PayPal did not make up this policy; it's based on Visa and MasterCard's Operating Regulations, which predate PayPal's very existence. I have first-hand experience that not only is this in virtually every merchant services contract at every bank in the US, but it's actually enforced, exactly the same way PayPal enforces it.
8 years back I had a sudden influx of chargebacks from a single scammer that used a bunch of different cards on one of my websites to buy services, back before I knew how to spot that kind of activity. My real, regulated bank (First National Bank of Omaha) terminated my merchant account and held several thousand dollars for exactly 180 days with no recourse for me. They never saw another chargeback against my account, but I still had no access to that money for 6 months. Exactly the same as PayPal does when it terminates an account for activity it deems high risk.
Yes, think about that. A merchant account -- where they hold your company's money -- relies on your personal credit score.
Anecdata: I had two chargebacks in five years of web software sales. Both claims were buyers ripping me off. I provided signed FedEx receipts for boxed software shipments and IP addresses/dates/times when the customer registered the software and downloaded updates. I ate the full cost (plus investigation and chargeback fees) both times. (This is "cost of doing business" and not an opportunity for a blog post, IMHO.)
From the post: "And thank god I made that [five figure] withdrawal when I did, because yesterday came the second phone call, informing me that a reserve would indeed be placed on my account."
I believe this action is what actually triggered the issue. If he paid the costs of running his business out of his PayPal account and took consistent monthly paychecks, it would have been far less of a flag.
Sucks that you have to do it, and we software types are famously short-tempered when it comes to dealing with real-world bureaucratic nonsense, but sometimes a bit of careful planning and playing the game wins the race.
When a merchant is terminated for fraud, breach of contract or excessive chargebacks, they can be placed on the TMF (Terminated Merchant File) and MATCH (Member Alert to High-Risk Merchants) lists which all Visa/MC member banks have access to. The social security numbers of all the principals are added to that list, so that if they apply with a new business somewhere else, the bank knows they've previously been a principal of a business some other bank terminated, and the reason.
I've noticed a disturbing trend in this respect recently, with seemingly everyone from law firms to banks wanting personal guarantees from someone to back up the company. This practice should, IMHO, be prohibited by law, and this should be impossible to override via any contract.
The entire point of a limited company (in UK terms) structure is that you know you are running a legally separate entity, and everyone else knows they are dealing with a legally separate entity. Everyone should judge the risks they are willing to take and offer terms that factor in those risks accordingly. This is done to incentivise people to start new businesses where there may be some degree of risk, without having to risk literally the roof over their heads to do it, and is universally acknowledged to be in the interests of economic development, which is why every major economy in the world has a concept analogous to that limited company.
Checking the credibility of the principals and asking for things like business plans and company financial statements is all perfectly reasonable so that a potential business partner can judge the level of risk. However, allowing piercing agreements is simply a completely one-sided deal: the little guy is now back on the hook for all of the risk, yet still takes the hit on all the bureaucracy associated with running a formal company.
If such agreements were banned, the banks and lawyers and other high-powered services would still have to deal with other businesses or they'd have on customers. They'd just have to be more realistic about what they charged if they wanted to continue working with profitable customers in the long run.
[Edit: Incidentally, piercing agreements do not seem to be completely universal. We've seen some fairly unpleasantly one-sided terms while investigating payment services, frequently including things like requiring direct control of your main bank account so they can grab whatever they feel like whenever they feel like it, but not everyone has asked for personal guarantees (as opposed to a personal credit check) at least at the stage we've got to with them.]
As far as I can see, those providers who require personal guarantees usually do so as a standard condition for almost any new business. Effectively, they consider everyone's financials to be inadequate.
You want that to be illegal? It's better than those companies not be able to obtain merchant accounts?
Someone would still offer the merchant account services to businesses who could demonstrate a reasonable business plan, because on balance they would make money from doing so. Most new businesses are not, in fact, going to experience a 30% chargeback rate four months after the original sale.
The banks obviously know that, they just want (as usual) to privatise the profits but externalise the risks/losses. I have no problem with prohibiting that kind of predatory behaviour. It's a potentially significant barrier to starting a new business, and with the global economy in its current state, allowing absurdly risk-averse banks to inhibit new businesses is exactly what we shouldn't be doing.
If the banking industry had a track record of assessing its clients responsibly and lending (or not lending) based on the results of those assessments and reasonable assumptions, I would be happy to cut them some slack. But we all know damn well that they aren't doing that. And if governments are going to pressure them just to lend to small businesses, they should certainly pressure them to provide basic services to businesses that are viable without relying on loans as well.
They are already doing it, every time a new business opens an account with them.
No law requires banks to require personal credit checks for merchant accounts.
I'm not talking about credit checks, I'm talking about a personal guarantee, of the "taking your house" variety.
Are you sure about that?
That suggests one of two things:
No, there are other possibilities. One is that the merchants assume that you're right and everyone is going to screw them the same way. Another is that they simply don't understand the profound legal implications of a couple of lines of small print and one more signature because, like most start-ups, they're trying to build a company and not paying lawyers thousands to review dozens of pages of terms sent by every financial service provider they've contacted.
The personal guarantees go away once your business is a going concern.
And if the personal guarantees are going to go away once the business is a going concern, there's no problem with writing a shut-off date into the contract to make this explicit from the beginning, is there?
If you are a real business, you will almost certainly change credit card processors anyway to get better payment terms as your volume increases. The last startup I worked for changed at least three times as our volume grew.
It's reasonable to ascertain the identities of those running the company. While I'm no expert on US law, certainly here in the UK company directors have some basic responsibilities for acting responsibly and so forth and could be on the hook if they've been severely negligent, so you have that the moment you're dealing with the company itself.
But the point of a piercing agreement seems to be to put the company's controlling people on the hook personally even if they aren't grossly negligent and the business just doesn't work out. The fundamental point of setting up an independent legal entity is to sever that connection, and I personally believe that everyone should treat negotiations accordingly.
Insisting on personal liability for a corporate account is equivalent to denying the account to the corporation.
Bankers would prefer to have you sign away your first born children too (sounds like something out of Dickens). But we've made such practices illegal and there's no evidence that the money supply is suffering for it.
So maybe the bank is willing to issue the merchant account to the individual with the understanding that it may be used by a corporation. But let's not call it something it isn't.
Completely automatic is obviously silly because of the fraud risk, but a presumption in favour and/or formal restrictions on acceptable criteria for refusal aren't nearly as absurd as you're implying.
We're talking about a very closed industry and a service that, in practice, directly affects people's ability to trade.
