk
calculations.

------
michaelpinto
You know I keep seeing tech types going on about how much they hate PayPal -
so why doesn't somebody do a startup to go head to head with them? I realize
I'm just a humble designer, but I can tell that even from a usability point of
view they're very vulnerable.

~~~
geoffschmidt
Stripe: [http://techcrunch.com/2011/03/28/stealth-payment-startup-
str...](http://techcrunch.com/2011/03/28/stealth-payment-startup-stripe-
paypal/)

WePay: <http://techcrunch.com/2010/10/26/wepay-ice-paypal/>

Both have Paypal founders among their investors.

~~~
pbhjpbhj
<https://stripe.com/> not live yet <https://www.wepay.com/> \- 3.5% fee, 50c
min, US only.

Any one got a suggestion for the UK?

------
ichilton
I've seen a number of conference organisers complain of this so it must happen
often!

~~~
pavel_lishin
> I've seen a number of conference organisers complain of this so it must
> happen often!

That's not really a valid argument. You don't know how many conferences used
Paypal and went off without a hitch. Not many people are going to write a blog
post saying, "We used PayPal, and it went fine!" - and of those, fewer still
would hit the HN front page.

------
known
Shun Paypal. Use Hawala. Save your time and money.

------
Astrohacker
If you accept bitcoin, then there is no third party that can freeze your
account.

~~~
pavel_lishin
That's also true if you accept payment in soiled panties or puka shells, but
the trick is convincing everyone involved - the venue, the speakers, the
staff, and the merchants you're relying on to print t-shirts and the like - to
accept this as a form of payment.

Praytell, what venue accepts payment in bitcoin?

~~~
mcantelon
It is true that Bitcoin adoption levels don't make it feasible to rely on
_completely_ for conference registration, but it makes sense to start offering
it as an option so we can gradually grow an alternative to Paypal, who has
been pulling these shenanigans for years. It usually takes a day or two to
convert Bitcoin to currency so there isn't a big reason not to offer it as a
payment option.

~~~
pavel_lishin
By offering it as an option, you no longer have the option to not rely on it
_completely_. What happens when _everyone_ decides to pay in Bitcoins? I don't
think the caterers will accept them as a form of payment - they'll echo Doug
Shaftoe's sentiment:

" Doug’s regained his composure now, and is back to belly laughs. "What’ll
that buy me? Pictures of naked girls on the World Wide Web?" "

~~~
mahyarm
It's a medium of exchange, they can exchange it for USD.

~~~
pavel_lishin
So are puka shells. And bitcoin's exchange rates are fluctuating pretty
rapidly, especially since exchanges tend to randomly disappear. What happens
when you have $5,000 in bitcoins, and the bithurf.com goes down and suddenly
you only have $500 in bitcoins?

~~~
mcantelon
>And bitcoin's exchange rates are fluctuating pretty rapidly

Not that rapidly. When pricing in Bitcoin most buyers are okay with prices
being based on recent pricing. Add a bit of padding to your Bitcoin price to
allow for normal fluctuations and you're fine.

>What happens when you have $5,000 in bitcoins, and the bithurf.com goes down
and suddenly you only have $500 in bitcoins?

You wait a couple of days for the value to go back up (at least that's how it
played out when Mt. Gox crashed). Significant non-short-term pricing movements
in Bitcoin land don't happen overnight.

------
ltamake
PayPal is a horrible company. They freeze accounts, hold money hostage (pretty
sure illegally), refuse to delete user data (illegal in the UK), and screw
smaller users over by forcing them to add bank accounts or sign up for their
shitty credit card just to verify that their account is real.

