7 ms·

Pre-orders are scams according to Paypal

81 points by dmak 15y ago

wccrawford 15y ago
I'm actually surprised that businesses till use PayPal after all the incidents like this. They've made it incredibly clear that their policies and actions are arbitrary and they don't care about their customers at all. And yet, companies still use them. I can understand customers using them... The customer almost never gets screwed, that I've seen... But anyone with a balance is taking a risk that it'll be seized. And if they feel like it, you won't get the money back. Google and Amazon now both offer excellent payment systems and I've never heard these horror stories about them. So why don't people switch?
- pfchangs 15y ago
  Merchants don't use google or amazon(or any other payment system) because they require a higher amount of reserve and/or fees. The loud complaints are from people who want their cake and eat it for free. People don't realize nothing is free.
  - codenerdz 15y ago
    The problem here is that people are generally unaware of a potential 6 months lockdown if paypal raises a red flag on your account. Furthermore the reasons for red flags are also unpredictable(Im assuming that paypal doesnt want its fraud detection scheme gamed). The biggest problem is a difficulty/impossibility of a resolution process other than waiting for 6 months to get your funds. I would definitely try to get somebody on the phone and escalate the problem as contacting email support will get you into an infinite ping pong of templated answers.
    - dangrossman 15y ago
      The reasons are perfectly predictable. PayPal's risk department acts like any other merchant processor's risk department. The things that trigger a review are... * >1% monthly volume chargeback rate * >1% monthly volume refund rate * too many payment disputes * violating the terms of service (including what types of products may not be sold through PayPal) * selling products or services with known high chargeback rates * a sudden increase in processing volume * a sale an order of magnitude larger than your average ticket * accepting payment too far in advance of shipping a product or providing a service I'm sure there's also some program in there looking at interactions between accounts to find strange patterns, but that's not usually what trips people up unless they're actually laundering money or factoring. It's always the obvious stuff.
- Anechoic 15y ago
  > Google and Amazon now both offer excellent payment systems and I've never heard these horror stories about them. So why don't people switch? I'll give the same answer I give whenever this question comes up - I stick with PayPal because of the instant access to the money from transactions via the PayPal debit card. Since I sell physical products, this gives me a lot of flexibility in terms re-ordering inventory, moreso than the "deposit to your account once per week/in a couple of business days" policies of other options. That said, I'm no fool; I sweep my money out of PayPal ASAP and I have an Amazon Payments account ready to go in the event PayPal screws with my account, but as long as things are working with PayPal, I'm going to stay with PayPal (until something better comes along).
  - chops 15y ago
    until something better comes along Like http://www.swipe.com http://www.swipe.com ?
    - edcrfv 15y ago
      I think you mean https://stripe.com/ https://stripe.com/ ?
    - Anechoic 15y ago
      (presuming you meant https://stripe.com https://stripe.com) Do they offer instant access to transactional cash? Also this look s like programmer-type offering (I'm not a programmer). Do they offer a bit of HTML I can drop into my website to process the transaction?
      - chops 15y ago
        (presuming you meant https://stripe.com)* https://stripe.com)* Heh, yep. Total brain fart. I'm not sure about the HTML stuff, but I thought that they do have a js drop-in that should require minimal coding. Don't quote me on that, but at the very least, it's not as nasty as Paypal seems to be.
    - mahyarm 15y ago
- cperciva 15y ago
  I'll support Google Checkout and Amazon Payments as soon as they support Canadian merchants.
- sek 15y ago
  Google doesn't offer direct debit here in Germany for example. Credit cards are not so common here, but every 12 year old with a bank account can use direct debit. There is a big chunk of money lost if Germans are not able to pay with Google Checkout and i assume there are similar problems elsewhere. For consumers PayPal has a easy verification process and from that point on it works everywhere instantly. I also see a lot of advertising from PayPal, so the regular people trust them i think. They know what they are doing, they put more effort behind it than other ones. Google has a marketing budget for Chrome and look how well it does. I never heard from Amazon payments, so the same situation here. They both could do more if they want to be a real competitor.
- dangrossman 15y ago
  > They've made it incredibly clear that their policies and actions are arbitrary and they don't care about their customers at all. It seems to me that they're incredibly consistent and care about their customers exactly as much as any other merchant account provider. This exact story with a game developer taking preorders then having PayPal problems has played out a half dozen times on Hacker News alone; in reality it happens regularly. It would happen if these developers applied for a merchant account and said they were taking long-term preorders on the application too. The only problem with PayPal is that merchants don't expect PayPal to act like every other processor, and have no experience dealing with the risk/underwriting departments of banks to realize that what they're doing would be a problem anywhere. As far as why businesses still use PayPal? Nobody else operates in as many countries. Nobody