We regulate service providers in other essential industries, and they can't deny provision to a customer just because they don't like them. It's part of the deal if you want to operate in those markets.
And there are all kinds of laws to prevent or restrict one-sided deals that inhibit people's ability to trade. There are laws about monopolies and anti-competitive behaviour. The handling of non-compete agreements in employment law would be another obvious example in a slightly different context.
I'm not looking for anything so dramatic, just that merchant account providers should recognise that they are dealing with a separate legal entity. Identifying the key personnel is reasonable, and so is wanting to check them against databases of known fraudsters etc. Asking to see financial statements, business plans, projections, etc. is all reasonable too. So is requiring a cautious degree of funds retention until the trading patterns become clear is reasonable. I really don't have a problem with a merchant account provider wanting to know who they're dealing with and to have some confidence that the company is a viable business; that's only fair.
I'm simply arguing that putting members of the company on the hook personally is not fair. If you're going to have companies at all then you have to protect them against such arrangements by law or you've devalued the entire concept and undone whatever benefits you were hoping to achieve in terms of incentivising entrepreneurial behaviour in your economy.
For the record, I'd add demanding direct control of the company bank account as a red flag as well. Aside from the glaring potential for abuse or error by the merchant account provider (for which, by the way, the company directors will once again take the heat), this has obvious implications if the company ever fails: it allows the payment company to grab whatever it decides it's due before the usual legal mechanisms for dealing with corporate bankcrupty get a look in, for example. And what if there's more than one payment service involved? Do they get to race to see who can empty a company's bank account first if anything does go severely wrong?
IIRC the US has a concept of bankruptcy protection to isolate a company that's in trouble if they have a reasonable plan to extricate themselves rather than failing. Not running a business in the US, I don't know all the details, but it seems a reasonable premise. But what happens if that company has signed over direct access to its bank account to a merchant account provider, who is risk averse and doesn't like the chapter 11 filing?
The bottom line is that these are all worst-case, doomsday scenarios, and even if a company is going to fail, it's usually not going to fail out of the blue and to that extent. I think you're obsessing over a fraud risk at the expense of making it much harder for people to run honest companies. If the system is set up in such a paranoid way, it's hardly going to be surprising if legitimate entrepreneurs are put off starting up, obviously leaving a disprortionate number of fraudulent applicants.
You might reasonably do a credit check on the principals, since someone running a company who has a track record of bad debts is obviously a warning sign. Likewise you can check them against the databases of people who've been kicked off payment services before.
But in the end, you should be looking at whether a company has a credible business plan and people who are likely to execute it well. That's apparently good enough for other major financial transactions, including attracting investors and things like company credit cards for principals on the day you open a bank account. How come everyone else in the world can use common sense and make an informed judgement about risk, but merchant account providers can't?
A. The bank offers a merchant account to a party they feel is worthy with the understanding that this party is going to use the account for the corporation.
B. The bank re-evaluates their criteria for merchant accounts and/or develops new products with which to serve the demand for merchant accounts.
But the status quo seems to me like a situation in which an entrepreneur can't start an honest corporation without putting his kids' college savings at risk of highly unpredictable fraud loss. Unless this person is connected to the right people in finance and banking, of course.
Why shouldn't my local tree-trimmer be able to accept credit cards? Like Greece, imagine the uncaptured tax that results from this sector of the economy dealing instead in mostly cash. I don't think this the current system is optimal or fair.
And to add insult to injury, that kind of risk is entirely the fault of the payment industry itself, for failing to implement sufficiently robust security measures. And yet, the merchant typically carries the risk, not the payment industry.
Perhaps any compulsory refunds should be classified as either based on fraud or based on dissatisfaction, and the card payment services should be required to indemnify the merchant against fraudulent ones provided that the merchant has followed the recommended security steps before completing the transaction.
In fact, I've noticed recently that a few payment services are offering to eat chargebacks based on claims of fraud if an on-line transaction included a test such as Verified by Visa, so this situation may be starting to change, albeit rather slowly.
For losses based on dissatisfaction, it's probably as fair as anything practical to make the merchant carry the risk, but it is extremely unlikely that this kind of chargeback would result in a sudden spike in refunds a long time after the initial payments. It seems reasonable to handle this case via a level of retained funds commensurate with the observed level of loss.
That really only leaves catastrophe-scale events, such as a product having a fundamental flaw where everything dies at midnight on 1 January 2000. But in that case, either the business has the funds to cover the loss (in which case there's no problem and the card services can go to court if the merchant doesn't pay back what they owe) or the business is toast (in which case unless it's a very small business, probably no individual who gave a personal guarantee could do much to cover the costs anyway, and if it was a very small business, there's no substantial danger to the card service companies on the relatively rare occasions that they have to write the client off and eat the loss themselves).
In short, to the individual a piercing agreement may be an existential threat to their way of life, but such agreements make little real difference to the card companies in cases where the problem is not essentially their fault anyway.
It seems to me at this point that we've lost track of what a merchant account provider even does, and that your argument in some way depends on the fact that it's easier for large companies to bear losses than small ones, and so they should bear those losses regardless of who causes them. Why not just say Apple and Walmart should insure all new startups against personal losses at the same time? It's the same argument.
Really? I think there's a good argument that insurance is exactly the business they are in.
The fundamental difficulty here is that money you think you have as a merchant can be taken away again retrospectively, and the merchant account provider is on the hook for it if the merchant disappears. The merchant account provider accepts that risk, but takes steps such as retaining partial funds that will normally be sufficient to mitigate it. Every now and then they'll take a big hit when there's a spectacular failure and whatever guarantees the merchant account provider thought they had turn out not to be worth enough to cover the loss. Most of the time, however, things will go fine and the merchant account provider will make a tidy margin.
How is this not an insurance model?
If you're starting a business and worried that your own product failures are going to bankrupt you, pay for insurance.
I'm not worried about my product failures, I'm worried about fraud due to a combination of their insufficient security and their rather generous waiting periods for customer complaints, or simply due to a mistake on their part.
And why not? They could at least be obligated to obtain such insurance. Seriously, what else are they doing with that 3% of all those transactions?
Primarily because we accept the status quo because the merchant is in such a weak bargaining position. Let us not forget that merchants and consumers form the basis of our economy whereas payment and banking systems are just plumbing.
If the financial industry had more incentive to increase the security of payment systems, then maybe we wouldn't have the absurdly insecure systems that we have now. Inter-bank ACH is fundamentally an honor system. Credit/debit networks are basically a shared secret between you and everyone you've ever spent money with.
