
Burning man defeats PayPal - alexandros
http://www.fastcompany.com/1680570/burning-man-defeat-paypal
======
pyre
I think that PayPal has the same problem as many police departments. The
police spend so much time dealing with criminals and looking for criminals,
that soon everyone that isn't a police officer looks and feels like a
criminal.

PayPal seems to have the same issue with fraudsters. They spend the majority
of their time dealing with fraud and looking for fraud (the good transactions
are automated and therefore abstracted away from human eyes for the most part)
that everything that comes across their desk looks like fraud and is treated
as guilty until proven innocent (hey, just like the IRS!). The assumption
probably is that 'the system' detects fraud and 'the system' is practically
infallible, so when it flags something as fraud they need mountains of
evidence to prove that 'the system' is wrong (because 'the system' is perfect,
didn't you know?).

------
blakejennelle
We had a nightmare like this when we first launched MyDunkTank and were using
PayPal for our payment processing. They suspended our ability to accept
payments without warning or notification and then dragged us through a
ridiculous and costly paperwork process for over a week.

We supplied everything they asked for and more. They denied our appeal and
then locked $2,600 in our account for 180 days without explanation. We worked
every channel we could to get a more reasonable outcome and it was to no
avail.

There were a few good people in the PayPal bureaucracy who became champions
for us but they were powerless. It was very discouraging.

The irony is that PayPal originally challenged the man. Now they are the man.

~~~
maushu
When you look into an abyss, the abyss also looks into you.

------
ck2
There are precious few "victory" stories over PayPal.

Unlike a credit card company, if they feel they might have to dip even 1 cent
into their own profits to deal with a bad transaction, they will immediately
kill an account, no matter how large or how old.

I simply do not understand why there are not more competitors to PayPal -
don't these corporations see the billions PayPal has made (THREE BILLION
_profit_ per YEAR) and how they get to skirt all the rules and regulations
that banks have to follow? Why not jump onboard and give consumers some
choices?

~~~
wallflower
> I simply do not understand why there are not more competitors to PayPal

If you read the excellent interview with Max Levchin in Founders at Work, he
alludes to the fact that PayPal is really just a state-of-the-art, best-in-
class fraud detection system with a payment frontend. He also says that Banks
are more conservative than PayPal - in that they can't go after a business
model where there is going to be fraud - and the game is to minimize the
losses.

~~~
tomh-
He forgot to mention it has an extremely large number of false positives using
that system. The reason it might work is because they take/freeze money from
innocent customers. The amount of horror stories about Paypal significantly
outnumber the horror stories about regular banks or credit card companies.

~~~
patio11
_The amount of horror stories about Paypal significantly outnumber the horror
stories about regular banks or credit card companies._

I surmise this is because you're a techy and you talk to people who run
businesses online on a regular basis. If you spent a lot of time on, e.g.,
credit card discussion boards (they exist), or spoke to "regular people" about
their payment issues on a regular basis, I suspect you would come to the
opposite conclusion in a hurry.

Paypal is not a scam which achieves profitability by freezing accounts. That
is crazy talk.

~~~
tomh-
You are right I'm a techy, I talk to people who run online businesses, they
use PayPal and other methods. PayPal is by far the biggest problem when it
comes to payment solutions. Also I'm from Europe, which means I talk to people
who use the common solutions in Europe to deal with payments, which is direct
bank transfers or an online alternative provided by banks (such as iDeal in
Holland). While our banks don't require as much documentation as PayPal
sometimes requires, you also don't have to threaten them with lawsuits to get
your money (I've seen that happen). They even have an chief escalation officer
who jumps in in case clients threaten them with lawsuits.

PayPal doesn't have the right to just freeze money for periods of 180 days
without providing sufficient methods for their customers to quickly resolve
the issues. 180 days for freezing all money for one suspicious transaction is
absolutely ridiculous. I don't claim PayPal achieves profitability by freezing
accounts, I do claim they regularly screw their own customers with
questionable account balance freezes.

~~~
ahoyhere
Banks in Europe are tightly controlled. You have no idea what it's like in the
US.

Imagine a system where…

1\. You pay a 20% fee to withdraw money from an ATM that doesn't belong to
your bank.

2\. The bank puts thru a charge they shouldn't, you run out of cash, and you
get whacked with a $35 fee.

3\. The bank charges you a monthly fee after that - another $35 fee.

4\. The bank shuts off your card because you're in another city, meanwhile
you're lost in the dark, and alone, and out of money, and can't get a cab.

And on and on and on…

Not to mention outright defrauding.

~~~
jrockway
1\. It's a 20% fee when you request $10, or a 2% fee if you request $100.

2\. Overdraft fees are disallowed by law and are opt-in now.

4\. Also, it's not typically the banks that cancel cards, it's the processing
network that does.

Most problems people have with banks are user-error, plain and simple. When
you misuse a computer program, you waste time. When you misuse a bank, they
charge you money.

~~~
oasisbob
re #2: Overdraft fees are only opt-in for certain classes of transactions,
namely ATM and non-recurring debit transactions.