else has over 200 million members already signed up and trusting the payment process. Few MOTO merchant accounts actually beat the fees PayPal charges, especially once you have >$10,000/mo in volume, when you actually add up all the transaction fees. And few gateways are as easy to implement or built into as many other ecommerce products. It makes no sense from a business standpoint not to use PayPal (which in 2011 does not mean sending someone to paypal.com to pay if they want to pay on site). They're cheaperc, more reliable, allow you to accept all major credit and debit cards, bank transfers, eChecks, payments from 200+ million members' balances, and pay you your funds immediately. If you're that worried about having a problem, have a backup in place to switch to and don't hold a PayPal balance -- risk free. You would think the HN community would look at PayPal and see a success story to be shared and celebrated. They were the only significant 3rd party payment processor to make it through the dot com bubble. There have been many attempts. They all went out of business due to fraud. PayPal was bleeding over $10 million a month to chargebacks and fraud at one point. They created the software and systems to make a global 3rd party payment platform possible and survived. Now they make possible an enormous amount of ecommerce for tens of millions of people that would not be able to accept payments any other way. Instead we see the occasional "horror story" that would likely happen whether the developer was using PayPal or anyone else, and a PayPal Sucks website that's accumulated barely 2000 threads in over a decade (what fraction of a fraction of a percent of PayPal users is that?), and certain vocal people pile on the "why would anyone ever use PayPal" bandwagon...
  - InclinedPlane 15y ago
- mgkimsal 15y ago
  Google's "checkout" is so-so, but they don't treat it like a real service for merchants (well, imo). Every time I log in to google.com/checkout, I have to go click a stupid little logo in the upper right that's not labelled as anything except a gear, then choose 'my sales' to see my sales. It always treats me as a consumer first, and merchant second. Secondly, even though I've told google checkout explicitly that I sell digital goods, it constantly shows "not yet shipped" on every single one of my orders. I'm explicitly setting "digital-content" flags on the request, but it's seemingly ignored. Thirdly, Google Checkout routinely - as in >50% of the time in my experience - holds payments for 15 minutes for 'fraud check'. In my case, I'm delivering digital goods, but I'm not going to tell people to wait for 15 minutes, so I have to trust that the request will go through. I get a few problems per month with that, but there's no setting in google checkout to say "please don't take 15 minutes to process payments". For people doing physical goods sales, it's probably OK. It's far from perfect for digital sales.
  - simcop2387 15y ago
    Depending on your digital goods, have you thought about sending a link in email, as part of a receipt even? Could easily setup a mail server to forge the time back 15 minutes and make it look like it was instant and just not send it if it was fraudulent. It's a little sleazy but it'd at least give a completely different impression than, "Please wait 15 minutes".
    - mgkimsal 15y ago
      People just don't want to wait that time at all. The actual impact on user's hasn't been too bad (because I'm taking the risk), but the actual flow, from my perspective, has been pretty poor, and from what I can tell it's not documented that they'll hold transactions for 15 minutes.
dhughes 15y ago
Someone at Reddit posted about having odd problems at PayPal where they are holding his money for 90 days and got a terse response from their help line. http://www.reddit.com/r/reddit.com/comments/l4q2y/please_help_me_expose_this_newest_paypal_fraud/ http://www.reddit.com/r/reddit.com/comments/l4q2y/please_hel...
brass_cannon 15y ago
PayPal is horrible at providing support, documentation and resolution channels in these type of situations. They also, at times, can appear to arbitrarily take adverse action against certain accounts. However, it's important to note that they hold the risk on these transactions. If the business goes under before pre-orders can be fulfilled, and the business doesn't have the funds to take care of all the chargebacks this event will cause, guess who pays out? PayPal. This scenario is the exception to be sure, but it happens with enough frequency that PayPal must implement some form of risk mitigation. There could be other factors in play here, as well. Does the business have a poor history with other processors? Do the founders have poor credit? Maybe not, but maybe so. It's difficult to arrive at a concrete conclusion from this post. That being said, it's a possibility that PayPal has not assessed risk appropriately in this case. We simply can't tell. Where PayPal could make situations like this better is by providing clear expectations up front as to how they assess risk, and what not to do with your account ahead of time. They could provide reasonable support to work with the merchant and get additional metrics / a better feel for the account. They could provide the above context to merchants when this happens. The best merchant account providers do this. PayPal fails spectacularly at the above, which is enough for businesses to strongly consider alternatives.
- tomp 15y ago
  I wish I could upvote you more than once. A very reasonable and balanced argument.
- dangrossman 15y ago
  One issue is that a lot of these developers and small businesses fail to change their account type from Premium to Business. Doing so does not change any fees or features, it simply attaches a business name to the account instead of an individual's name, but it also changes the help UI and gives you access to the business support phone line. When there's an issue with a business account, PayPal actually calls you, in my experience. And when I call their phone line, a human being answered right away.