I'm not saying merchants should be immune from all chargebacks. I'm just saying that the lack of competition in payment systems is effectively disallowing the benefits of an LLC to the little guy.
Because I was joking; the cost to ensure businesses that risk thousands of chargebacks would be stratospheric.
What I'm suggesting is:
A. It makes the little sense for the personal savings of an entrepreneur to be the underwriter of last resort.
B. If the financial industry wasn't so easily able to push the risk off on others, we might find that they become interested in real security improvements that result in an overall decrease of fraud.
It's called Paypal.
But the merchant account issuer doesn't distinguish fraudulent merchants from losses due to stolen cards, fraudulent customer chargebacks, etc. So currently in the US, essentially all fraud costs tend to be passed on to the merchant (and for small entrepreneurs, their kids' college savings).
Note that most of the criticisms people level against Paypal aren't against their policies and mechanisms that are a rational defense against risk. It's things like the destroyed antique violin, banning merchant accounts for "editorial" reasons, outright hostile customer relations, and (last but not least) a penchant for holding on to other people's money for as long as possible for completely unjustified reasons.
Hopefully we can agree that the root cause here is the prevalence of fraud itself. A more secure transaction system could make things nicer for everyone. The problem is that the payment networks are the only ones who can institute meaningful change and the current system (that enables them to pass the costs on to merchants) suits them just fine.
Well, I don't believe that would be the universal answer in most cases, and perhaps where it really is there is a lesson that someone should learn cheaply. But let's assume you're right for the sake of this discussion.
Your response is... what?
That a financial service company with no new clients is not long for the business world.
No. That's not going to happen. I'll go one further: if you so much as sign your name on a contract the wrong way, for instance by leaving out your title, you can easily create situations in which contracts that individual officers of your company sign bind directly to them; for instance, your VP/Engineering could easily sign a contract with a consulting developer that would leave them personally liable to that consultant if the company went out of business and didn't pay the consultant. The VP/Engineering in that scenario didn't even intend to create a personal attachment, and yet cases like this have been decided against people like that.
Similarly, in some states, payroll obligations --- which are contractual, precisely the type of exposure that limited liability covers --- can automatically pierce corporate liability and bind to the owners of the company.
I think you drastically overestimate the protection afforded by limited liability.
Which happens all the time, particularly when the parties have unequal bargaining positions, in which case frankly your characterisation of the parties as "consenting" is a stretch at best.
and then, to get around the fact that this would result in a market where small startups would never be able to get merchant accounts
Of course they would. The industry is extremely profitable despite the ever-present risk of fraud, and the rates that merchant account providers charge to start-ups are often at least double what they can get away with for more savvy established businesses. You keep saying that start-ups wouldn't be able to get a merchant account at all if piercing agreements weren't allowed, but you've given no evidence for this and your position defies all logic. As I've argued elsewhere, piercing agreements are unlikely to provide much cover for the merchant account provider most of the time anyway, and I'm quite sure that the people in the industry have concrete figures for things like how often they really have to rely on such agreements and how much of their losses they are really able to recoup in those cases.
suggests that the entire payment processing market would either restructure itself or be forced to restructure itself to get around that problem.
In case you hadn't noticed, the on-line payments industry is restructuring.
For one thing, companies like Stripe are taking traditional merchant account/payment gateway set-ups to the cleaners. Every HN discussion on this topic is full of people who are involved with start-ups bemoaning the lack of alternatives outside the US, and as the new generation of payment companies establishes itself globally, things are only going to get better for merchant-experience-focussed companies like Stripe. The industry giants with their month-plus application processes and hundred-page legalese documents are either going to have to play nicely with the new kids (and I'm betting even a young company like Stripe is already able to negotiate much better terms than their start-up clients could) or lose out in the ever-growing on-line sales market.
Obviously there are already alternatives with different business models like PayPal, and despite the horror stories, they still potentially offer a much better experience to merchants than the old school providers. As offerings from other big names like Google and Amazon improve, and as more companies like Stripe go international, competition will also force PayPal to improve rather than relying on often being the only salesman in town.
And then there's the small issue of companies like GoCardless, who eschew the anachronisms and merchant-hostile terms of the card payment industry entirely. I expect they're going to do pretty well out of that, too.
In short, I think you put way too much faith in dinosaurs. The question isn't if they're going to change, it's only when. The issue for most of us running small companies outside the US right now is just that we're a bit early. I expect in five years time we'll all look back on this conversation and laugh.
The VP/Engineering in that scenario didn't even intend to create a personal attachment, and yet cases like this have been decided against people like that.
I'm not sure what your argument was in that part, but surely you know that as a basic matter of law a contract requires understanding by both parties of what the agreement is, so whatever cases you're thinking of probably weren't as simple as you're suggesting.
Could elaborate on the other ones?
If you think about this for just a second, you can see that incorporation can't possibly be a "get out of credit checks free" card.
The issue is that fraud prevention--like terrorism prevention--means the side that's doing the groping isn't going to tell you exactly what they're doing and why. This leads to a lot of confusion.
For the first few years I was in business my corporate credit lines were effectively personal credit lines that happened to have my company name on them.
I always have mixed feeling on these stories.
On the one hand, if you operate almost entirely online, you're in amidst a mass of scammers and conmen, it's a much higher risk, hence everything being more draconian. So there's always problems. Brick and mortar businesses are much less as there's a real presence, etc.
On the other hand, this is a long established business. Are they really that high-risk any more? Why are they treated like someone who's just started? Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing?
8Faces has been in print since 2010. That's a great start. It's not a really long time. Issue 5 is ready to pre-order. (Weirdly the author claims that they don't really do pre-orders, but on the website there is a huge banner telling people that they can pre-order issue 5.)
Magazine publishing is notoriously tricky, especially in the UK.
> Why can't Paypal treat them more respectfully as there's plenty of trading history. Why are there no mechanisms for establishing real identities that are much stronger than what they seem to be doing?
This is an excellent point. I can understand why Paypal don't have customer reps for every little nickel and dime trader, but a magazine doing £15,000 per issue is reasonably substantial amount of money. It'd be great if Paypal could establish identities (interviews? documentation?) and build relationships with the honest traders that use the service.
>It is therefore not possible for UK customers to obtain legal redress from the company in the English, Scottish, or Northern Irish Courts.
So he's not getting his £600 back through the courts.
But I actually think holding an issues worth of revenue in reserve is a decent enough compromise. If the company goes bankrupt before an issue ships, for whatever reason, PayPal themselves are going to be on the hook for refunding every single payment, as well as chargeback fees that may apply.
