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Why Is PayPal So Successful Yet They Treat Merchants Like Crap?
- chrischen 8y agoThey treat merchants slightly less crappy than credit card companies.
- alexandernst 8y agoIMHO PayPal offered 2 things that nobody else offered at the time they were starting: easy & secure. Nowadays more platforms like PayPal offer the same features, but once some company has made a big share of the market, it's really hard for other companies to take that market share away.
- marpstar 8y agoagreed. That on top of their eBay partnership (and later acquisition). I think people forget how popular (relative to the rest of the internet) eBay was 20 years ago. I remember getting a PayPal account in like...1999 or 2000. That's a long time. Only within the past 5 years have processors like Stripe and Square have really gained visibility, and they each have their own niche (developer-friendly and small-shop-owner-friendly, respectively).
- neonate 8y agoThe quote which forms the body of the post is surprisingly interesting.
- code_duck 8y agoIt seems like that is the actual content of this submission. It makes sense, too… PayPal was the only payment processor that stood out as having their own currency and balance system. I can see why that would save them a lot of money.
- dpcx 8y agoPersonally, I think the title of this should have been "Why is PayPal so successful yet they treat their users like crap?" I have had multiple people come to me asking why their PayPal payment was rejected, or why PayPal closed their account, or myriad other questions. My answer to them is always the same: PayPal does what PayPal wants, and (in practice) users have little to no recourse to that fact.
- oosjc9a5 8y agoAs an end user I am happy PayPal treats merchants like crap. Just think about it: unless you drink the libertarian kool-aid, you know in any given business transaction there's a minimum of 1 (one) sucker. I'd rather the merchant be the sucker.
- ecommerceguy 8y agoI hate to burst your bubble but we've never lost a paypal dispute and they have treated us extremely well. Further, I can call them any time and talk with a senior rep relatively easily.
- astrowilliam 8y agoWhat does being a libertarian have anything to do with a business transaction?
- deleted 8y ago[deleted]
- dashmatte 8y agoExplain who is a sucker and why? Because I haven't experienced that.
- paulie_a 8y agoYou should tell that to my friend who routinely tells me about sending 2000 dollars of equipment just to get scammed. It's happened so many times now he barely gets annoyed. Just a cost of doing business, getting scammed and PayPal is complicit.
- leowoo91 8y agoIf my understanding is right, their security measures are over-engineered even that means losing profits. As an individual I told them (about 10 times, after my account recovered) that I own them couple of thousand dollars. They responded "no, you are perfectly fine" ¯\_(ツ)_/¯
- lykr0n 8y agoBecause for a silent majority of their users have no issues. I've been using paypal for 5+ years and have never had a single issue with them.
- rock_hard 8y ago15 years and counting...never had a issue.
- cheza 8y agoI've had a PayPal account since the beginning. At least 15+ years with zero problems.
- code_duck 8y agoI had a startup based a community that used PayPal, and used them to process hundreds of thousands of dollars with no complaints. I also never had any chargebacks against my business, though.
- jseliger 8y agoLike many people, though, you never have an issue till you have an issue. And then you're screwed. https://jakeseliger.com/2011/12/09/december-2011-links-paypals-bogusness-ribbed-tees-literary-friendships-literary-research-alex-tabarroks-new-book-and-more/ https://jakeseliger.com/2011/12/09/december-2011-links-paypa.... And you will then write a piece bemoaning about how awful Paypal actually is, and you'll be confronted by other people shrugging and saying, "Never had a problem myself."
- jdietrich 8y agoThere's a very simple quid-pro-quo with Paypal - they'll let basically anyone accept payments, they offer very strong protections to buyers, but they'll freeze any account that smells even slightly iffy. If your transactions could plausibly look like fraud, then there's a strong likelihood that Paypal will freeze your account; there's an even stronger likelihood that a mainstream merchant account issuer will politely decline your business. Go to your bank and ask them "I'd like to accept donations on the internet via credit card. No, I'm not a registered charity" or "I'm planning on holding an event next year. I don't have enough funds to cover the cost of running the event, so I need to pre-sell tickets." See if they offer you a merchant account. Paypal aren't perfect, they aren't the best fit for every business, but they offer a genuinely unique service.
