
Why I am always on the lookout for a PayPal alternative - yashg
http://www.yash.info/blog/index.php/uconomix/this-is-why-i-am-always-on-the-lookout-for-a-paypal-alternative
======
RyanZAG
Can't really see how this is Paypal's fault directly - this is just Paypal
bowing to regulations - and if they didn't, they'd be in serious trouble.
Chargebacks are a requirement by law. No keeping money out of a bank in India
is Indian law. The two of these terrible laws fit together to create an awful
experience, I agree, but the solution is to fix the laws. Any competitor to
Paypal would be forced to do the exact same thing in India.

~~~
kamaal
>>No keeping money out of a bank in India is Indian law.

And for a very good reason.

Tax evasion is very common in India. In fact the most generally know thing is,
if taxes are not deducted at the source of the transaction they won't be paid
ever. Big money people are a little different, they are small in number to
monitor and their transactions can be traced out easily.

But small to medium scale traders and business hardly pay taxes. Some even
pride in doing so. The best case I've seen among these guys is paying some
thing like paying 5% of the taxes they are supposed to pay. I've asked a few
people why they don't pay, and the answer comes simple. If they pay the right
taxes once, given the business growth they have to pay a little more next
year. So they use every trick in the book to pay as little or nothing at all.

Now if they are allowed to freely park money in places where it can't be
traced easily(like these) they will have a field day.

May be if citizens show a little responsibility and do what they are honestly
supposed they will get laws that trust each other. Until then if the
government has policies to curb fraud you shouldn't look too surprised. After
all, laws are optimized for the common case.

~~~
markokocic
Just to be clear, paying little or no taxes is only government fail to collect
them. It has nothing to do with responsibilities. There is no law in the world
that forces anyone to maximize tax that it has to pay, so everyone has a right
to pay as little tax as legally allowed.

~~~
hobs
The difference in your arguments is that the OP is saying they are paying 5%
of the tax they are legally required (not allowed) to pay. It is just by using
deceitfulness that they do not have to pay the full tax owed.

There is a big difference between minimizing your tax burden and pretending
you dont have assets/revenue so you straight up dont have to pay taxes on
them.

------
ppradhan
not exactly a paypal alternative but if more devs outside the US could use
reasonable companies like stripe, braintree etc for CC processing we would.

until good CC processing companies go worldwide, what are the choices? just an
idea, but I wonder if it is legally possible for an american company to
provide the services of a payment collector on behalf of non-US devs. people
could integrate stripe's API to pay to this company and they could handle
wiring money worldwide for a small reasonable fee.

Even in countries like Australia CC processing is expensive and potentially
restrictive to small startups and devs. Some kind of company in the US that
takes payment on your behalf and wires it worldwide with reasonable charges
would be a boon to countless devs and startups all over the world. That or
bitcoin takes off and everyone just starts using it. Until then, Paypal is
your payment buddy albeit a dodgy one that rips you off every chance it gets.
Thus their immense power.

EDIT: Also worth pointing out that the guy above is being given a hard time by
his country's laws and it's banking system - not just Paypal.

------
codeduck
I work in currency conversion, and honestly the conversion rates here do not
look bad for an ad-hoc, small value transaction. The spread between buy and
sell rates is how traders make profits. If there was no spread, or the spread
was small, traders would need to take a proportion of the conversion as a fee.
Some banks and third parties do this - they offer a really wide spread, and
then take a proportion over and above that. Also, Paypal may not itself be
interfacing with the currency markets, but may rather be using a third party
intermediary to perform the actual currency trades.

~~~
yashg
I have $200 of yours with me. I initiate the process of giving the $200 to
you, like I take out my wallet. Then I stop before I actually give the money
to you, I put my wallet back and then I tell you "Hey you know what now I owe
you only $180!"

