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PayPal's Verification Wait Irks a Business Owner

45 points by carbocation 15y ago

rollypolly 15y ago
In that matter, as with this current one, eBay/PayPal spokespeople said that preventing fraud — not enhancing profits, by accumulating bank interest — was the point of hanging on to the money. Good'ol "plausible deniability".
- eli 15y ago
  I mean, I guess it can be both, but I would imagine fraud has a much larger potential impact on PayPal's business than the very meager bank interest gained for delaying payments. I believe that PayPal views fraud as the number one threat to their business, and they are willing to piss people off and lose customers in order to keep fraud losses to a minimum.
  - chives 15y ago
    potential fraud (without giving any reason to suspect the transaction) some how has a greater net effect of holding on to something like 1000's of transactions worth of money for 21 days. I call bullshit. "randomly" (as there is no evidence as of yet that suggests they target them for any other reason) picking transactions to hold as some way to prevent (???, nah, no sense made there either) the potential threat of fraud is retarded. Is fraud prevented? maybe. Is commerce prevented? definitely. Does Paypal make money off of this policy? Yes, and a great deal of it at that. Ultimately it just goes back to the age old internet saying of "Fuck paypal, everyone else, their mother, and that shady guy over there are all more transparent with transactions then the aforementioned crooked lot"
    - elemeno 15y ago
      You do realize that with current US interest rates the interest on a 21 day hold would amount to even less than $150[1] per $1mil held - and thats assuming that they could even get Fed Reserve lending rates, which you're not going to be getting from your bank no matter how much money you have with them [2]. Given that that amounts to less than $2600/yr - with that massive assumption that PayPal can even get that rate of interest, do you think that they're really doing it for what amounts to a rounding error for a company that size, or is it, maybe, just about possible that their operational risk might run close to that number as well? [1] $1mil * 1.0025^(21/360) = 145.6 - assuming A/360, $143.6 with A/365 [2] Current US interest rate is 0.25% - but that's the rate at which banks can borrow from the Fed, not the rate that you'll get from your bank.
      - DenisM 15y ago
        PayPal "verified" accounts draw money from users bank account, which allows them to skip the credit card processing fees. That's a huge amount of money, and that's why they keep pushing users to "verify" their account through every way possible.
  - fierarul 15y ago
    I assume PayPal is able to do things that are much more interesting than just letting money in a bank deposit. They surely gain a lot just by knowing they can control the cashflow this way.
- deleted 15y ago
  [deleted]
  - joenathan 15y ago
    That quote is referring to the 21+ day holds that paypal puts many eBay sellers through. I know this very well personally having sold a number of items on eBay, where paypal randomly decides that this auction but not that auction will have its payment held for 21 days or 3-4 days after I have confirmed delivery of the item for sale. Where sometimes they don't even release enough money for you to buy shipping for the item.
kylebrown 15y ago
Chinese credit card and Alipay transactions are irreversible, though Alibaba buyers can opt to use the Aliexpress escrow service. I think the U.S. will eventually need to stop babying the consumer. To some extent this is already happening, with banks refusing to be liable for small and medium business losses from online banking trojans. Obviously the bank can't be liable if a business loses money due to embezzlement, and its a thin line since a banking trojan would be perfect cover for an insider embezzlement scheme. Its pretty clear that Paypal's data mining for fraud detection, which used to be considered cutting-edge and allowed them to dominate the market, now has an extremely high false positive rate that only gives too many honest merchants a reason to leave.
- joenathan 15y ago
  That or eBay(owner of Paypal) has a monopoly on online auctions and online payments and are in a position where they can do pretty much anything they want to squeeze a few more dimes out of their clientele with no one to effectively challenge them.
sparknlaunch12 15y ago
This is one frustration with Paypal however once you are verified it is a breeze to use. Given the high volume of online fraud, proper verification has to happen.
- joenathan 15y ago
  I'm verified(bank account linked on a 10 year + old account) but have recently had eBay payments held for 21 days because apparently only selling things once or twice a year on eBay is too infrequent for Paypal, I wouldn't call this a breeze.... edit: check this previous article http://www.nytimes.com/2012/03/11/your-money/ebay-policy-leaves-some-sellers-fuming.html http://www.nytimes.com/2012/03/11/your-money/ebay-policy-lea... or this summary http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02 http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02
dmethvin 15y ago
Just about anyone using PayPal's back-end payment notification has experienced this. The article says PayPal notifies you about a delay but I've seen cases where even that doesn't happen. If you're selling a service, the best thing to do is to provide a grace period. So to maintain goodwill you just let 'em in and if PayPal doesn't confirm payment within 48 hours you suspend the account until they pay. Obviously that doesn't work well for non-revocable transactions, but you have to weigh the potential for fraud against the lost sales.
cperciva 15y ago
... asking users to “verify” their account after transferring $10,000 over the company’s network. One can get “verified” by either handing over bank account information or signing up for a PayPal-affiliated credit. PayPal has long described this as a “risk-prevention technique,” but that makes little sense, because even customers with perfect track records must comply Makes perfect sense to me. If having a perfect track record on your first $10k of transactions was enough to let you bypass the verification process, they'd see lots of criminals running $10k of shell transactions -- just like eBay scammers run up lots of perfect-feedback small purchases to create a good rating for themselves.
- smhinsey 15y ago
  I think the fact that this system doesn't take account age into account is problematic. My PayPal account is who knows how old, but somewhere in the neighborhood of 10 years. I'm just now hitting that limit after years and years of small transactions. This is probably going to make me stop using them because I don't trust them with my bank account and I don't need any credit. This seems like a really stupid way to lose a long time customer.
andrewpi 15y ago
If you read the book "Founders at Work" you'll see that fraud was a huge issue for PayPal, and was one of the first barriers to success. You can't downplay how quickly fraud will destroy any business that moves money around.
brokentone 15y ago
I feel like every PayPal article I've ever read has discussed them having double standards, holding money meant for charity for no apparent reason, and making people smash antique violins. Why are they still a player in the market?