PayPal's fees are around 5% - what's their gross profit on each transaction, 1-2% at most?
So if there's a 2% chance of an issue going awry and angry people starting chargebacks, a magazine 50 issues old could turn into a net loss for PayPal overnight, which is why even merchants with long and clean track records get stung by this.
PayPal's freeze on that money means their end is covered, and you can still bring the sales to a bank and get a line of credit to cover the printing costs.
The way PayPal handles the customer service end rightfully earns their horrible reputation. But too many people act like the risk itself is not there, or that there's a clear, obvious line between fraudulent businesses that con artists start and solid trustworthy businesses that we start. If PayPal wasn't as aggressive with their fraud prevention, they'd be skinned alive.
And, as other people are pointing out in this thread, standard merchant accounts are not immune from the same level of shoot first, ask questions later fraud prevention.
That's especially true for PayPal now. Before merchants didn't have much choice. If PayPal continues to be seen as difficult and risky, the better-qualified merchants will be the first to shift to other services. That will leave PayPal with a much more risky customer base than they have now.
5-year ex-paypal customer (and hated being one the whole time). 6-month stripe customer (and happy every minute of it so far)
Money transfer systems are different. They draw a lot of dark, evil forces that try not just to hack their systems, but to game and abuse it through normal operations.
It's unfortunate that legitimate businesses get caught in the crossfire sometimes, but we rarely hear about how many credit card thieves PayPal's system rightful stops. (Answer: It's a lot.)
How do you know it is a lot if we rarely hear about it?
The specific numbers are privileged, but suffice it to say, I'm very confident that PayPal deals with as much, if not more fraud, than the mind-boggling amounts I saw at that job.
Yes, that's not ideal for you as the merchant. Welcome to being a merchant. Shrinkage exists.
There are people (individuals, and entire enterprises) dedicated to financial shenanigans of the black hat variety. If Paypal didn't have a robust risk prevention system, they'd have been annihilated a long time ago.
In fact, I often spot fraudulent charges very quickly and have to email my third part processor to refund or cancel the payments.
I was pointed to http://maxmind.com by another HN poster, which is an API that'll give you a probability of a charge being fraudulent so you can verify it before passing it to the payment provider. I'm going to test that out in combination with Stripe.
I'd definitely be interested in seeing a write-up about integrating Stripe with third-party fraud detection systems.
Also, fraudsters tend to not brag about how much fraud they weren't able to process.
I wonder if other Elon Musk's creations (SpaceX and Tesla) will become something like this after he will sell them.
Overall I think SpaceX is his baby. Based on interviews and what i've generally read about the man, I think he's gonna stick with it for the long run. I mean hell, he wants to go to Mars as soon as possible in one of his own rockets. That's a dedicated man.
Well, US banks aren't. Dutch banks are doing it just fine:
Works very well and I trust this method a lot more than a payment processor that's not my bank.
I'm not entirely sure what the rules are from the merchant's side, however.
Point being: The precedent of putting Paypal under the behemoth of banking laws/PCI/Frank-Dodd is more frightening than people still willing to do business with them getting shafted. Dare I say, if it were easier and less regulated to move money through the interwebs, Paypal wouldn't be an issue.
So your suggested way around this is to incur credit charges & pay for the credit risk baked into the interest rate all so that Paypal is covered?
The merchant is, if I understand the post correctly, taking orders, using the money to print a run, then shipping them.
The risk is caused by the merchant's business model. It may not be high, but it certainly exists. Either the merchant, PayPal or consumers themselves must pay for it.
Who would you pick?
For Credit Risk banks and other financial institutions use interest rates.
For Operational Risk they use fees. The freezing of accounts comes only when the activity of the merchant approaches a threshold not covered by the fees not prior.
As a base coverage all banks are required to keep a reserve just in case their losses start to mount and then they kick in the extreme measures. Paypal has no such standard to meet in the US (not sure what being a Bank in EU/UK would do).
Truly the Merchant should cover the risk directly with Paypal and the fee structure if they are legitimate. But that is not your solution... a third party must enter the equation to cover where Paypal is deficient in their risk assessment.
I want to share two things with all of you:
#1 — there's a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it.
#2 — you have my commitment to make this company GREAT again. We're reinventing how we work, our products, our platforms, our APIs, and our policies. This WILL change, and we won't rest until you all see it. The first installments are due very soon. So stay tuned...
2. there were many instances where you were greedy ( diaspora, wikileaks). Alot of stories in IM forums that you freeze money from vendors and never return the money ( to either side).
3. tens of thousands vendors are waiting for stripe to go abroad including me so we could run away from your draconian "service"
What it would take to restore credibility in my view at this point is apologizing and making up for the antique violin incident and un-blacklisting Wikileaks.
Paypal, your transparency sucks. If my account is fishy, tell what it is. We're no longer in the McCarthy times.
And besides, I'm living in the EU. US rules are not always popular for us.
That's where the positives end for me however. For Paypal, I fear it's too little too late. You've done too much damage to yourselves. I get the reasons why you do things, but the communication over the last years has been atrocious.
We're in the UK and are just waiting for Stripe to come over. I think a lot of other businesses are thinking along the same lines as well.
Your fee structure is pretty expensive as well. There's also a lot of hidden costs:
- We're on an upper tier so should have a reduced commission rate. However, after scratching my head for ages as to why a majority of our sales are not at the lowered rate I finally find the link about cross border fees or whatever reason you use to charge us more. As an example, some of our $119 USD sales have $4.35 fees which is ~3.7%. Our current rate it says on our account should be 1.9%. Your fees structure is not as clear as it should be.
- Have you tried issuing a refund in a different currency? You have to draw money from your bank (even if there are available funds), which is converted to the correct currency which because your spreads as so expensive means sometimes refunds cost us money. I phoned up about this and they told me to open different currency balances which I did and which fixed the issue, but again, bad communication and a broken process
- Related to the previous point, your spreads on foreign conversions are high. I think they've improved a bit over the last couple of years but I still consider them an expensive hidden cost. I contacted Stripe asking what spreads they offer, and they told me they would consider it a hidden cost and they offer customers the same spreads the banks give them.
Also, your website is mind bogglingly slow. See this support ticket I opened:
The support person didn't do anything about it. I didn't expect them to though, as Paypal is an impenetrable behemoth that doesn't seem to care about these sorts of things.
Your website being as slow as it is, mind numbingly slow, is honestly enough reason alone for me to move service. Trying to find transactions just is a huge waste of my time waiting for each page to load. Try using your sandbox with pages that load that slow.