This is what it looks like - <http://i.imgur.com/GIaP5O2.png>

Does that look right?

~~~
codeduck
Paypal has $200 of mine with them. According to the rules governing financial
institutions in the country in which I reside and from which I have registered
for their services, ther are required (by law, as a condition of their
continued right to offer a payment service in that country) to pay that $200
into my account by close of business today.

My account is for Rupees, not USD. Because of the way the Banking system
works, that currency must be exchanged so that it can reflect in my account.
This exchange is performed at the current market rate, plus some surcharge of
fees levied by Paypal's liquidity provider to perform the currency conversion,
and by Paypal in order to cover the SWIFT interbank charges plus any
backoffice administration they need to do to verify my identity. There are
additional verifications they need to perform on the US side; for e.g. that my
bank account is not on a Interpol, NSA, FBI, CIA or INS watch list.

That money is then sent, likely via the SWIFT interbank network, which levies
a charge.

Those funds arrive at my bank, where my bank levies a charge. The money
reflects in my account, and I see that 'Paypal' have given me a terrible
exchange rate.

They haven't. They've likely given me a reasonable rate, because it is not in
their interests to charge punitive exchange rates as it will drive customers
to competitors.

My point is that there is a whole different level of processing and
infrastructure hidden behind Paypal's facade that you are not privy to; all of
it has people performing tasks to move the currency from a US account to a
Indian account, and all of that requires a modicum of human oversight because
of incredibly strict financial fraud controls.

Trust me when I say that the small markup Paypal is charging you is nothing
compared to the level of bureaucracy you would run into were you to try to
perform the above exchange manually.

~~~
yashg
That would hold true if the transfer had been completed. PayPal is able to
stop the process and credit my account back means that money has not actually
left their system. I agree the underlying mechanisms are much more complex but
I also understand that what we see in that screenshot is just entries in a
database and no real transfer or conversion of money has taken place as yet.
If it had happened a day later then I would accept the fact that the process
was well underway and some money had changed some accounts.

The point is PayPal decides right at the time of beginning with the withdrawal
how much in Rupees it is going to pay me. So if it decides for some reason it
doesn't want to pay me, it should again give me back the same USD.

~~~
mnarayan01
I'm not entirely sure I follow everything that's happening here, but it seems
to me that what you're requesting would, if nothing else, allow a currency
trader to use PayPal to conditionally do conversion only if they were making a
profit. PayPal is doing the conversion at the time at which it is responsible
for the conversion rate, which seems like the "right" thing to do. Admittedly,
this results in subpar outcomes for people in India, but I'm not sure they can
do anything different.

------
saurik
In case anyone is wondering where the numbers come from, PayPal charges a 4%
overhead to convert money to rupees on demand as part of an immediate
transaction (such as a withdrawal). When the money was returned, he was given
the more lenient "convert balance between currencies" conversion rate of 2.5%.
I point this out, as the author of this article seems to equate them as
PayPal's "pathetic conversion rate".

The chargeback, of course, is a cost of doing business: if anything, PayPal's
chargeback rates are actually quite low (as they have such an extensive system
for handling disputes internally) and as a seller of pure digital goods I've
been amazed that I often win true chargebacks that are marked "unauthorized
charge" (which really shouldn't happen: its really just buyer fraud) as PayPal
argues the case on my behalf and can demonstrate "the user really paid for
this".

What sucks, of course, is that the user got double-whammied on the currency
conversion, but I really hesitate to blame PayPal for this... if anything, I
blame the Indian banking system, which has decided to put in place the laws
that state you aren't allowed to hold balances with your credit card
processor; the result of this is that your balance in India has to be forced
out of your PayPal account every day, even though that money could be charged-
back at any time.

As for the money being credited back the first time and not the second, that's
quite common: he didn't realize that fee existed the first time, so the
customer support people there "let him slide" and credited everything back;
however, the second time he really should have known that was going to
happen... no one, to be clear, is forcing him to use PayPal; in fact, his
country really doesn't want him to be using PayPal, and he's doing so anyway.
If he were in a country that didn't have laws making it difficult to use
PayPal, he wouldn't be having such a difficult time doing so.

Thankfully, this person does seem to understand that RBI is at least somewhat
of a problem here: he even wrote an even angrier message about RBI making it
nearly impossible for him to buy things from people online using PayPal.

[http://www.yash.info/blog/index.php/entrepreneurship/reserve...](http://www.yash.info/blog/index.php/entrepreneurship/reserve-
bank-of-india-and-its-senseless-policies)

What I find ironic about this other article is that in this piece on PayPal
he's angry that he can't just let his Indian bank handle things for him, but
in his other article he's slamming the Indian banks and wishing he could use
PayPal.

> Every time I spend $$ for something where I could have used my PayPal
> balance I have to give a cut to some worthless Indian bank for using the
> credit card!

To be clear: if he were in some other country, he'd be allowed to store a
balance at PayPal in relation to his outstanding chargeback risk.
Additionally, he'd be able to store his balances in his native currency. If he
wanted to convert the currencies back/forth, he'd be able to do so on his own
schedule and be able to do it to his outstanding balance (as opposed to while
immediately moving funds), giving the flexibility to get the 2.5% rate (which
really isn't that bad) for all conversions. In fact, he'd probably not have to
do the conversions at all, as he could sell the software in his native
currency and have the buyers do the conversion from whatever currency they
have, rather than doing it from dollars on his end.

PayPal really does go to great lengths to make this stuff work and generally
work well, but everyone is being screwed here by RBI's policies (which, to be
clear, might have some underlying good reason I just don't understand because
I'm not privy to India's political requirements): I mean, let's put it this
way... he's still using PayPal, and yet he hates it that much? PayPal's not
doing that badly here...

