PayPal has a worse track record than most widely known alternatives. And at least in the US, they're less regulated than the banks from which one typically obtains merchant accounts. These two facts together are a bad combo.
I believe they are regulated as a bank in the EU. That said, their EU head office is in Luxembourg, which along with Ireland is one of the most pro-corporate locations they could have chosen and one of the least likely to take a pro-consumer stance where EU law allows them discretion.