- pier25 8y agoBecause it's convenient for end users
- runxel 8y agoSo much this. The convenience must never be underestimated. Paying with PayPal is just _easy_.
- buboard 8y agoMaybe they caught the disease from their friends in banks
- cwyers 8y agoCanada's largest Bitcoin exchange has lost $190 million in assets because its founder died and nobody else has access to the cold storage wallets. https://www.ccn.com/190m-gone-how-canada-biggest-bitcoin-exchange-lost-it https://www.ccn.com/190m-gone-how-canada-biggest-bitcoin-exc... Traditional banks do not have the "one person died/ran away to the Bahamas/whatever and now everybody is out their deposits" problem. Banks have other problems! Banks have loads of problems. But banks have to exist in a world of piles and piles of regulations, and you have to realize is that most of those regulations exist not because regulators are bastards but in response to someone screwing over someone else in the past. Banking regulations and banking practices have evolved for reasons, and if you don't understand those reasons and try and invent banking from first principles like all the people in the wild west of crypto have been trying to do, you are going to learn real fast that there are things you did not account for.
- buboard 8y agopaypal is not crypto, and in fact in europe paypal IS a bank
- toast0 8y agoFor a long time, PayPal was the fastest way to accept credit cards. You could sign up for an account practically instantly vs finding a merchant bank account, a credit card processor, and a third company to interface with you and your processor via the Internet. And the fees are at least towards the bottom of entry level fees with the traditional method, if not lower. Nowadays there are many more options (ex Stripe, Amazon payments, Google payments, probably more), so maybe pick the one or two that are the least terrible, until you have enough volume to get a better deal?
- theamk 8y agoBecause they provide security for the users. With paypal, I can buy from any random sellers, and know that in the worst case, I am risking just a purchase amount. Security is hard, and even if someone makes great products, that does not mean they are great programmers. For a small or a medium store, I always assume that their website will be hacked and entire database will be stolen (it is really sad how often this happens). Entering credit card directly just means more problems for me down the line. This means some sort of trusted checkout service. Stripe has no extra security, so this leaves Paypal or Google Checkout. I think the latter has died (I have not seen it for a while), so this leaves Paypal.
- paulie_a 8y agoBasically PayPal takes a hostile attitude towards sellers. "Oh you have done millions of dollars with us over years and this new account is making a very flimsy complaint, well fuck you" At a certain point PayPal is actively and knowingly participating in scams.
- YeahSureWhyNot 8y agoPayPal sides with a buyer regardless of how established your business is and how many thousands of legitimate shipment of product you have made. Buyer called saying they didnt get the package that UPS driver left at their door step? full refund of 1100 dollars at seller's expense. As a business owner, I don't accept PayPal for these reasons.
- ptd 8y agoBut as a consumer, you understand why this is so powerful. Anytime a customer has to get into a he said she said with a company, the company usually wins, especially if there is money involved. It’s nice to use PayPal and not have to worry about convincing vendors like you that x, y, or z happened.
- paulie_a 8y agoYes it is powerful. I can blatantly scam people as a buyer. It's a thief's dream. Oh hey this seller has had 100,000 transactions with very minimal issues...this buyer has 1...oh well the buyer must be right.
- rossdavidh 8y ago1) PayPal is a pain sometimes, but they do usually seem to be trying (my wife is a small business owner), and refereeing fraud disputes is a Hard Problem 2) their old-school competition was not always great 3) my (anecdotal) impression is that Square and Stripe both ARE doing well (marketshare-wise, anyway), so the idea that PayPal owns this whole space is not accurate
- cosmin800 8y agoI didn't know paypal is still a thing in 2019. Stoped using it about 5 years ago for the same reasons like in the article (high fees, random payment rejects, high profile accounts closed for no reason). I am better with good old credit/debit cards and now with crypto.