reaktivo 15y ago
bitcoins.
michaelschade 15y ago
They should use Stripe: https://stripe.com/ https://stripe.com/ We were able to get our product off the ground right away with Stripe (we were in their beta before they opened up to all). It's extremely quick to implement, their APIs are well-documented, and I doubt they'd prove bothersome like PayPal is being here. In my experiences, their support actually responds quickly and goes above and beyond to help. If someone from Xenonauts is reading this: let me know if you need any help implementing Stripe if you decide to go that route. You can tweet me at @michaelschade or drop me a note at hn [-at: @-] mschade [-dot: .-] me and I'll provide whatever advice I can. I'll also see about sending this suggestion through their site in case they're not HN readers. Edit: found their email and sent through there too. Hopefully they can get the issue resolved–I feel bad for them not being able to accept orders right now, that must be a really upsetting position to be in.
- darylteo 15y ago
  I would love to use stripe, but am not in the US. Any ideas?
  - michaelschade 15y ago
    They're unfortunately not operating outside of the US yet (at least, not publicly). From what I hear, they're anxious to make this possible. Your best bet is probably to follow them on Twitter (https://twitter.com/#!/stripe https://twitter.com/#!/stripe) to find out when they announce international support. Edit: You can asked to be notified when your specific country is available: https://stripe.com/global https://stripe.com/global
mgkimsal 15y ago
I'm not sure paypal is that much different from other merchant processors. I spoke to several last year, and they were all fine and dandy until I told them I take payment for 12 month subscriptions in advance (jsmag.com and groovymag.com). I also take payments for indieconf.com, an annual tech conference. 3 processors told me they couldn't work with me at all. A couple said I'd need to go to underwriting, and I'd pay a higher fee. I asked why, and was told "possibility for chargebacks is high". I then said something like "why can a company like Expedia charge me for a ticket 11 months in advance for $2000, but you won't let me sell a ticket to a conference 3 months in advance?". "Companies like Expedia have millions in reserve to cover chargebacks" was the answer I got. I could have received a merchant account through any of those companies by lying about the nature of what I was selling, but had they found out, my account may have been suspended or I may have had a certain amount subject to reserve holding. I don't see the behaviour of paypal as all that different to most other processors, except that most people don't tell paypal ahead of time what they'll be selling. I have a merchant account through BoA - got to meet with a real person who answered questions, asked me some, pushed things through underwriting, and it all went OK, but I still run nearly everything through paypal and google checkout right now still - both paypal and google checkout have pretty strong name recognition and people are generally comfortable with them so far.
jfruh 15y ago
Can someone explain what specifically PayPal doesn't like about pre-orders? Is there something specific in their terms of service that doing pre-orders violates? I'm seriously considering a future project that will involve pre-orders so it seems important to get this clarified...
- michaelschade 15y ago
  It probably has to due with the risk involved with how to handle chargebacks if the company doesn't fulfill their promise of the product, and PayPal assuming liability if the company doesn't have sufficient funds in that case. There are plenty of horror stories around pre-orders on PayPal. I'm not sure how Stripe handles this specifically, but they may be a good alternative: https://stripe.com/ https://stripe.com/ (we use and love them).
  - saurik 15y ago
    I would love if someone from Stripe talked about how they handled this sort of stuff. Everyone keeps saying "I use Stripe and love them", but the process people describe of signing up seems to be begging people to scam them. There are actually good reasons why merchant accounts work the way that they do, and Stripe doesn't provide any argument for why they don't: until they do, I can't imagine trusting them for anything important at my business. I mean, they are almost sketchy when it comes to talking about "when bad things happen"; example: when chargebacks happen (and they do happen: I get one every couple days), can I easily (as in: no human interaction) tie it to an individual payment? The only mentions on their entire website about chargebacks are in the painfully informal FAQ/pricing (that it costs $15), and in their terms of service (which indicates that the $15 doesn't include mediation, which I'm pretty certain PayPal's $20 does). The first thing I think, of course, is "they charge more, duh": if you do any kind of volume at all, or are involved in small transactions, they are a /lot/ more expensive than PayPal: I'd easily be paying them hundreds of thousands of dollars a year for the privilege of not spending a few hours on the phone negotiating a merchant account. (For those not looking at their pricing, their fixed fee is PayPal's worst case fee; PayPal discounts 1-2% from that for volume, and supports a fundamentally better fee schedule for payments under $12: 5.0%+$0.05 vs. 2.9%+$0.30. Unless you are handling small numbers of transactions all over $12, Stripe is going to burn you on fees.) However, when I think through "where does the risk of credit fraud mostly occur", I'd imagine it would be reasonable sized transactions (trying to launder tons of money $1 at a time will get noticed pretty quickly), and I'd imagine the merchant fraud is mostly small volume (as if you actually have a functional business, you are able to easily able to cover the risks). So yeah: I just don't get it... is the Stripe 7 day hold enough? (PayPal doesn't have any hold for most businesses.) I certainly wouldn't touch it over PayPal if the only reason is "PayPal seems overly cautious": Stripe simply seems to be "asking for it". (And this is just looking at normal chargebacks: pre-orders are a whole different ballgame, and if Stripe doesn't have a policy forbidding them then they will probably be out of business, seemingly out of nowhere, in a few months.)
