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PayPal Freezes Mailpile Campaign Funds

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Re: PayPal Freezes Mailpile Campaign Funds

#181

Post by smackfu »

transfire wrote: post #131

There is very simple solution to all this!!!!!! PayPal should have an "AT YOUR OWN RISK" payment option. Pre-sale vendors would be required by the terms of use to use this payment option instead of the normal one unless they first get a pre-sale waiver from PayPal. PayPal can charge an application fee for that process. All done.

The problem is that chargebacks and disputes are happening at the level above Paypal (at the banks), and Paypal is just the merchant. And there is no way for merchants to make a sale and say "no chargebacks."

Re: PayPal Freezes Mailpile Campaign Funds

#182

Post by patio11 »

derefr wrote: post #174
chris_wot wrote: post #135

Earlier quoted context omitted.

If Paypal are so concerned about presales, then in my opinion they should get out of the market. Or force their customer base to get some sort of insurance. You know, do their risk management before they let the vendor take payments? It amazes me that their marker for freezing money is for how many sales the company does . Because you wouldn't want to accept money from a successful business now!

I wonder how much of Paypal's margin it would eat to just require a phone call with everyone who signs up for a Business account, asking precisely what kind of business they'll be doing (with the real possibility of denying their request.)

For some of their business products, you do actually have to get pre-approval. For example, I filled out approximately ~10 questions (about a page worth of text, about business model, business history, shipping/refund policies, anticipate monthly revenue, etc) to get Appointment Reminder the payments gateway to charge credit cards offsite. I got asked to call in with some elaboration. It went something like:

"So this business hasn't actually sold any software yet?"

"That's correct, we're anticipating opening to the public next week."

"And you charge people monthly for the software? That's after they actually get the software, right?" [+]

"Yes. The software is already written and we are capable of fulfilling immediately, we just haven't opened to the public yet."

"That's great Mr. McKenzie. You're going to be approved, and will get an email when the account is ready."

(We use Stripe these days for AR and substantially all of our other CC payments. Stripe asked very similar questions prior to provisioning the account, but didn't require a phone call or elaboration.)

[+ If you ever get asked a question phrased this way by someone not in the software industry you should probably not respond by saying "Hmm, technically they don't 'get' anything, well OK technically they GET lots of things, but the software is actually physically only on our servers and provided to them on a software as a service model, which means..." When people not in the software industry talk about downloading Gmail just smile and nod -- you don't understand their job, either.]

Re: PayPal Freezes Mailpile Campaign Funds

#183

Post by MichaelApproved »

a3_nm wrote: post #168
danielweber wrote: post #133

Earlier quoted context omitted.

This merchant offered Bitcoin. The vast majority of payors chose to use PayPal with its built-in buyer protection instead.

The fact that the vast majority of payors used PayPal rather than Bitcoin certainly has nothing to do with PayPal's buyer protection and everything to do with Bitcoin being obscure and more complex to use.

I rarely use cash when I buy anything in person mainly because of the buyer protection a credit card offers me.

Online it's the same thing. I'd pick credit card or Paypal over bitcoin just like I pick credit cards IRL over cash. It has nothing to do with obscurity.

Re: PayPal Freezes Mailpile Campaign Funds

#184

Post by freejack »

patio11 wrote: post #167
freejack wrote: post #152

Earlier quoted context omitted.

Whoa there. Paypal loses nothing to fraud. Just like all the other middlemen, Visa, MC, etc., they shift their losses onto the merchants. The way this works out is that Mailpile files an answer to Paypal's RFI, Paypal reviews it and says something like "There's a 90 day hold on funds deposited to your account until you can demonstrate that you aren't high risk", Mailpile complies and everyone walks away happy. (Backg…

I think we're in substantial agreement as to Paypal desiring to shift losses due to fraud or non-performance onto the merchants. Since they desire to do this, they will not accede to Mailpile's desired world, where Mailpile gets 100% of the money on day 1 and then Paypal can seek recovery on day 120 or 365 if a chargeback comes in. Many HNers wish we lived in Mailpile's desired world 100% of the time regardless of me…

yeah, I totally agree. My only nit was your claim that Paypal bears risk. Its true that their model comes with risk and they've built their business model in a way that they shift it to third parties as extensively and quickly as possible. Its a sore point with me in how Paypa, Visa, etc. operate. The merchant is rarely right.

Re: PayPal Freezes Mailpile Campaign Funds

#185

Post by grandalf »

patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

It's not just presales. When any kind of fraud alert is triggered, PayPal freezes the account. There is no way to get a human being on the phone to understand why the account was frozen, when it will be unfrozen, etc. Even if it's obvious to any reasonable human that no fraud occurred.