~~~
yashg
I am the author and yes RBI and PayPal both are to be blamed here. I would
like to hold balance in My PayPal account only because of a possibility of a
chargeback or a dispute. I lament RBI for not allowing me to do that.

I lament PayPal because when they take $200 from me, they should return me
$200 and NOT $180. I have not said anything about the chargeback charges. I
did not pay anything for chargeback because I refunded the transaction. I DO
understand that chargebacks are a part of business.

My grouse is with the ridiculous pretense under which PayPal duped me out of
$24.99 (over two cancellations) in the name of currency conversion charges.

Take a look at this - <http://i.imgur.com/GIaP5O2.png>

Does it look like a fair deal from any angle?

//he's still using PayPal, and yet he hates it that much?//

Yes because I don't have any other options - at least for now. Indian Payment
gateways won't allow me to charge in USD, and I can't use Stripe/Dwolla or any
half decent system because I am not in the US or Europe.

~~~
kamaal
No way is the RBI ever going to allow parking funds in a non-banking
institution in a country where tax evasions are so high.

By the way they are not be blamed here, the fraud prevention policy is in
place because fraud happens.

~~~
yashg
Right, so they'd rather have companies incorporating in other countries for
the sole purpose of being able to collect money from their customers! Seems
legit.

For instance - [http://blog.freshdesk.com/how-to-incorporate-a-us-
corporatio...](http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-
from-outs/#.UJjX-oYkrmJ)

That's an even better way to save taxes. Delaware has 8% tax. India has 30%.
People won't even bring the money in India.

RBI is treating PayPal as some swiss bank account. Keeping all the USD balance
in PayPal doesn't make sense. I have to bring the money in India because I
need to pay the bills and salary and all. And the PayPal balance doesn't earn
any interest. But when I have to pay the hosting charges or domain
registration charges which are in USD why should I not be able to use some
money from my PayPal account which is already in USD? RBI insists that money
first come to an Indian bank and then used for paying abroad. Again costing me
conversion fees every time the money crosses the border.

~~~
nmridul
Its not just the black money, its consumer protection that the Government is
keen on.

India Government just wants Paypal to behave like a bank if they are going to
hold consumer;s money. If Paypal follows the regulation, they will end up
paying interest on the money they hold. And they will forced to insure the
amount.

And paypal works around this issue by pushing the money to consumers bank when
it reaches the legal limit.

You can't blame the Government for this mess. Its Paypal that is working
around the system.