Checks, ACH transfers, and recurring debit transactions can still generate
overdraft fees without an opt-in consent.

re #4: The networks pulls the trigger, but the standing orders come from the
issuing institutions. Fraud detection is often used as a differentiation
feature by the networks to attract bank customers, the networks themselves
don't have a direct incentive to prevent fraudulent transactions beyond this:
they don't stand to take a loss.

------
wccrawford
I hear way too many stories about this. I was even paying a company through
PayPal when they had their account frozen and their money taken. 3 times. The
company continued to use them because so many of their customers demanded
PayPal. They had continued to use PayPal because it was cheaper to lose their
funds (they regularly withdrew) than the customers. After the third time
losing everything in their account, they finally had to tell their customers
'no PayPal' and live with the consequences.

Yes, you read that right... PayPal took every cent in their account 3 times.
And there's no law against it.

~~~
ido
What is a better alternative?

I understand Google Checkout also had similar issues in the past?

~~~
Throlkim
I've yet to use it myself, and I'm not sure if it's entirely been released
yet, but Amazon has a payments system in the works:
<http://aws.amazon.com/fps/>

~~~
awad
It seems to have been out for a while. Does anyone have any experience with
FPS? I'm launching a new project soon and the one thing left is payment
processing. I'm scared to be tied to just PayPal and am looking into Google
Checkout and Amazon as well.

I know, I know, just get a merchant account. And I will. But this is not
really a startup or company and much more of just a small idea I'd like to
test out. Ideally, if it picks up steam, I'll switch over to a real merchant
account.

~~~
ido
isn't merchant account US only?

Seems like a pretty significant disadvantage for an internet business.

~~~
awad
Not necessarily. There are international providers. Authorize.net, for
example, allows for international payments.

------
gimmejimmy
Here is another example of how PayPal is a bit shady:

Sign into PayPal to send money. If you have a credit card as a payment method
and a bank account as a payment method, PayPal will auto select your bank
account. That's fine, except when you change your payment method from the
default bank account to your credit card. A confirmation page comes up and
tries to change your selection back to your bank account. There are two
options: Use Bank Account / Use Credit Card. These options are randomly
changed back and forth to confuse the user. Even the highlighting of these to
option (which one is yellow) is randomized to make you accidently select the
Bank Account option.

~~~
christonog
Yes! I mainly use my credit card for everything online, including paypal, and
that trick does get me on some occasions when I'm not paying close attention.
It's probably a cost saving measure as credit cards most likely cost more to
transact with than bank accounts.

~~~
oasisbob
Indeed. ACH processing is dirt cheap. I also wouldn't be surprised if the
terms of ACH transactions are more favorable to PayPal than those of
MasterCard/VISA.

The ACH system has very strict rules guaranteeing payments once they clear the
network, as opposed to the more consumer friendly rules that the card networks
offer. ACH, afterall, is meant to be used by financial institutions that know
exactly what they're doing.

------
jasonlbaptiste
I refuse to go near PayPal. We don't accept it for PadPressed. We might be
losing some revenue, but I can't support paypal / leave ourselves open to the
shit they pull. Same thing with a conference we're putting on in October. Not
allowing PayPal as an option. I hope WePay or someone else succeeds as being a
viable+robust alternative.

~~~
helveticaman
Use daily sweep.

------
techsupporter
My organization had this same problem. We formed a cooperative corporation,
filed for tax exempt status, and then opened bank and PayPal accounts. Within
7 days of opening the PayPal account for our org, it was frozen on the grounds
that extra documentation was needed. Before I could send those documents,
PayPal then turned around and froze my personal account since the
organization's account had my name as the "responsible party" contact.

The resolution? There hasn't been one. I tried to get PayPal to accept our
tax-exempt documents, but they've refused because we're not a 501(c)3 charity
(we are 501(c)12) and both the org and my personal accounts stay frozen.

------
rpledge
Opencamp had similar issues, which only got resolved under public pressure
<http://openca.mp/blog/the-paypal-and-opencamp-resolution/>

------
miah_
I find it amusing that people still use Paypal. Its been widely documented
that they're a horrible company for _years_ now. I closed my account a few
years ago and haven't looked back.

Paypal will _not_ change their ways so long as people keep giving them money.

Paypal is _not_ a bank and thus doesn't have to follow the same rules as a
bank. Please people, quit treating it like its a bank. Do not store your money
there. Do not link it to your primary checking or savings accounts.

Remember! Paypal _will_ cause you great pain and serious amounts of anger. Its
only a matter of time.

------
iamelgringo
Can I just say, kudos to WePay for picking up the drop and landing the
account. These guys kick ass.

------
inc
<http://i.imgur.com/DaLcV.gif>

------
Ixiaus
Burners are an innovative, sharp, and down to earth bunch; I'm not surprised
PayPal got "burned" by pulling what they did. Burners are also a big(ish)
community, some of which are influential people in mainstream society.

Glad to see someone met their needs, WePay just got some damn good publicity.