Re: PayPal Freezes Mailpile Campaign Funds

#186

Post by smackfu »

nraynaud wrote: post #146
patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

and of course, paypal only discovers all that risk when there is a lot of money on the hook? And their only action is to make a move that's hugely profitable to them ? Because now customers are charged (they won't pay by another mean) and the company is dry.

>And their only action is to make a move that's hugely profitable to them ?

Not sure why you think PayPal is going to just take the money and screw over the customers. Much more likely they will refund all the payments.

Re: PayPal Freezes Mailpile Campaign Funds

#187

Post by kamjam »

Xylakant wrote: post #157
jasonlotito wrote: post #123

Earlier quoted context omitted.

> they collectively are shouldering a much bigger risk than paypal in that transaction. No, they are not. Financially, PayPal is the one shouldering the biggest risk. Edit: > No and no. They're a payment provider, They most likely have legal obligations in various jurisdictions and with the credit card providers to do due diligence. And looking at business plans and how payments like this will be used is an important…

> No, they are not. Financially, PayPal is the one shouldering the biggest risk. Actually not. Let's assume a chargeback rate of 100%. The donated amount was 135 000 USD, the amount PayPal handled was 45 000 USD, so the remaining backers collectively shoulder about twice as much risk as PayPal. > They most likely have legal obligations in various jurisdictions and with the credit card providers to do due diligence. T…

Lay out the conditions early: Hey, we'll take the money and keep it for a year.

patio11 answered this in another comment: https://news.ycombinator.com/item?id=6333932

It's there, it's always been there, people just accepted the T&Cs without reading them.

Re: PayPal Freezes Mailpile Campaign Funds

#188

Post by HerraBRE »

patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

You are glossing over one important point: PayPal has a financial stake in keeping money within their network for as long as possible.

For every month they keep $X within their network instead of releasing to the rightful owners, they have effectively seized whatever could have been earned by investing $X for that month. For smaller amounts (individuals, small campaigns like ours), this is negligible, but in aggregate, when you consider how much money PayPal is sitting on, this is a decidedly nontrivial sum. They have a strong incentive to routinely and as a matter of course withhold funds from legitimate businesses just because they can. This is what we are up against.

Their talk about risk could very well be a smokescreen to justify the above behavior. This is not at all implausible, if they were only concerned about risk they could withhold fractional amounts for reasonable periods of time, on a rolling schedule. This is how less predatory payment processors I have dealt with handle this problem.

We understand and accept that they may want to hold onto our funds for a reasonable amount of time to mitigate their risk. We don't expect them to release all the funds immediately.

However we consider their threats to hold ALL THE MONEY for a FULL YEAR to be entirely unreasonable and not in good faith. In the face of such unreasonable demands we balked and sought help from both the community (public outrage) and our legal counsel, the Software Freedom Law Foundation in New York.

Re: PayPal Freezes Mailpile Campaign Funds

#189

Post by devinmontgomery »

Anyone considering using PayPal as a seller should read Jessica Livingston's "Founders at Work" interview with Max Levchin. PayPal is an anti-fraud company that occasionally processes payments.

It's appealing to customers and established merchants with slow, predictable growth and short lead times, but not for pre-orders. And I don't see them changing this - it's in their DNA.

Kickstarter with Amazon Payments, in contrast and for better or worse, is the most pre-order friendly system imaginable. Tens of thousands to millions of dollars transferred in days with virtually no questions asked. The 14-day holding period they mention is only for first time projects.

Re: PayPal Freezes Mailpile Campaign Funds

#190

Post by patio11 »

grandalf wrote: post #185
patio11 wrote: post #118

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sa…

It's not just presales. When any kind of fraud alert is triggered, PayPal freezes the account. There is no way to get a human being on the phone to understand why the account was frozen, when it will be unfrozen, etc. Even if it's obvious to any reasonable human that no fraud occurred.

In point of fact, in this instance they've had four phone calls and a talk with a supervisor. To add another anecdote, when my Paypal account was frozen (a client paid me on Paypal during an apartment move, which looked like "Somebody just tried to move 3 months of typical revenue through a novel IP address IN JAPAN!"), it took less than a minute on the phone to resolve.

I think people's perceptions of Paypal's fraud department are like people's perceptions of Microsoft's security: dominated by a poor record from a decade ago. Both businesses have gotten religion on this topic in the interim.

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