~~~
phdp
Paypal is not working around the system: they are simply not a bank. They are
a payment processor. Just think about what would happen to the fees that he
already complains about if they had to insure the deposits.

~~~
nmridul
And a payment processor should not hold the customer's money for a longer
duration. That is what the Government is trying to push them into complying.
Just like any other payment processors operating in the country, Paypal can
also keep the money with them for just enough duration that is required to
process the payment. After that they need to TRANSFER the amount and not hold
it with them.

If the India Govt relaxes it for Paypal, multitude of such payment processors
would start operating and one day you would see them disappear with people's
money. Then again you will blame the Govt.

------
digitalengineer
Why does PayPal have such enormous power? What's stopping other initiatives
from getting enough traction?

~~~
lenazegher
> Why does PayPal have such enormous power? What's stopping other initiatives
> from getting enough traction?

They have a huge amount of inertia because the average guy of the street has
heard of them and can trust them to some degree.

Trying to get people to sign up with a new, unknown payment processor during
checkout will have a strong negative effect on your conversion rates.

~~~
digitalengineer
Sounds like a trust-issue. Perhaps that's it? Startups often fee they don't
have do spend money on marketing. But a trust-issue is a good problem to have,
branding can take care of that. First thing to do is convert 'trust -> faith &
confidence'.

" _...there is also growing evidence that increasing numbers of people today
are unwilling to engage in social or economic contracts based on trust.
Globalization has arguably contributed to a loss of social connectedness in
many developed and undeveloped nations by disrupting traditional employment
patterns, and people who have seen their social networks disrupted may be
reluctant to trust others.

Meanwhile the traditional family has been under assault by other social
changes, and young people may find it difficult to even learn to trust. For
many people, relationships based on faith or confidence may feel more
comfortable than those based on trust._ Source (2005):
<http://www.brandchannel.com/features_effect.asp?pf_id=263>

------
drmr
Perhaps offer a variety of payment options to your customers and add a small
fee to the methods that give you problems (like PayPal).

This will give feed-back to the customers about the convenience of these
payment options and will give them an incentive to use a different method.
(people love discounts)

------
BuddhaSource
We used PayPay for our product <http://justmigrate.com>

It is a night mare if someone asks for refund after auto withdrawal and never
change PAN details unless you are okay with 7 days downtime.

You missed another important point, we also got few users from India and
thanks to RBI regulations using paypal we cannot accept payments from another
Indian. Well just offered them free migration.

Also if you are targeting consumers in US they are little more confident
paying with PayPal vs asking for credit card details. This is an important
point, always keep PayPal as an alternate when accepting payments from US
market.

------
Jhsto
Today I received an email to dispute my authority by sending in them a proof
of my indentity, address and statement of my bank or credit card.

What I found rather obnoxious was that they had records of my credit cards
which I had deleted from their system years ago. The email clearly listed all
the last four digits of all credit cards I had ever had on them, even though I
currently have no more than one linked to my account.

Top of that my account is linked to a profile of some Chinese personel, even
though I'm Finnish, leaves me without words to say.

------
coob
Does anyone have a good background on why PayPal is not subject to the same
regulations as banks? Is it because they don't lend?

~~~
lambada
In the EU they are regulated as a (Luxembourg) bank. I assume you're talking
about in the US?

------
utunga
It's this kind of bullshit from paypal and the banks generally that is
providing wind beneath the wings of alternative payment systems which charge
the true (much lower) cost of international money transfer... Great! Bring on
a bitcoin future.

------
philhippus
Enough with this nonsense. Take the plunge and start using Bitcoin. Whatever
risks and uncertainty Bitcoin may have for vendors is miniscule compared to
the daily fleecing handed down by the likes of Paypal.