> there's a massive culture change happening at PayPal right now. If we suck at something, we now face it, and we do something about it.
So can you make your website faster for a start?
I think if you process enough transactions you get good phone support. They've been great every time.
All the other problems though cancel this benefit out and more in my opinion.
Yes, but just for my part I'd certainly let them take another couple of percent (on top of the 3.9% I'm already paying with Pro) for better service :-)
It makes no sense, but if you don't like it your option is to not accept Visa. They own the customer so they make the rules. It doesn't matter if its PayPal, Stripe, or any other merchant - if your buyer initiates a chargeback, you'll lose the money until its resolved (~6 months, usually).
As such, PayPal/Stripe/any other merchant account will hold your money for a period of time, until they are comfortable that either:
1) its been long enough that a chargeback is unlikely
2) they'll be able to get the money back from you if a chargeback occurs later.
Also relevant to this specific case: its against the TOS of Visa/MC/AMEX/etc to charge the buyer before shipment. You're supposed to authorize at time of purchase and capture only when you actually ship the goods. The OP seems to blatantly violate this, and I suspect they'll have to change the practice regardless of their choice of merchant account.
None of this excuses PayPal's lack of customer support. But Stripe et. all may not be the panacea you're hoping for. Credit cards are where these crazy policies originate, and unless you're prepared to stop accepting them, you'll have to play ball.
I also believed this to be true, but wouldn't that mean Kickstarter (and therefore Amazon) are flagrantly violating T&Cs? I wonder if Amazon has a special arrangement with the main card issuers in this regard.
Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill.
If it does not fully fund, you receive a refund from Kickstarter.
If it does, your funds go to the project, who are on their best effort to successfully launch the project.
You are NOT, however, directly purchasing a reward. You receive a reward as a gift for helping to fund at a given level.
But you ignore the bigger problem. How are you, as a Backer, able to require a refund because a Project breached its terms with Kickstarter?
There are some FTC rules about this too, IIRC, that a product must ship within a certain period following payment. I once worked with a company where this was an issue: they had to provide a great deal of data to the FTC to plead their case.
Here in Australia, my bank told me they were obligated to have a chargeback process resolved within 90 days.
Not sure if its a legal thing or just their own internal policy (Westpac).
I think the problem here is that they really don't have any kind of a real relationship with their customers.
As an honest business person --not a scammer-- when this kind of thing happens to you it is horribly disruptive and demoralizing. As honest people we should be spending time on our business rather than trying to get our money out of a company that has totalitarian control over it. It could, and has, sink a business.
That said, I feel the OP may have triggered the freeze by clearing the account of nearly all funds a couple of days after the phone interview. If I were looking at that data I would see it as a potential red flag. It would almost be irresponsible not to interpret it that way.
I've had sales in excess of $20K (meaning, the invoice for that particular purchase was $20K) come into one of our Paypal accounts and have never had any issues. Then again, the money tends to stay in the account for months. I don't think they've ever seen us clear large amounts of money out of the account immediately after a large sale. That, I am sure, builds trust, even at the algorithmic level.
Right, but you've been doing that with regularity. It's all about patterns. In addition to that, you are not doing this a day or two after having a probing conversation with a Paypal representative who obviously called with concerns about your account. Huge difference.
I can take almost any amount I want out of our Paypal accounts and it has never triggered so much as a warning email. Our track record (~10 years) is pretty solid.
It would be very helpful for someone to post (from experience and/or inside knowledge) a "How work with PayPal and avoid problems" FAQ
Then there's their automated fraud prevention system that is just too trigger happy. As an example: I bought an item on eBay the other week and they refused to process the payment. A couple of days later I decided to try again before buying from another seller and it went through without issues.
If you're running an on-going business that has multiple to many transactions everyday over long periods of time, then I suspect that you're less likely to trigger these problems. But again, YMMV.
Additionally, many have issues with the fees. Going back to eBay, you get hit with fees for both services, and I think many just see it as being too much given other emerging comparable services.
"I used ebay, something went wrong, here's my post" vs "I used ebay, everything went smoothly, here's my post".
Obviously you're going to have many more posts where things go wrong, but that doesn't tell you anything about the total number of transactions, nor the successful transactions.
I agree that there are numerous positive experiences out there. I would imagine PayPal would struggle if there wasn't a large user base that was satisfied. The point here is that some people are starting to reassess and or question the net-benefit offered by PayPal at the cost of these inconveniences.
He might have argued the point, but in this particular example a simple explanation of "We are concerned about liability if you cancel an issue before the physical version is delivered. The hold on funds helps protect us in that event".
The Paypal model fits small transactions and small volume. As soon as you are big enough to feel like you deserve / expect such an explanation it is probably just time to move on.
The result of this is Paypal saying I owed them £65, but that once paid they would not return this to the companies and the companies sating that I owed them nominal amounts each.
I repaid the companies in cash through the post (I even converted it to the correct currency) and have squared things with them, and Paypal is still saying I owe them £65.
I have told Paypal that as they paid out £65 and then took it back, they are currently level and are not owed any money and informed them to cancel the outgoing payments as I have paid them myself, but they continue to persist with the idea that I owe them money.
They refuse to let me add another card to my account to pay off this amount (the card I originally used is Spanish and I don't use it anymore, the balance on it is, however +£0.47) and I refuse to lose money having it converted over to Euros.
As a result I have cancelled all existing usage of paypal and now pay from a credit card instead and I refuse to either pay Paypal the money I supposedly owe them or add more funds to my old account to have them take it away (leaving them £65 in the green and me in the minus)
My experience of Paypal customer services is poor service and automated responses, if it was possible to talk to a human this would have been sorted months ago, but as a result of their ineptitude they have lost a customer who was doing daily business with them in the order of £100 - £200 incoming and outgoing.
It's not much income to them, but I will no longer use their service and if enough people follow suit it will make a difference.
And for the record, the freeze they placed on my account over such a nominal amount cost me around £750 in lost sales before I began re-routing to my credit card, but I doubt very much they will offer to refund this.
Are your customers exclusively in North America? Or do you just write those customers off (which is a valid option if PayPal integration would be that painful)?
Adding PayPal as a payment option has been an enormous pain for us but a non-consequently amount of our revenue comes from customers either without credit cards or with cards which always fail on international transactions. I see no alternative to PayPal for these customers.
If you don't use PayPal, how do you receive payment from
customers who don't have credit cards?