------
HeyLaughingBoy
The bigger news here is that PayPal is getting more negative publicity in
mainstream press and that will, over time, force them to become more
responsive.

A few hackers bitching in online forums is one thing, A large social media
response in connection with a well known festival threatening to close
accounts is going to be much more effective

------
cloudbrain
This is why I withdraw all funds from PayPal every weekday morning.

PayPal has been the sole payment solution for my software company for more
than 5 years. 99% of all of my money, my families money and my employees
salaries goes through PayPal. When I bought my first home (at the end of 2005,
oops...) I had to call PayPal to get some financial details for the mortgage
company. I spoke with a nice person on the phone from PayPal and they faxed me
the documentation I needed write away. Every time a new payment processor
comes on the scene I check them out, but none have been able to offer the
pricing or features I get via PayPal.

That being said. I have read all the horror stories. So I just assume that any
money left in my PayPal account overnight could be potentially lost. No
problem, I just withdraw it every morning so my lost potential is always
minimal (a few grand).

I don't de recurring subscriptions. I imagine things would be different then.
If I did subscriptions I think I would want my own merchant account - you want
to own as much of the customer as you can.

------
ericz
Can we start the move to Google Checkout and Amazon Payments? They both charge
the same amount of fees as PayPal yet do not have draconian policies and
downright retarded treatment of their customers

~~~
dhimes
Customer service with PayPal is a hundred times better than customer service
with Google, in my experience. I've never had a problem getting CS on the
phone with PayPal. Google is a different story.

~~~
jrockway
And Amazon?

~~~
dhimes
I don't know about them yet. I hope somebody answers you, though.

------
techiferous
My wife is organizing a conference using a non-profit and is going through the
same PayPal headaches.

This is extremely bad customer service. All PayPal has to do is (1) refuse to
do business with non-profits or (2) present non-profits with an accurate
description of what could happen (account freezing, etc.) before they sign-up.
(Burying this in the terms of service doesn't count, by the way.) Customer
service is as much about expectations as it is about delivering.

------
stevederico
Congrats to wepay. Great job on seizing a customer in trouble and meeting
their needs. There are plenty of other frustrated pay pal customers, this
could be a great starting point for wepay. Go get em wepay

------
markbao
PayPal is absolute trash for payment processing. Horror stories aplenty. Take
the time to obtain a merchant account.

------
donaq
Wow, I did not know there was so much bad karma for Paypal. Does anyone know
of alternatives for businesses not located in the US?

------
edj
Reading this thread made me a little paranoid. So I logged into my high school
reunion account (I'm the organizer) to withdraw the funds into our bank
account, and lo!, of course there's a hold on one classmate's payment. That's
$75 we may never see... at least not in time to pay our caterers and such.

------
Mistone
seems like they folded to social pressure of the burner community which is
vocal and well connected, but their change of heart was driven by wanting to
further avoid a PR shit storm. Joe Q web company or individual has no chance
of getting similar treatment.

------
elblanco
The tl;dr version, "Burning man defeats PayPal by routing around it."

------
pinksoda
PayPal once made me refund every customer in the last 6 months. They said it
was the only way to unfreeze my account. I gave them the thumbs up because I
had no other options at the time, and they said, "you have to manually refund
them one-by-one yourself and then call us when it is done". It was really
strange.

They permanently froze my account after I refunded everyone and refused to
talk to me when I called. I wasn't able to get a merchant account and I lost
thousands of PayPal recurring subscriptions. This was the death of my first
start-up.

PayPal is a scam and it's not as uncommon as you think. If you're using
PayPal, your time will come. I didn't think they would do it to me either,
they never bothered me once until all of this went down.

~~~
callmeed
We've been processing 5 figures a month with PayPal subscriptions for over 5
years (we've since moved to a different system but have a lot of legacy
customers still on PayPal).

While I've had some odd issues here and there and the user experience for
clients is poor, I've never had anything close to what you've described.

I have to say–either you're wrong about "your time will come" or there's
simply more to your story.

~~~
nod
It sounds like your time hasn't come yet.

------
bluelu
To every story there is also the other side of the story. They obviously don't
freeze accounts account just like that for fun, so they certainly had some
reasons to do so.

~~~
matrix
The story isn't really about them freezing the account. I think everyone
accepts that PayPal needs to be vigilant against fraud, given the amount they
deal with. The story is that that legitimate customers are pretty much
powerless to unfreeze their accounts; there's no due process, no oversight,
and no accountability. If PayPal decides to screw you, that's it. Game over.
Thanks for the free money.

------
InfinityX0
This is ridiculous. PayPal is not some evil "big brother" - they are a company
whose entire business model relies on stopping fraudulent activity, and as
such, things like this often occur. Pick your poison - either have this happen
on occasion, or have your money frequently stolen and more likely, be made
essentially impossible to transfer safely on the web.

I will take the occasional inconvenience in exchange for a payment method that
makes my life much, much easier.

~~~
Gobiner
I don't doubt that you'd accept the occasional inconvenience _to other
people_. Try having your own money taken away from you and report back to us
about the "inconvenience."