45 points by carbocation 15y ago

In that matter, as with this current one, eBay/PayPal spokespeople said that preventing fraud — not enhancing profits, by accumulating bank interest — was the point of hanging on to the money. Good'ol "plausible deniability".

eli 15y ago
I mean, I guess it can be both, but I would imagine fraud has a much larger potential impact on PayPal's business than the very meager bank interest gained for delaying payments. I believe that PayPal views fraud as the number one threat to their business, and they are willing to piss people off and lose customers in order to keep fraud losses to a minimum.
- chives 15y ago
  potential fraud (without giving any reason to suspect the transaction) some how has a greater net effect of holding on to something like 1000's of transactions worth of money for 21 days. I call bullshit. "randomly" (as there is no evidence as of yet that suggests they target them for any other reason) picking transactions to hold as some way to prevent (???, nah, no sense made there either) the potential threat of fraud is retarded. Is fraud prevented? maybe. Is commerce prevented? definitely. Does Paypal make money off of this policy? Yes, and a great deal of it at that. Ultimately it just goes back to the age old internet saying of "Fuck paypal, everyone else, their mother, and that shady guy over there are all more transparent with transactions then the aforementioned crooked lot"
  - elemeno 15y ago
    You do realize that with current US interest rates the interest on a 21 day hold would amount to even less than $150[1] per $1mil held - and thats assuming that they could even get Fed Reserve lending rates, which you're not going to be getting from your bank no matter how much money you have with them [2]. Given that that amounts to less than $2600/yr - with that massive assumption that PayPal can even get that rate of interest, do you think that they're really doing it for what amounts to a rounding error for a company that size, or is it, maybe, just about possible that their operational risk might run close to that number as well? [1] $1mil * 1.0025^(21/360) = 145.6 - assuming A/360, $143.6 with A/365 [2] Current US interest rate is 0.25% - but that's the rate at which banks can borrow from the Fed, not the rate that you'll get from your bank.
    - DenisM 15y ago
      PayPal "verified" accounts draw money from users bank account, which allows them to skip the credit card processing fees. That's a huge amount of money, and that's why they keep pushing users to "verify" their account through every way possible.
- fierarul 15y ago
  I assume PayPal is able to do things that are much more interesting than just letting money in a bank deposit. They surely gain a lot just by knowing they can control the cashflow this way.
deleted 15y ago
[deleted]
- joenathan 15y ago
  That quote is referring to the 21+ day holds that paypal puts many eBay sellers through. I know this very well personally having sold a number of items on eBay, where paypal randomly decides that this auction but not that auction will have its payment held for 21 days or 3-4 days after I have confirmed delivery of the item for sale. Where sometimes they don't even release enough money for you to buy shipping for the item.