Examples (no affiliations):
http://gharpay.in/ - Home cash pickup;
https://www.itzcash.com/ - Prepaid Cash card;
Mobile Money services in Africa such as M-Pesa - http://en.wikipedia.org/wiki/M-Pesa
Maybe it doesn't scale too well, but at her business scale it still works for the exception cases and money is money. If you're biggest problem is too many people depositing money to your bank account, that's not a bad problem.
When you go to make a payment, it logs into your bank account and does the transfer for you. So you get an instant receipt, without having to wait for the money to show up in the merchants bank account.
It's a breach of my bank's terms of service, so I would be responsible for fraud if I used it. No thanks.
Moneybookers interface is terrible, and they will expose your customers to this horrible interface. Their customer service seems to be confused but I've never heard horror stories.
There are payment solutions geared towards European customers so that you can accept bank transfers, etc.
Skrill is such an awful name IMHO!
See also the lyrics for "Cash in My Pocket" by Wiley:
> All I really want is money in my pocket
> Cash in my hand, oh, skrilla in my wallet
> Cash in my hand and skrilla in my wallet, yeah
NB: This doesn't stop it still being an awful name, but it might explain why they chose it.
In fact, everyone I know has at least one debit card (either MasterCard or VISA), aside from the number of people who have an AMEX/VISA (credit type).
And debit cards work everywhere. I've used my VISA Electron (debit) pretty much everywhere in the developed world, both online and travelling abroad.
Where payment options are concerned, VISA/Mastercard branded debit cards are the exact same thing as credit cards. And in many countries, the average citizen has neither. They may have a debit card that's part of some national payment network, they may be used to buying stuff online via their mobile phone account, or in cash at their corner convenience store, or via wire transfer from their bank account.
Paypal allows payment via a MANY such schemes you have never heard about. That is their USP, and something no startup can easily "disrupt".
For a consumer, Paypal makes it very easy to manage payments, receipts, and any other issues.
By the way, never ever use a debt card online. You're handing over access to your bank account.
Visa will refund you money if your card is lost or stolen:
My personal bank also has similar verbiage for my debit card. They also mention that internet purchases are considered non-PIN purchases and are offered the same protection.
Yes, there is more risk since money can be taken directly out of your account instead of going against your credit, but there are mitigations in place.
With a credit card, you can say that the charge was fraudulent and they will take the charge(s) off and you're not on the hook. With a debit card, you're out the money of the fraudulent charge while the bank investigates. From my personal experience, this can take a few days to 3 weeks before the bank puts the money back in your account. If the charge happens to put your account into overdraft, you may still have to pay the overdraft fee which may be hard to get overturned.
I pretty much only use my debit card as an ATM card. Very rarely do I actually use it as a debit card (there are rare instances where I may need to)
Conclusion: Don't use your debit card online if you have a credit card.
Really, afaik in europe and for sure in germany this is totally easy. It is not equally easy to reverse a transaction you started yourself. But when another person has you account-number and the public data belonging to this, all he can do is a "lastschrift" (direct debit), which is easily reverseable.
No need to downvote me. The USA is different than europe, and in this regards way behind.
About the direct debt, sure, I can undo this, via internet banking.
But a fraudulent debt card purchase takes time to process and you don't have you money in the account anymore.
With a credit card I can check for fraud and my money is not gone if this happens (and yes, it has happened to me)
This just highlights the fact that our global banking system works very differently in different parts of the world. And maybe, to close the cicle, as the article claims paypal really shouldn't forget this, as it has to behave differently outside of the US if it wants to stay successful. A different environment probably always needs a different strategy.
Me? Got my first credit card with 30, when I moved to Israel. That thing's invalid by now. Here in Germany I have a direct debit card (likely ~everyone~ has one, it's the one you use for the ATM as well), issued by my bank.
Now, I can use Paypal. In Germany (and probably more places) they offer to connect a regular bank account. So - Paypal can withdraw from my bank account, I can pay with Paypal where people otherwise insist on a type of payment that I don't like (Paypal's not the nicest thing ever by itself, but 'it works').
In my circle, credit cards are still mistrusted, ~rare~ (as in at least 2 out of 3 won't have one) and really just for collecting debt or buying stuff on your company's name. People around me are waiting for Google Play (oh I HATE that name) gift cards, because they'd really like to buy apps some time..
News flash buddy, population of Earth > potential customers > "everyone you know".
In the UK we have "prepaid credit cards" which could be useful for some people who are otherwise unable to get credit.
 confusing name, because they never give you credit, and I don't think they have the same protections as normal credit cards.
Paypal is just giving every opportunity for someone else to come and get their market share. Hopefully it will happen sooner rather than later.
If neither Amazon nor Google's brand recognition hasn't convinced folks (buyers or sellers) to start pushing it instead of PayPal for Internet purchases, I can only hope it's because their solutions are equally terrible - otherwise, I have a hard time seeing how a new player will make headway in this space. And I'd really like a new player. :/
It also had an even worse payment flow than paypal. Which is saying something.
You can't ignore early adopters like that so no-one switched.
Also seem to remember it didn't take payments from a lot of countries. Could be wrong.
As a buyer (and not a merchant), I love Paypal because I can have it debit directly from by bank account instead of handing over my credit card information. I hate credit cards, and this combined with Paypal's two-factor authentication gives me some good peace of mind. I haven't seen any other services that provide direct-debit to Australians, and even if they did, they would be useless to me unless they were as ubiquitous as Paypal is. I can use Paypal just about everywhere except for Amazon and O'Reilly. At this point I wouldn't even consider using Amazon or Google Wallet for purchases.
On the other hand, these horror stories have made me very wary of the merchant side of Paypal, and I'd definitely think twice about using them to process payments.
I don't understand this at all. I pay through PayPal via a credit card when a merchant accepts no other form of payment, and if they ever gave me trouble, I trust my credit card provider enough that I don't have to trust PayPal. I wouldn't let PayPal near my bank account, because bank accounts don't have the same level of protection for illegitimate transfers, and PayPal will happily ACH away however much they feel entitled to.
You'd rather give the internet a direct line to your bank account to suck out all your money, vs giving it a number to a credit line (which you can refuse to pay if there's any fraud)? I'd like to see the logic behind this.
eBay would account for some of it. Also, payments is a relatively highly regulated market globally, as evidenced by Stripe trying to expand internationally.
We axed amazon soon after we integrated with them - I gather that now both the API and more importantly the UI are much better, and people can sucessfully use their pre-existing amazon accounts. That would be huge.
Google we still support, but it's usage has plummeted from a low starting place on our site. It'll be dropped on the next rev of the our UI.
I'm from the Netherlands and if you're a freelancer here you need to provide income statements for 3 years before you can get a credit card.