- RandallBrown 8y agoPayPal owns Venmo, which is pretty huge now in its own right.
- notahacker 8y agoIsn't the true answer to this because most payment providers set up much more onerous requirements to let people take payments via their service and/or charge merchants more? When your payment services have lower bars to entry for scammers and lower margins, you're going to flag a higher proportion of possible issues with your merchants and not handle them as smoothly.
- bitcoinbutter 8y agoIt's a combination of factors. As mentioned in the original link, PayPal has an advantage because a portion of transactions are done internally using PayPal balance. This results in an instant and free transaction. They also have a network effect which is compounded by saving the buyers'payment information, meaning the buyer doesn't need to resubmit their payment information on each transaction. The company treats its merchants terribly and treats buyers like royalty. This is a winning strategy because merchants have no choice but to use the payment methods the buyer prefers. Otherwise the buyer will simply go to a competitor who does take PayPal. PayPal is an essential service to most merchants. The way they close and limit accounts can basically determine which businesses in a specific industry are successful. They seem to selectively enforce their own policies among merchants. This will create monopolies or oligopolies simply through having a functional PayPal account. Considering this huge power they hold, it is unfortunate that their policies are so opaque and inconsistent. A merchant is in a constant state of fear that one day PayPal will just permanently close their account, and will have no option to discuss or appeal the decision. It happens constantly and is the reason many businesses eventually fold.
- aboutruby 8y ago> The way they close and limit accounts can basically determine which businesses in a specific industry are successful I think it used to be this way but now with the concentration of e-commerce with Amazon and Shopify (and most other sites using Stripe / Braintree), it seems to me that Paypal is becoming more and more irrelevant.
- jkaplowitz 8y agoPayPal owns Braintree (and, relatedly, also Venmo).
- aboutruby 8y agoStill those are different services (I was talking about the service becoming irrelevant, not the company). And they probably bought Braintree to make e-commerce companies use Paypal (Braintree is pushing everybody to integrate Paypal into their payment methods).
- marcinzm 8y agoIf it's a choice between giving my CC to a random web merchant that likely doesn't know technology (so non-trivial chance that they or their third party payment processor are compromised) or using Paypal to pay then I know which one I'll choose.
- zeroimpl 8y agoI look it at the opposite. As a user, the only thing Paypal protects is your credit card info. Your personal information (name and address) gets passed on to the merchant regardless. There's zero risk to us consumers for stolen credit card numbers, so why would I care about that? Instead, Paypal costs more for the merchants, and I'd prefer the merchant stays in business so I'll use their preferred payment system. Plus, why do I want Paypal keeping their own record of everything I purchase? Thus I only use Paypal when there are no other options.
- felipelemos 8y ago> There's zero risk to us consumers for stolen credit card numbers Care to elaborate on this?
- techsupporter 8y agoIf you're using a credit (NOT DEBIT) card number in the US, you have zero liability for unauthorized and fraudulent transactions. You can even get your credit card issuer to--usually--go to bat for you in the case of "not as described" transactions, too. So there's theoretically no risk to you as a buyer using a credit card because if it doesn't work out, you just tell your credit card issuer to go get the money back. This is, supposedly, one reason why PINs on chip cards weren't adopted widely here. The customer can, with relative ease and usual success, reverse the charge so what does it matter if someone makes off with a card? The key is credit cards instead of debit. Your chargeback rights are much more limited with a debit card and a debit card means your money has been held up, not the card issuer's.
- 8y ago
- confiscate 8y agobecause PayPal is like any marketplace platform. Demand side is always more important than Supply side. If there is Demand (people willing to pay), there will most likely be lots of folks happy to Supply (merchants willing to sell). The opposite is not true. If you ramp up Supply (add more good merchants), it's hard to ramp up Demand to match (getting more customers). Hence, "the customer is always right".