TheAmazingIdiot 15y ago
I'm going to be somewhat direct here. I allege that what Paypal is doing here (holding funds over 10 days) is illegal. In order to do what Paypal does in the USA, you need licensure. They point out that they are not a bank. Indeed, they aren't: in many states they are classified as a money transmitter. In 8 states, they have no license to operate.#1 What is this money transmitter stuff? In essence, the law in all the locales I have checked (I have not gone through every one), indicate only a short holding period (5-15 days) and only allow holding of money of a known crime. So indeed what they do is absolutely fraudulent. In other words, if you have a patent troll corporation with many lawyers, target Paypal for their illegal behavior. #1 Source: https://www.paypal-media.com/state_licenses.cfm https://www.paypal-media.com/state_licenses.cfm
- OstiaAntica 15y ago
  This is a very anti-hacker post, and an argument for the broken status quo. I also seriously doubt it is accurate. PayPal has disintermediated anti-competitive banking laws, providing millions with low-cost quasi-banking. They should be celebrated, not attacked.
  - TheAmazingIdiot 15y ago
    Theft of money from startups and non-for-profits is worse in my book. I use the direct word theft, because they take money that is out of the bounds of most money transmitter licenses. And considering what is taught in business school, is to quantify risk. If you trigger the unknown red flags, which software makers and other starting businesses tend to do, you risk losing access to your money for at least 180 days (up to forever). How do you quantify that kind of risk? California, re 1841: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=01001-02000&file=1840-1846 http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&#3... And they are not even licensed to _operate_ in my state of Indiana. IC 28-8-4-20 (a) A person may not engage in the business of money transmission without a license required by this chapter. # hence all Paypal business in Indiana is illegal.
njloof 15y ago
Shoulda used Kickstarter. Preorders like this are their bread and butter.
- joshaidan 15y ago
  I was thinking the same.
aespinoza 15y ago
This is the second news related to Paypal disappointments I have seen today. I am taking this as a sign, and for our project we are going to be removing support for payments via Paypal. The Paypal related discussion is here: http://news.ycombinator.com/item?id=3087322 http://news.ycombinator.com/item?id=3087322
- lurker19 15y ago
  Very superstitious.
  - aespinoza 15y ago
    "Superstition is a credulous belief or notion, not based on reason or knowledge." It would be superstition if I've done it without seeing the problems other people have. Those two articles, actually describe real experiences. Experience defeats anything else. I choose to believe those two articles, and not because I read them on here, because they are not the only bad experiences I have heard regarding PayPal. In fact I have never heard a good review of their service.
UrbanRonin 15y ago
While I certainly don't care for PayPal's practices, I'm also not a fan of pre-orders. Specifically, I don't think anyone should ever be charged for something, even a partial payment, before it's delivered/shipped. In fact, I think there are regulations that payment not be captured until merchandise is shipped. If you're just authorizing the cost of the merchandise, and then waiting to capture after shipping, I think that's fine, but does PayPal allow you to do that?
apinstein 15y ago
If you read any merchant agreement for credit card companies, you will see that you are technically not allowed to charge someone until you ship a product. Charging someone before you have actually "delivered" the good is a completely different level of risk than charging someone for something you've already delivered. The supplier might not ship, the manufacturer might not ship, or you could be outright scamming people. This is not a defense of PayPal, but just explaining why money processors do not typically allow you to get your money for pre-orders. There's a huge risk that it blows up in their faces.
- cdh 15y ago
  I wonder if this requirement can be sidestepped by shipping the customer something, but just not the actual item being pre-ordered. For example, emailing them a redeemable code or physically delivering a voucher. If not, it seems like you could go even further and bundle something small but tangible with each sale. For a game pre-order, maybe access to a demo or access to private forums?
  - apinstein 15y ago
    That sounds like fraud to me. I would think that you could negotiate this with a merchant bank. For instance service companies often take deposits and kickstarter clearly charges before shipment. But in both cases they probably have agreement from their processor for their business model. I think having to post reserves is one such model for when you are doing riskier transactions. But don't think that merchant bank won't cut you off if you violate the terms of your agreement. However in practice merchant banks seem very lax compared to PayPal.