That meant that until last year I couldn't buy a thing with Google Wallet or Amazon Payments without asking my family for a credit card.
The only thing that worked for me was PayPal (and the iTunes store.)
That's amazing. Also goes to show anyone who tries to talk about "Europe" is making a useless generalization - here in Sweden I easily got two credit cards when I was a student with no income aside from government student loans.
But don't you have VISA/Mastercard debit cards? In Sweden, there are no longer any ATM cards, everyone gets a VISA or MasterCard instead that works in ATM, stores and online.
If you didn't apply or it gets revoked because you were flagged somehow, which happened to me when moving abroad for a year, you end up in the situation I described.
And no, we are still pretty much exclusively ATM based here.
Network effects, name recognition, and forced integration with the only online auction site that matters.
You know how every time a new payment provider comes up and people kvelch that it isn't available in their country and how no provider is? This is because every payment provider which attempts to hit as many countries as Paypal does dies. They're killed by fraud. (Fraud kills domestic ones, too, all the time, but it's marginally less frequent.)
Luckily, Paypal is an anti-fraud AI company which also happens to run credit cards sometimes. When in doubt, they will always come down on the conservative side. This is why they still exist. (Early in their corporate history they lost -- no kidding -- one hundred million dollars to fraud.)
This perception does not actually match reality, though: most people bitten by this are unaware that similar activity would get them shut down by the fraud department at e.g. a bank. See comments by dangrossman, etc.
IMO Paypal swung quickly from being too sloppy to being too conservative. The fraud they missed a few years ago was easy to catch - it was from sketchy sites and the products were being shipped to PO boxes nowhere close to where I live. Paypal is playing a dangerous game now by shutting down people's accounts because their strength comes from a network effect within a potential monopoly (unlike Chase); every person they ban from paypal removes the legitimacy of their service a little.
BTW Paypal's fraud team was only built up to a solid point in the past 3-4 years. I know this because I used to work in the industry.
The thing is, it shouldn't take much in the way of "AI" to recognize that a company that has already been doing business for several months or even years is probably not going to wake up one morning and start defrauding people. Criminals are lazy, and running a business is a lot of work. It would take about 30 seconds' worth of review time on the part of a moderately low-paid staffer at PayPal to avoid most of these PayPal Media Debacle of the Week stories.
I simply cannot believe that it's that hard to distinguish between a fraudulent user and a real one, given the presence of a significant transaction history. New accounts opened by people with no discernible history? Yes, they should freeze/ban/lock first and ask questions later. Accounts that are clearly used as part of a business? Give the customer the benefit of the doubt, or at least a 5-minute phone call.
Criminals are perfectly willing to put time and effort to create fake accounts or just buy stolen accounts.
On eBay, yes, it was pretty easy to play the "Sell a bunch of stuff for 99 cents and then pull the big scam" game. But none of the widely-publicized cases where PayPal has basically attempted to wreck the lives of startup founders fall into that pattern. These people have all had independent web sites selling actual products, and/or a background in other ventures that could be checked if PayPal were to spend 5 minutes doing due diligence on them.
1) Run a legit business for a few months
2) Build up credit history with suppliers
3) After a while, buy a huge amount of stock on credit
4) Sell all of the stock for cash at massive discounts
5) Disappear with the cash, leaving a pile of unpaid debt in your wake
Someone looking to put one over on PayPal is not going to do all that crap. Sorry. I need to hear some actual examples if I'm going to change my mind.
Simple due diligence will either eliminate the genuine criminals, or it will not. If five minutes' worth of due diligence by humans fails, then so will any conceivable AI algorithm.
I'm willing to bet that in the beginning, when they were mainly trying to court businesses to implement their service, the situation was different.
* At most merchant services providers, underwriting happens up front: you have to describe your business, what you're selling, expected volume, etc. on an application, and go back and forth with the bank, before you are allowed to accept credit cards. PayPal lets you start immediately, and only gets the information from you once you've started transacting some meaningful volume. So the risk problems are weeded out with other processors right at the start, where with PayPal it can come up suddenly.
* These people have never even thought about underwriting and risk assessment. They treat PayPal as if it's a consumer service, when PayPal has to treat it seriously -- they're essentially making a rolling loan in the amount of 6 months of your transaction volume -- because if you disappear, they're on the hook for the chargebacks for all your past payments. People do stuff no other processor would let them do -- like taking massive donations with no prior approval, selling pre-orders to software that hasn't been written yet -- and PayPal isn't OK with it either once they find out.
* PayPal merchants are disproportionately more often individuals than actual businesses compared to what other processors see... because it's so easy to open an account, and everyone that's used eBay already has one.
* Because the merchants are individuals, and have no experience with underwriting at other processors, and have previously used accounts suddenly limited or frozen, they're confused and surprised. Add to that customer service that won't really tell you much once an account's been closed, and you end up with a couple really angry people a month: cue blog post about how PayPal is evil and if only it were a bank, they couldn't do this.
They long ago could have introduced some sort of premier business account that drags serious merchants through a proper vetting process.
Then they could have made the "we're scared of you" experience for non-premier users much less confusing. They clearly have a lot of internal structure and rules. They want to keep some of that hidden, to minimize fraud hackery. But they could expose the broad strokes to users, make clear what state they're in, and offer them the opportunity to upgrade to properly vetted merchant accounts at any time. People aren't upset about the restrictions; it's their arbitrary, opaque nature that makes them seem so unfair.
I think the real problem here is that PayPal is owned by EBay. I hear EBay is getting better, but the place used to be a nightmare to work at, and one glance at their website tells you how thoroughly they're focusing on exploiting their existing model at the expense of trying anything new. With that kind of ownership, I figure anybody with a desire for innovation long ago left PayPal.
The result is that the system is treating them identically to how a bank would treat a more organized company; however, with an accountant on hand and an understanding of the rules, the organized company is much less likely to make silly mistakes (such as selling people a product that is shipped more than 48 hours later, already in violation of VISA's rules, to a third-party's address and then claiming that it is a "donation" and not a "purchase" <- an example from earlier this year).
There are also simply more players, as we are now talking about a bunch of couple-person companies that are using PayPal to accept credit cards, and even individuals who may not be incorporated at all but are using it to launch and sell products on their websites. These kinds of people are also much more likely to decide to attempt "lynch-mob" as their primary means of recourse against a company doing something they disliked, so we are doubly more likely to hear about situations.
However, as a merchant who operates something that many people (incorrectly) call sketchy, and one who has spent much too long learning all of the relevant tax regulations, reading up on credit cards, talking to people with real merchant accounts, and having meetings with banks about possibly using their service instead, my opinion is: PayPal is not that difficult to talk to and they are not actually unreasonable; there are things they are incompetent at, but this isn't one of them.