- deleted 8y ago[deleted]
- oblib 8y agoI've been selling on PayPal for at least 17 years now and never had a problem. My case may be rare but I think the reason is pretty simple, whenever anyone has requested a refund I've issued it asap, no questions asked. PayPal makes that very easy and last time I looked they made it clear that's what they expect. In their defense, I don't think I can or should expect them to arbitrate a claim for a refund and I can certainly understand why they wont. Paypal really only has two options. They can either say the money stays with the vendor and buyer beware, or the money always goes back to the buyer and the vendor must deal with any issues that arise from a complaint. I have a PayPal debit card so I also use PayPal to make purchases. I like having that protection.
- xchaotic 8y agoas a consumer PayPal works well for me - it has extra layer of insurance that I never used but that certainly gives me 'feel good' thing. I can pay for things in one currency with a credit card in another. Yes the exchange rate is not ideal, but much better than a flat fee for every overseas transaction on my otherwise cost-free credit card.
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- christocracy 8y agoI’m a merchant and I once won a PayPal chargeback. I sell a software product. Customer generates a key to unlock the code. Once a key is generated, that key will unlock the product forever; it cannot be revoked, thus no refund at that point. In the dispute form, I wrote “It’s like buying a DVD from Walmart — once the cellophane is torn open...” PayPal judged in my favor and refused the chargeback of $349. I’ve had 2 or 3 chargebacks from Visa and never won those.
- kalleboo 8y agoWe had a credit card charge back on our PayPal account and PayPal managed to successfully argue it to the credit card company so we won (!)
- deleted 8y ago[deleted]
- fouc 8y agoNice bit from the first answer: >“That’s why we created a PayPal debit card. It’s a little counterintuitive, but the easier you make it for people to get money out of PayPal, the less they’ll want to do it. Though technically the first answer didn't answer the question it seems.
- deleted 8y ago[deleted]
- kalleboo 8y agoPayPal is very useful to me since my main credit card brand (JCB) is poorly accepted abroad, but if they accept PayPal I can use it anyway. They help debit card users with their extra layer of protection. They offer a way for people without credit/debit cards a way to pay. And they are probably still the fastest and easiest way (but absolutely not the cheapest) to send money between individuals internationally. They fill in a lot of cracks in payments that others leave open.
- mannykannot 8y agoTwo of the first questions to ask are "could a competitor do better in this regard?" and, if the answer is in the affirmative, "Could a competitor replace PayPal by doing better in this regard?" For a number of the most successful e-commerce fields (those having a large market that can be served in an almost completely automated way), the answer to the first is probably yes, but only in a tiny fraction of all transactions, and only by spending a lot more on human customer service. Consequently, the answer to the second question is probably no. There is also the asymmetry with regard to whether PayPal leans towards the customer or the vendor in a dispute. The former attitude tends to lubricate commerce, while the latter applies the brake, so it is actually to the benefit of vendors as a group, as well as customers (and also, of course, itself), if it does the former. If customers regard PayPay as the preferable way to do business, the pressure is on vendors to use it, while vendors who spurn it in favor other methods risk losing business to competitors. Because PayPal made a number of smart choices, it offers benefits to both sides of a transaction in the vast majority of cases, and that is pretty unusual (compare it to, for example, the credit rating agencies.) It is in a sweet spot where it would be difficult to compete either by reducing costs or by improving service, and that sweet spot is defined by what it is currently technically feasible to automate. That sweet spot will move with technological developments, and PayPal will need to adapt accordingly to stay in it.
- doe88 8y agoUbiquitous.
- Tigere 8y agoI think its success was initially was from first to market truly web payment system and then the Ebay acquisition potentially has driven transaction volumes. Almost every Ebay account has a PayPal account.