kylebrown 15y ago

Chinese credit card and Alipay transactions are irreversible, though Alibaba buyers can opt to use the Aliexpress escrow service. I think the U.S. will eventually need to stop babying the consumer. To some extent this is already happening, with banks refusing to be liable for small and medium business losses from online banking trojans. Obviously the bank can't be liable if a business loses money due to embezzlement, and its a thin line since a banking trojan would be perfect cover for an insider embezzlement scheme. Its pretty clear that Paypal's data mining for fraud detection, which used to be considered cutting-edge and allowed them to dominate the market, now has an extremely high false positive rate that only gives too many honest merchants a reason to leave.

joenathan 15y ago
That or eBay(owner of Paypal) has a monopoly on online auctions and online payments and are in a position where they can do pretty much anything they want to squeeze a few more dimes out of their clientele with no one to effectively challenge them.

sparknlaunch12 15y ago

This is one frustration with Paypal however once you are verified it is a breeze to use. Given the high volume of online fraud, proper verification has to happen.

joenathan 15y ago
I'm verified(bank account linked on a 10 year + old account) but have recently had eBay payments held for 21 days because apparently only selling things once or twice a year on eBay is too infrequent for Paypal, I wouldn't call this a breeze.... edit: check this previous article http://www.nytimes.com/2012/03/11/your-money/ebay-policy-leaves-some-sellers-fuming.html http://www.nytimes.com/2012/03/11/your-money/ebay-policy-lea... or this summary http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02 http://www.auctionbytes.com/cab/abn/y12/m03/i12/s02

dmethvin 15y ago

Just about anyone using PayPal's back-end payment notification has experienced this. The article says PayPal notifies you about a delay but I've seen cases where even that doesn't happen. If you're selling a service, the best thing to do is to provide a grace period. So to maintain goodwill you just let 'em in and if PayPal doesn't confirm payment within 48 hours you suspend the account until they pay. Obviously that doesn't work well for non-revocable transactions, but you have to weigh the potential for fraud against the lost sales.

cperciva 15y ago

... asking users to “verify” their account after transferring $10,000 over the company’s network. One can get “verified” by either handing over bank account information or signing up for a PayPal-affiliated credit. PayPal has long described this as a “risk-prevention technique,” but that makes little sense, because even customers with perfect track records must comply Makes perfect sense to me. If having a perfect track record on your first $10k of transactions was enough to let you bypass the verification process, they'd see lots of criminals running $10k of shell transactions -- just like eBay scammers run up lots of perfect-feedback small purchases to create a good rating for themselves.

smhinsey 15y ago
I think the fact that this system doesn't take account age into account is problematic. My PayPal account is who knows how old, but somewhere in the neighborhood of 10 years. I'm just now hitting that limit after years and years of small transactions. This is probably going to make me stop using them because I don't trust them with my bank account and I don't need any credit. This seems like a really stupid way to lose a long time customer.

andrewpi 15y ago

If you read the book "Founders at Work" you'll see that fraud was a huge issue for PayPal, and was one of the first barriers to success. You can't downplay how quickly fraud will destroy any business that moves money around.

brokentone 15y ago

I feel like every PayPal article I've ever read has discussed them having double standards, holding money meant for charity for no apparent reason, and making people smash antique violins. Why are they still a player in the market?