Paypal's profit margin is a small percentage of the value of a transaction. The potential losses due to fraud can go as high as 100% of the value of the transaction. I.e. their losses can be 50-100x as big as their gains.
Further, the selling point of Paypal is they let anyone who wants to set up shop and use Paypal for money transfers. The tradeoff you make by using Paypal is much lower setup costs (relative to a merchant account) for much higher risk.
Stripe et. al. are the credit unions of the card processing world -- they can offer more personalized service. But they also can't really scale and meet all demand, or handle the very largest accounts, without putting many PayPal-esque structures in place.
Great, and I will keep not using your site, and I will keep filing complaints through every forum possible until we eventually end up on a new site and the circle of life of
useful startup--->gets an ego and stops caring about customers--->replaced by new useful startup
EDIT: The best part was they accused me of three things:
1) Being a newer member (I opened my account in 2000 so I'm not sure I agree.)
2) Not having enough account history. (In the 12 years I've been a member I tend to make 1-2 transactions per month).
3) The transaction being "abnormally large". (I get paid rent and pay rent through the account for thousands of dollars at a time, the transaction in question was for $400 dollars)
basically paypal can diagf.
We use Stripe and I couldn't be happier. Started with Paypal, wanted to shoot myself on a regular basis.
Can I safely assume at this point that our reply was "lost" and we should start over? Not exactly a promising start on the customer service front, but perhaps we can call it teething trouble. :-)
I've been hearing a lot about Stripe lately, but haven't used it yet.
So PayPal doesn't have to operate by the same rules. When you use PayPal, you are putting money into PayPal's bank account and hoping they act in your best interests.
A reasonable person (I feel) would conclude PayPal is a de facto merchant acquiring bank, especially given the volume, and therefore should be required to operate under those laws.
Of course, PayPal knows the real money is in becoming a card scheme, so it's only a matter of time before we see that (not co-branded with MasterCard). At least they'd have to operate under existing card scheme laws, but I sure as heck wouldn't use one.
I had nearly $40k (ALL of my upstart company's capital) held for 180 days, and I almost went out of business. My products unexpectedly sold better than we had planned for, and we received a few chargebacks, that we had asked Paypal how we should handle before they occurred. The chargebacks were a very small amount, but they held the ENTIRE BALANCE. I couldnt pay for any of the inventory, which led to a chain reaction of chargebacks.
What made it even worse - THEY NEVER REFUNDED the customers on time and did not allow us, the merchant, to process the refunds --- IT WAS THE ULTIMATE BUSINESS NIGHTMARE!!! We started out as victims of our own sucess. Instead of helping us, we almost became victims of Paypal!
The best part about them giving buyers refunds is that if you, as a seller, want to dispute their chargeback, you have to pay Paypal an administrative fee ^_^
Another cause that it will freeze an account is when it suspects the account is used for illegal activities (e.g. selling fake goods).
Please note I am in no way implying the OP is involved in any of these. I am just making some guess on why PP may shut down/freeze accounts.
Chargebacks are filed a month or two later by owners of these stolen credit cards.
In return for being cheaper and faster there are trade offs. As stated in the article, this person's business model is a "high risk" one in general and to PayPal in particular. This is a great example of where a merchant account with a bank really is the better option. They need to met you, understand your business and why it works the way it does. Once done, you're less likely to have ongoing issues. So, you can keep your "higher risk" business model and change from PayPal or you can change your business model to better fit with PayPal. I don't think you can have both.
PayPal is a family sedan. This guy is lamenting that his vehicle doesn't perform the way he wants it to at high speed on twisty mountain roads. Seems like an unfair car review in that sense.
As others noted - it would look very strange to PayPal if you basically pull all your funds two days after that call. Who knows what else he inadvertently did to raise suspicion.
Bullshit. If you're going to process payments, you have to solve hard problems like fraud prevention, and PayPal is doing a dreadful job solving them. Freezing accounts isn't the problem; the problem is that PayPal is a giant black pit offering no way to resolve any issues. This is customer-hostile behavior. Shoot first, ask no questions later.
(Disclosure: I work at Braintree)
Oh, and I just signed up for Zoompass.
Square would solve the problem for many, but... would the average person carry around a hardware device so their friends can give them money by cell phone? Probably not.
Has anyone used it? Is there a catch? How do customers react?
As far as we can tell, there is only one catch, but it's a big one: you can only take payments from bank accounts within the reach of their direct debit system. That means UK-only today, and they've announced their intent to expand across Europe in "mid-2012" , but it's not clear when they might go any further.
We also work from the same office as GC and they're good guys. Always on the phone with customers, helping out and listening to feedback.
That is precisely the problem, PayPal is on the hook for any credit card charges for 6 months so they are much more willing to protect themselves then to try to understand a specific situation. They are a black box when it comes to these types of issues, you feed lots of information in but you get almost nothing in return.
Banks usually transfer funds nightly and they don’t hold subscriber information hostage.
It would be one thing if PayPal was amazing to use but they are just one technical or customer service blunder after another.
Maybe this just happens to all payment companies at scale, but it seems like PayPal has a lot of stories from ordinary-sounding, reasonable-sounding people who were just trying to sell something and ended up losing all their money. Who's responsible for those service delivery failures?
I certainly wouldn't set up any of my businesses to rely on PayPal to take payments, and I expect many others feel the same way.
Many merchants are just simply turning to the ACH Platform.
Once you pay someone with BTC, your money is gone. It's that simple. Unless you involve a third party of some kind, and then it's PayPal all over again... though I assume it's a great deal easier to become a BTC middleman than a middleman of any established currency, due to lack of idiotic government red tape to jump through.
Bankers hate BTC because it removes them from inter-mediating people and their money, statists hate BTC because it nullifies their socialist dreams of gathering funds at will (printing money). Anonymity is just a nice bonus.
Bitcoin is valuable because it gives you a choice: you can either have third party to resolve issues and insure risks, or you can go by yourself. In case of paypal/visa/wire transfer you do not have such choice.
Therefore I assert that the Bitcoin model is superior: solving the fraud risk for merchants is more important than for customers. If a merchant start delivering poorly (or not at all) with purchases, he will quickly receive poor reviews and go out of business, hence self-correcting the fraud problem.
Of course another option with Bitcoin which you are not thinking about is to use escrow services as third party between buyers and sellers.
..which is just replaced with built-in inflation. At least the rate is predictable and static.