81 points by dmak 15y ago

I'm actually surprised that businesses till use PayPal after all the incidents like this. They've made it incredibly clear that their policies and actions are arbitrary and they don't care about their customers at all. And yet, companies still use them. I can understand customers using them... The customer almost never gets screwed, that I've seen... But anyone with a balance is taking a risk that it'll be seized. And if they feel like it, you won't get the money back. Google and Amazon now both offer excellent payment systems and I've never heard these horror stories about them. So why don't people switch?

pfchangs 15y ago
Merchants don't use google or amazon(or any other payment system) because they require a higher amount of reserve and/or fees. The loud complaints are from people who want their cake and eat it for free. People don't realize nothing is free.
- codenerdz 15y ago
  The problem here is that people are generally unaware of a potential 6 months lockdown if paypal raises a red flag on your account. Furthermore the reasons for red flags are also unpredictable(Im assuming that paypal doesnt want its fraud detection scheme gamed). The biggest problem is a difficulty/impossibility of a resolution process other than waiting for 6 months to get your funds. I would definitely try to get somebody on the phone and escalate the problem as contacting email support will get you into an infinite ping pong of templated answers.
  - dangrossman 15y ago
    The reasons are perfectly predictable. PayPal's risk department acts like any other merchant processor's risk department. The things that trigger a review are... * >1% monthly volume chargeback rate * >1% monthly volume refund rate * too many payment disputes * violating the terms of service (including what types of products may not be sold through PayPal) * selling products or services with known high chargeback rates * a sudden increase in processing volume * a sale an order of magnitude larger than your average ticket * accepting payment too far in advance of shipping a product or providing a service I'm sure there's also some program in there looking at interactions between accounts to find strange patterns, but that's not usually what trips people up unless they're actually laundering money or factoring. It's always the obvious stuff.
Anechoic 15y ago
> Google and Amazon now both offer excellent payment systems and I've never heard these horror stories about them. So why don't people switch? I'll give the same answer I give whenever this question comes up - I stick with PayPal because of the instant access to the money from transactions via the PayPal debit card. Since I sell physical products, this gives me a lot of flexibility in terms re-ordering inventory, moreso than the "deposit to your account once per week/in a couple of business days" policies of other options. That said, I'm no fool; I sweep my money out of PayPal ASAP and I have an Amazon Payments account ready to go in the event PayPal screws with my account, but as long as things are working with PayPal, I'm going to stay with PayPal (until something better comes along).
- chops 15y ago
  until something better comes along Like http://www.swipe.com http://www.swipe.com ?
  - edcrfv 15y ago
    I think you mean https://stripe.com/ https://stripe.com/ ?
  - Anechoic 15y ago
    (presuming you meant https://stripe.com https://stripe.com) Do they offer instant access to transactional cash? Also this look s like programmer-type offering (I'm not a programmer). Do they offer a bit of HTML I can drop into my website to process the transaction?
    - chops 15y ago
      (presuming you meant https://stripe.com)* https://stripe.com)* Heh, yep. Total brain fart. I'm not sure about the HTML stuff, but I thought that they do have a js drop-in that should require minimal coding. Don't quote me on that, but at the very least, it's not as nasty as Paypal seems to be.
  - mahyarm 15y ago
cperciva 15y ago
I'll support Google Checkout and Amazon Payments as soon as they support Canadian merchants.
sek 15y ago
Google doesn't offer direct debit here in Germany for example. Credit cards are not so common here, but every 12 year old with a bank account can use direct debit. There is a big chunk of money lost if Germans are not able to pay with Google Checkout and i assume there are similar problems elsewhere. For consumers PayPal has a easy verification process and from that point on it works everywhere instantly. I also see a lot of advertising from PayPal, so the regular people trust them i think. They know what they are doing, they put more effort behind it than other ones. Google has a marketing budget for Chrome and look how well it does. I never heard from Amazon payments, so the same situation here. They both could do more if they want to be a real competitor.
dangrossman 15y ago
> They've made it incredibly clear that their policies and actions are arbitrary and they don't care about their customers at all. It seems to me that they're incredibly consistent and care about their customers exactly as much as any other merchant account provider. This exact story with a game developer taking preorders then having PayPal problems has played out a half dozen times on Hacker News alone; in reality it happens regularly. It would happen if these developers applied for a merchant account and said they were taking long-term preorders on the application too. The only problem with PayPal is that merchants don't expect PayPal to act like every other processor, and have no experience dealing with the risk/underwriting departments of banks to realize that what they're doing would be a problem anywhere. As far as why businesses still use PayPal? Nobody else operates in as many countries. Nobody else has over 200 million members already signed up and trusting the payment process. Few MOTO merchant accounts actually beat the fees PayPal charges, especially once you have >$10,000/mo in volume, when you actually add up all the transaction fees. And few gateways are as easy to implement or built into as many other ecommerce products. It makes no sense from a business standpoint not to use PayPal (which in 2011 does not mean sending someone to paypal.com to pay if they want to pay on site). They're cheaperc, more reliable, allow you to accept all major credit and debit cards, bank transfers, eChecks, payments from 200+ million members' balances, and pay you your funds immediately. If you're that worried about having a problem, have a backup in place to switch to and don't hold a PayPal balance -- risk free. You would think the HN community would look at PayPal and see a success story to be shared and celebrated. They were the only significant 3rd party payment processor to make it through the dot com bubble. There have been many attempts. They all went out of business due to fraud. PayPal was bleeding over $10 million a month to chargebacks and fraud at one point. They created the software and systems to make a global 3rd party payment platform possible and survived. Now they make possible an enormous amount of ecommerce for tens of millions of people that would not be able to accept payments any other way. Instead we see the occasional "horror story" that would likely happen whether the developer was using PayPal or anyone else, and a PayPal Sucks website that's accumulated barely 2000 threads in over a decade (what fraction of a fraction of a percent of PayPal users is that?), and certain vocal people pile on the "why would anyone ever use PayPal" bandwagon...
- InclinedPlane 15y ago
mgkimsal 15y ago
Google's "checkout" is so-so, but they don't treat it like a real service for merchants (well, imo). Every time I log in to google.com/checkout, I have to go click a stupid little logo in the upper right that's not labelled as anything except a gear, then choose 'my sales' to see my sales. It always treats me as a consumer first, and merchant second. Secondly, even though I've told google checkout explicitly that I sell digital goods, it constantly shows "not yet shipped" on every single one of my orders. I'm explicitly setting "digital-content" flags on the request, but it's seemingly ignored. Thirdly, Google Checkout routinely - as in >50% of the time in my experience - holds payments for 15 minutes for 'fraud check'. In my case, I'm delivering digital goods, but I'm not going to tell people to wait for 15 minutes, so I have to trust that the request will go through. I get a few problems per month with that, but there's no setting in google checkout to say "please don't take 15 minutes to process payments". For people doing physical goods sales, it's probably OK. It's far from perfect for digital sales.
- simcop2387 15y ago
  Depending on your digital goods, have you thought about sending a link in email, as part of a receipt even? Could easily setup a mail server to forge the time back 15 minutes and make it look like it was instant and just not send it if it was fraudulent. It's a little sleazy but it'd at least give a completely different impression than, "Please wait 15 minutes".
  - mgkimsal 15y ago
    People just don't want to wait that time at all. The actual impact on user's hasn't been too bad (because I'm taking the risk), but the actual flow, from my perspective, has been pretty poor, and from what I can tell it's not documented that they'll hold transactions for 15 minutes.

