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WHY IS PAYPAL COMPLICATED?

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  • WHY IS PAYPAL COMPLICATED?

    In a nutshell, Paypal's problems....... both from a standpoint of users having disputes and problems with Paypal, and Paypal having problems clearly defining what they are (ie. are we a bank, are we simply a transfer agent etc) stem from their initial business model. Let me illustrate this with some examples. When you use a credit card to fund an acct, the money comes from a credit line given to you by the issuing bank. Everyone knows this of course. Likewise if you were to use, say a debit card to fund an acct., the money comes from your funds at the bank or credit union or whatever. That's clear as well. But when using a Paypal acct., there are a number of sources that the money could have come from. Before I try to explain where it could come from, some of you may be saying "so what", right? Actually the answer is very important because where this money in your Paypal acct comes from DETERMINES your rights to contest the transfer at a later date. Think of it this way............. You order a book from a mailorder company and you send them a moneyorder to pay for it. I order a book from the same company but I use my credit card to pay. Our respective rights as to getting a refund on the item will normally be very different. Some mailorder companies state that you will not be able to get a cash refund on your moneyorder purchase.........just credits to a future purchase or an exchange, BUT the person who used a credit card has much broader options and OFTEN a much longer time to change their mind. Simply stated, with a credit card, the final call belongs to VISA or MC, your issuing bank or whomever..........with a moneyorder or check, the final call belongs to the merchant. SO, how does this relate to Paypal?

    The money in your Paypal acct can come from the following sources: A credit card, a debit card, someone simply sending you money with no "sale of goods" involved, or someone sending you money as payment for something they bought from you (like in an auction or online store for example) Or you could in theory fund the acct yourself by sending Paypal a check. Additionally there is nothing to say that your Paypal acct may not contain a mix of funds from the above sources. For example.......... I buy a piece of shit from you for $20 and my paypal acct has $12, $10 was from someone who used a credit card to buy something I sold, the other $2 was from when I used a debit card to fund my own account and I'm still short $8 which will come from my credit card. So now the $20 I sent you just came from 3 sources. Now here is where people often get confused. When YOU use that money in your Paypal acct to buy something or to send to a sportsbook, the rules governing your rights as it pertains to a chargeback or other recourse you may or may not have (if there's a problem or if you're just being a dick) under Paypal's terms of service is VERY DEPENDENT ON WHERE THE MONEY IN QUESTION COMES FROM.
    In other words, you send $500 to a book from a Paypal acct that is funded solely by a credit card...........and I send a book $500 from a Paypal acct that is funded solely from money that was sent to me by customers buying my shit, and Paypal will apply very different rules in processing a potential dispute or chargeback. THAT is the inherent problem with Paypal. It is not completely their fault. It is the nature of the beast. Their flexibility IS their problem. They compound this by adopting a customer service strategy that does not adequately explain these issues to their users.........perhaps because they figure that the small % of problems is tolerable or maybe they think it will queer people away from the service if its overly complicated. Or perhaps they feel that most people are not detail oriented to that level, I don't know. All of this would be tolerable for me personally but the thing that has pissed many people off about Paypal is the manner in which they handle problems when they occur. They are extremely quick to assume fraud or foul play and they don't readily accept responsibility for any actions or inactions on their part that may have contributed to the problem in the first place. But that's another story. Sorry about the length, but sometimes things aren't simple. The above scenarios is really just one answer to why Paypal is so complicated.

  • #2
    I'm not a lawyer nor am I a business buff (I'm an engineering graduate student at one of the top 5 schools in the US), but I've always felt that they functioned as a bank. I have a feeling some investors buying Paypal stocks for the long run are going to get screwed. I was expecting Paypal to delay their IPO. The IPO caught me by suprise.

    I think the reason why Paypal went ahead with the IPO was because they knew they are currently the leader in online payment and had they delayed it any longer, this might not be the case. I've sold lots of things on Ebay and have abruptly stopped Paypal usage due to its newly enforced charges. I believe many others stopped too or will stop. I am looking at other online payment services such as c2it offered by Citibank (go to www.c2it.com) and they seem more promising than Paypal. I believe Paypal knows that if they delay their IPO any longer, the public will question Paypal's ability to retain the title of online payment leader due to competition from goliths such as citibank. I personally dont think Paypal can. Their membership number may be big but that's because they gave $5 for registration and because they used to provide services for free (there are charges now).

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