------
enrmarc
Does anyone know a good alternative to PayPal?

~~~
jeltz
Depends on which market you target. In Russia and some of the other former
soviet countries there is WebMoney which has low fees (0.8% for transactions,
unknown for withdrawals from WebMoney) and as far as I know does not screw
over its customers as much. In Sweden there is Klarna for letting ordinary
people pay with invoice. In many countries there are options where you can use
your internet bank to pay.

And if it is credit card payments you wish to receive it is worth looking into
a getting an account at a payment processor.

------
csomar
So, I'm an asshole if I purchase your product and decide later to do a
chargeback (you don't even have a chargeback policy or a policy at all).

Apparently, you are not the nicest person to deal with on earth, and you are
complaining about PayPal because _your_ country laws are complicated?

Also, exchange rates are indicative. There is always a middle men when you are
exchaging currencies, and he makes money by charging that rate.

~~~
jusben1369
I wonder if you're confusing refund for chargeback. Chargebacks are often used
by people who a) use the product for a while, b) decide they want their money
back, c) know the vendor won't return their money as there's no real reason to
so d) call up their credit card company instead, dispute the charge, get their
money back and see the vendor lose that sale + get hit with a $25 chargeback
fee.

~~~
itsybitsycoder
That's a bit one-sided, don't you think? They're also often used when
companies fail to provide the product/service that was paid for, or when the
charge was unauthorized. That's what it's there for. The author doesn't say
why the chargeback was made so I'm not sure why we're assuming it was
fraudulent. The software site promises a lot of features and it's entirely
possible that the buyer required one that didn't work as advertised. It's also
possible that the credit card used was stolen, which would make the original
buyer, not the person doing the chargeback, the "asshole".

------
stblack
@yashg FYI your blog prevents zooming on tablets and small devices; could not
read.

~~~
yashg
Yeah, need to change the theme...

~~~
stblack
Just remove the < meta name="viewport" ... > line.

------
superflit
Easier solution:

Have a US based paypal account.

Yes it works way better, it is not a safe haven from chargeback but the
service and US laws are more stable.

More stable = the laws does not change so much as the non-english countries.
Maybe it is the common law, I do not know. But there is a reason the whole
bank system power is in common law powers.

~~~
arbuge
Wouldn't you need a US bank account & US taxpayer ID to make that happen? Good
luck getting those from India in the wake of the Patriot Act, etc.

~~~
yashg
Not that difficult. People are already doing it and I too am seriously
considering it. [http://blog.freshdesk.com/how-to-incorporate-a-us-
corporatio...](http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-
from-outs/#.UYjmScqT7cO)

------
jusben1369
What would you do if PayPal wasn't in India?

~~~
kalleboo
I imagine he'd have to use a domestic merchant account, and post his prices in
INR instead of USD. He'd lose customers who don't understand non-USD prices or
think it looks scammy.

~~~
yashg
Yes. When I say the price is $29, people expect to see $29 on their credit
card statement. $28.xxx will make them suspicious.

There's a reason why Apple rounds prices on App store to nearest .99 in local
currencies so people pay exactly what they see.

------
skadamat
Venmo.com

that is all

~~~
daxelrod
Venmo is doing what PayPal started off doing: mobile payments between users.

PayPal, in this lament, however, is acting as a payment processor for someone
selling something. Venmo doesn't seem to do that.

------
lgarciaac
dont use it ... end

------
dcc1
Whats the complaining about for fucks sake! Our company had 7000 euro frozen
for 6 months while those skullheads were deciding whether to give us our money
and not telling us why they are doing this Then they proceeded to close my
personal account simply because I was the company director

Thats for a 6-7 year old or so hosting company that has always been in profit

Maybe more Indians like the above guy start using bitcoin, the world would be
a fucking better place without Paypal

~~~
aneth4
I guess you won't complain when I cut off one of your arms, since some other
guy lost all four limbs in a car accident...

Unfortunately, even if he accepted bitcoin, probably less than a tenth of a
percent of customers would pay with bitcoin. I agree though, that would be
better.