dhughes 15y ago

Someone at Reddit posted about having odd problems at PayPal where they are holding his money for 90 days and got a terse response from their help line. http://www.reddit.com/r/reddit.com/comments/l4q2y/please_help_me_expose_this_newest_paypal_fraud/ http://www.reddit.com/r/reddit.com/comments/l4q2y/please_hel...

brass_cannon 15y ago

PayPal is horrible at providing support, documentation and resolution channels in these type of situations. They also, at times, can appear to arbitrarily take adverse action against certain accounts. However, it's important to note that they hold the risk on these transactions. If the business goes under before pre-orders can be fulfilled, and the business doesn't have the funds to take care of all the chargebacks this event will cause, guess who pays out? PayPal. This scenario is the exception to be sure, but it happens with enough frequency that PayPal must implement some form of risk mitigation. There could be other factors in play here, as well. Does the business have a poor history with other processors? Do the founders have poor credit? Maybe not, but maybe so. It's difficult to arrive at a concrete conclusion from this post. That being said, it's a possibility that PayPal has not assessed risk appropriately in this case. We simply can't tell. Where PayPal could make situations like this better is by providing clear expectations up front as to how they assess risk, and what not to do with your account ahead of time. They could provide reasonable support to work with the merchant and get additional metrics / a better feel for the account. They could provide the above context to merchants when this happens. The best merchant account providers do this. PayPal fails spectacularly at the above, which is enough for businesses to strongly consider alternatives.

tomp 15y ago
I wish I could upvote you more than once. A very reasonable and balanced argument.
dangrossman 15y ago
One issue is that a lot of these developers and small businesses fail to change their account type from Premium to Business. Doing so does not change any fees or features, it simply attaches a business name to the account instead of an individual's name, but it also changes the help UI and gives you access to the business support phone line. When there's an issue with a business account, PayPal actually calls you, in my experience. And when I call their phone line, a human being answered right away.

