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This is not unique to PayPal, it's standard in the credit card processing business. https://www.merchantmaverick.com/understanding-rolling-reserve-put-business/

This is not unique to PayPal, it's standard in the credit card processing business. https://www.merchantmaverick.com/understanding-rolling-reserve-put-business/ https://www.merchantmaverick.com/understanding-rolling-reser... However, they do seem particularly aggressive in applying a reserve in this case. We are missing a lot of data here, for example the business' chargeback rate.

joenot443 9y ago
>It's worth noting that our chargeback rate is well under 0.1%
- URSpider94 9y ago
  Thanks for highlighting. This does seem pretty aggressive. This does stink, but they have options. If their revenue is as large as they state, they can likely go to a bank and get a line of credit with their receivables as collateral. If they were in a B2B business, they would likely be facing Net 45 terms from their customers anyway. http://www.comcapfactoring.com/blog/line-of-credit-secured-by-accounts-receivable/ http://www.comcapfactoring.com/blog/line-of-credit-secured-b...
  - phil21 9y ago
    I'm curious if they need Paypal due to customer preference, or if they could simply accept credit cards directly. At that volume, implementing your own merchant account sounds like a much better idea than paying the absurd rates Paypal charges. However, I'm fairly certain that they would have thought of this :) I'm assuming they need to accept Paypal due to customer demand.
deleted 9y ago
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droopyEyelids 9y ago
Chargeback rate is low, but: 1) NZ company operating out of Australia- complicated international ownership structure. 2) Industry is software. Software is a high risk product category. 3) Very quick unexpected growth in transaction volume. Another big fraud red flag. This isn't an aggressive reserve, it's a defensive one.
- pentae 9y ago
  Industry standard holdback rate is 10% for six months. I've been in the payments industry 15+ years and never heard of anyone holding more than 10% except for PayPal. Not giving a timeline on when the holdback is returned is also unique to PayPal. There's no defense here. What they are doing should be against the law.

joenot443 9y ago

>It's worth noting that our chargeback rate is well under 0.1%

URSpider94 9y ago
Thanks for highlighting. This does seem pretty aggressive. This does stink, but they have options. If their revenue is as large as they state, they can likely go to a bank and get a line of credit with their receivables as collateral. If they were in a B2B business, they would likely be facing Net 45 terms from their customers anyway. http://www.comcapfactoring.com/blog/line-of-credit-secured-by-accounts-receivable/ http://www.comcapfactoring.com/blog/line-of-credit-secured-b...
- phil21 9y ago
  I'm curious if they need Paypal due to customer preference, or if they could simply accept credit cards directly. At that volume, implementing your own merchant account sounds like a much better idea than paying the absurd rates Paypal charges. However, I'm fairly certain that they would have thought of this :) I'm assuming they need to accept Paypal due to customer demand.

deleted 9y ago

[deleted]

droopyEyelids 9y ago

Chargeback rate is low, but: 1) NZ company operating out of Australia- complicated international ownership structure. 2) Industry is software. Software is a high risk product category. 3) Very quick unexpected growth in transaction volume. Another big fraud red flag. This isn't an aggressive reserve, it's a defensive one.

pentae 9y ago
Industry standard holdback rate is 10% for six months. I've been in the payments industry 15+ years and never heard of anyone holding more than 10% except for PayPal. Not giving a timeline on when the holdback is returned is also unique to PayPal. There's no defense here. What they are doing should be against the law.