reaktivo 15y ago

bitcoins.

michaelschade 15y ago

They should use Stripe: https://stripe.com/ https://stripe.com/ We were able to get our product off the ground right away with Stripe (we were in their beta before they opened up to all). It's extremely quick to implement, their APIs are well-documented, and I doubt they'd prove bothersome like PayPal is being here. In my experiences, their support actually responds quickly and goes above and beyond to help. If someone from Xenonauts is reading this: let me know if you need any help implementing Stripe if you decide to go that route. You can tweet me at @michaelschade or drop me a note at hn [-at: @-] mschade [-dot: .-] me and I'll provide whatever advice I can. I'll also see about sending this suggestion through their site in case they're not HN readers. Edit: found their email and sent through there too. Hopefully they can get the issue resolved–I feel bad for them not being able to accept orders right now, that must be a really upsetting position to be in.

darylteo 15y ago
I would love to use stripe, but am not in the US. Any ideas?
- michaelschade 15y ago
  They're unfortunately not operating outside of the US yet (at least, not publicly). From what I hear, they're anxious to make this possible. Your best bet is probably to follow them on Twitter (https://twitter.com/#!/stripe https://twitter.com/#!/stripe) to find out when they announce international support. Edit: You can asked to be notified when your specific country is available: https://stripe.com/global https://stripe.com/global

mgkimsal 15y ago

I'm not sure paypal is that much different from other merchant processors. I spoke to several last year, and they were all fine and dandy until I told them I take payment for 12 month subscriptions in advance (jsmag.com and groovymag.com). I also take payments for indieconf.com, an annual tech conference. 3 processors told me they couldn't work with me at all. A couple said I'd need to go to underwriting, and I'd pay a higher fee. I asked why, and was told "possibility for chargebacks is high". I then said something like "why can a company like Expedia charge me for a ticket 11 months in advance for $2000, but you won't let me sell a ticket to a conference 3 months in advance?". "Companies like Expedia have millions in reserve to cover chargebacks" was the answer I got. I could have received a merchant account through any of those companies by lying about the nature of what I was selling, but had they found out, my account may have been suspended or I may have had a certain amount subject to reserve holding. I don't see the behaviour of paypal as all that different to most other processors, except that most people don't tell paypal ahead of time what they'll be selling. I have a merchant account through BoA - got to meet with a real person who answered questions, asked me some, pushed things through underwriting, and it all went OK, but I still run nearly everything through paypal and google checkout right now still - both paypal and google checkout have pretty strong name recognition and people are generally comfortable with them so far.

jfruh 15y ago

Can someone explain what specifically PayPal doesn't like about pre-orders? Is there something specific in their terms of service that doing pre-orders violates? I'm seriously considering a future project that will involve pre-orders so it seems important to get this clarified...

michaelschade 15y ago
It probably has to due with the risk involved with how to handle chargebacks if the company doesn't fulfill their promise of the product, and PayPal assuming liability if the company doesn't have sufficient funds in that case. There are plenty of horror stories around pre-orders on PayPal. I'm not sure how Stripe handles this specifically, but they may be a good alternative: https://stripe.com/ https://stripe.com/ (we use and love them).
- saurik 15y ago
  I would love if someone from Stripe talked about how they handled this sort of stuff. Everyone keeps saying "I use Stripe and love them", but the process people describe of signing up seems to be begging people to scam them. There are actually good reasons why merchant accounts work the way that they do, and Stripe doesn't provide any argument for why they don't: until they do, I can't imagine trusting them for anything important at my business. I mean, they are almost sketchy when it comes to talking about "when bad things happen"; example: when chargebacks happen (and they do happen: I get one every couple days), can I easily (as in: no human interaction) tie it to an individual payment? The only mentions on their entire website about chargebacks are in the painfully informal FAQ/pricing (that it costs $15), and in their terms of service (which indicates that the $15 doesn't include mediation, which I'm pretty certain PayPal's $20 does). The first thing I think, of course, is "they charge more, duh": if you do any kind of volume at all, or are involved in small transactions, they are a /lot/ more expensive than PayPal: I'd easily be paying them hundreds of thousands of dollars a year for the privilege of not spending a few hours on the phone negotiating a merchant account. (For those not looking at their pricing, their fixed fee is PayPal's worst case fee; PayPal discounts 1-2% from that for volume, and supports a fundamentally better fee schedule for payments under $12: 5.0%+$0.05 vs. 2.9%+$0.30. Unless you are handling small numbers of transactions all over $12, Stripe is going to burn you on fees.) However, when I think through "where does the risk of credit fraud mostly occur", I'd imagine it would be reasonable sized transactions (trying to launder tons of money $1 at a time will get noticed pretty quickly), and I'd imagine the merchant fraud is mostly small volume (as if you actually have a functional business, you are able to easily able to cover the risks). So yeah: I just don't get it... is the Stripe 7 day hold enough? (PayPal doesn't have any hold for most businesses.) I certainly wouldn't touch it over PayPal if the only reason is "PayPal seems overly cautious": Stripe simply seems to be "asking for it". (And this is just looking at normal chargebacks: pre-orders are a whole different ballgame, and if Stripe doesn't have a policy forbidding them then they will probably be out of business, seemingly out of nowhere, in a few months.)

TheAmazingIdiot 15y ago

I'm going to be somewhat direct here. I allege that what Paypal is doing here (holding funds over 10 days) is illegal. In order to do what Paypal does in the USA, you need licensure. They point out that they are not a bank. Indeed, they aren't: in many states they are classified as a money transmitter. In 8 states, they have no license to operate.#1 What is this money transmitter stuff? In essence, the law in all the locales I have checked (I have not gone through every one), indicate only a short holding period (5-15 days) and only allow holding of money of a known crime. So indeed what they do is absolutely fraudulent. In other words, if you have a patent troll corporation with many lawyers, target Paypal for their illegal behavior. #1 Source: https://www.paypal-media.com/state_licenses.cfm https://www.paypal-media.com/state_licenses.cfm

OstiaAntica 15y ago
This is a very anti-hacker post, and an argument for the broken status quo. I also seriously doubt it is accurate. PayPal has disintermediated anti-competitive banking laws, providing millions with low-cost quasi-banking. They should be celebrated, not attacked.
- TheAmazingIdiot 15y ago
  Theft of money from startups and non-for-profits is worse in my book. I use the direct word theft, because they take money that is out of the bounds of most money transmitter licenses. And considering what is taught in business school, is to quantify risk. If you trigger the unknown red flags, which software makers and other starting businesses tend to do, you risk losing access to your money for at least 180 days (up to forever). How do you quantify that kind of risk? California, re 1841: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=01001-02000&file=1840-1846 http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&#3... And they are not even licensed to _operate_ in my state of Indiana. IC 28-8-4-20 (a) A person may not engage in the business of money transmission without a license required by this chapter. # hence all Paypal business in Indiana is illegal.

njloof 15y ago

Shoulda used Kickstarter. Preorders like this are their bread and butter.

joshaidan 15y ago
I was thinking the same.

aespinoza 15y ago

This is the second news related to Paypal disappointments I have seen today. I am taking this as a sign, and for our project we are going to be removing support for payments via Paypal. The Paypal related discussion is here: http://news.ycombinator.com/item?id=3087322 http://news.ycombinator.com/item?id=3087322

lurker19 15y ago
Very superstitious.
- aespinoza 15y ago
  "Superstition is a credulous belief or notion, not based on reason or knowledge." It would be superstition if I've done it without seeing the problems other people have. Those two articles, actually describe real experiences. Experience defeats anything else. I choose to believe those two articles, and not because I read them on here, because they are not the only bad experiences I have heard regarding PayPal. In fact I have never heard a good review of their service.

UrbanRonin 15y ago

While I certainly don't care for PayPal's practices, I'm also not a fan of pre-orders. Specifically, I don't think anyone should ever be charged for something, even a partial payment, before it's delivered/shipped. In fact, I think there are regulations that payment not be captured until merchandise is shipped. If you're just authorizing the cost of the merchandise, and then waiting to capture after shipping, I think that's fine, but does PayPal allow you to do that?

apinstein 15y ago

If you read any merchant agreement for credit card companies, you will see that you are technically not allowed to charge someone until you ship a product. Charging someone before you have actually "delivered" the good is a completely different level of risk than charging someone for something you've already delivered. The supplier might not ship, the manufacturer might not ship, or you could be outright scamming people. This is not a defense of PayPal, but just explaining why money processors do not typically allow you to get your money for pre-orders. There's a huge risk that it blows up in their faces.

cdh 15y ago
I wonder if this requirement can be sidestepped by shipping the customer something, but just not the actual item being pre-ordered. For example, emailing them a redeemable code or physically delivering a voucher. If not, it seems like you could go even further and bundle something small but tangible with each sale. For a game pre-order, maybe access to a demo or access to private forums?
- apinstein 15y ago
  That sounds like fraud to me. I would think that you could negotiate this with a merchant bank. For instance service companies often take deposits and kickstarter clearly charges before shipment. But in both cases they probably have agreement from their processor for their business model. I think having to post reserves is one such model for when you are doing riskier transactions. But don't think that merchant bank won't cut you off if you violate the terms of your agreement. However in practice merchant banks seem very lax compared to PayPal.