PayPal Freezes Mailpile Campaign Funds • Hacker News Board

Re: PayPal Freezes Mailpile Campaign Funds

#201

Post by brudgers » Thu, Sep 05, 2013, 2:32 PM UTC

pc wrote: post #151

ig1 wrote: post #130

Earlier quoted context omitted.

(in a previous life I worked in front office investment banking so had to undergo anti-fraud and anti-money laundering training as well as worked on general exposure risk issues) The problem is that fraud/risk (like tech security) is it often involves black swan events. Everything seems fine right until the point where it's not and you're on the hook for millions of dollars (Stripe is probably in the position where y…

> I'd recommend you be careful about becoming over-complacent. Absolutely. Indeed, I'd characterize us as actively paranoid. My point was merely that we're already operating at a scale that needs pretty good fraud systems. (I think we're mostly in strong agreement.)

Does fraud follow the power law?

Re: PayPal Freezes Mailpile Campaign Funds

#202

Post by rmc » Thu, Sep 05, 2013, 2:32 PM UTC

M4v3R wrote: post #112

danielweber wrote: post #105

Earlier quoted context omitted.

> no fraud Only for extremely specific and useless definitions of "no fraud." If I send my bitcoins to someone to buy something, I have no protection if they decide not to deliver. At which point the Bitcoin enthusiasts will say "but you can use a third party escrow service," which is true, and puts us right back into the same situation we are with PayPal .

But with Bitcoin, if you trust the merchant/recipient you can opt out of using escrow and transfer the money directly to him. With Paypal it's impossible.

I can still send someone cash in the post.

Re: PayPal Freezes Mailpile Campaign Funds

#203

Post by patio11 » Thu, Sep 05, 2013, 2:33 PM UTC

HerraBRE wrote: post #188

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 aggregat…

I totally understand that this inconveniences you a lot. Be that as it may, your conspiracy theory has no basis in fact whatsoever. Paypal will, in fact, not make large amounts of money on transaction float -- they're already probably losing money on your account by talking to you too darn much. Interest rates are presently something like 15 basis points ($150 per year on $100k). Even if we count their underwriter as free, if you've spent an hour on the phone total, they're already in the red. They'd like nothing better than for you to be riskless and for them to be able to release all your funds tomorrow and for you to sell another $100,000 every day this year. (It also isn't clear to me that Paypal can licitly get any float on your money, due to banking regs, but that is deeply technical and not the kind of technical that I'm good at.)

But that isn't the world we live in. In the one we do, pre-sales is an incredibly high-risk business model.

f they were only concerned about risk they could withhold fractional amounts for reasonable periods of time, on a rolling schedule

As I mentioned in a separate comment, while rolling fractional reserves do insure against risk in some business models, they don't do a great job of insuring for the risk of software not getting written or not meeting expectations. Assuming you have a multi-month development timeline, every risk your business is exposed to at N-1 days (your team members or your families falling ill, the project being technically beyond the capabilities, the money running out and you guys needing to delay shipping while mixing in freelancing to stay afloat, etc etc) is still a risk at N+1 days, unless you have shipped on day N.

You're totally within your rights as a businessman to try to fight this in the court of public opinion or attempt to convince Paypal's legal department or a court of competent jurisdiction that they're in breach. I sympathize with you because I sympathize with people who are making things, but I think that Paypal has a better understanding of the risks involved in your enterprise than you do (and, unfortunately for the both of you, their upside being sharply less than your upside means they will tend to have more of a hair trigger with regards to that risk than you will).

Re: PayPal Freezes Mailpile Campaign Funds

#204

Post by rmc » Thu, Sep 05, 2013, 2:34 PM UTC

M4v3R wrote: post #70

gaius wrote: post #56

Earlier quoted context omitted.

What should they use - Google Checkout? https://support.google.com/checkout/sell/answer/3080449?hl=e... For better or worse, Paypal has survived and looks like it's going to go on surviving, that's why people if they only support one method, choose it.

People can get tired of other people telling this, but really, they should use Bitcoin. There are several advantages of this: accountability (you can verify with the block chain that they really received your payment), ease of use (utilizing 3rd parties like Coinbase, BitPay and others you don't really have to know how Bitcoin works to pay with them) and most importantly - irreversibility - once you receive Bitcoin t…

irreversibility - once you receive Bitcoin there are no chargebacks.

irreversibility is good for the merchant, and bad for the customer.

Re: PayPal Freezes Mailpile Campaign Funds

#205

Post by nine_k » Thu, Sep 05, 2013, 2:34 PM UTC

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 seems that PayPal is just a wrong tool for the job.

I'm happy to use PayPal to pay couple hundred dollars when buying an item from a mass merchant. This is what PayPal is intended for.

If I sold a hugely expensive one-time unique product (which a crowd-funded effort essentially is), I'd probably consider something different.

Re: PayPal Freezes Mailpile Campaign Funds

#206

Post by rmc » Thu, Sep 05, 2013, 2:35 PM UTC

MacsHeadroom wrote: post #116

contextual wrote: post #98

Earlier quoted context omitted.

Out of the half dozen times I've purchased with bitcoins, I was ripped off every single time. I stopped using it. I'm a supporter of bitcoins and want it to succeed, I just don't trust a lot of the vendors that use it.

What were you buying? Out of the dozens of times I've purchased with Bitcoins I have never been ripped off. Buy from reputable companies or use an escrow service. A homeless guy asked me for my car keys the other day. He said he'd clean the inside of my car and bring me the keys. I didn't give him my keys. Something tells me you would have.

use an escrow service.

Something like PayPal for Bitcoins? Sounds like we're back to square one. What's the point of bitcoin again?

Re: PayPal Freezes Mailpile Campaign Funds

#207

Post by jasonlotito » Thu, Sep 05, 2013, 2:38 PM UTC

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…

> the amount PayPal handled was 45 000 USD

Which is the only part relevant to this discussion. PayPal's risk is far greater than 45,000. This depends on how much PayPal is charged for chargebacks, a rate I cannot know.

> They're an official payment provider for IGG. I assume they know what IGG is by now and the risks associated with that.

Yes. Hence the reason for the additional due diligence. Understanding IGG's operations, it makes complete sense that the would oversee individual projects going through on IGG, and doing additional due diligence on top of IGG. You are making a unwarranted assumption that they their diligence stops at IGG. Having dealt directly with situations like this (essentially acting as an IPSP, or basically, something akin to IGG), banks are still required to do their part.

> Point is: everyone can decide under which conditions he'd like to support a project - certified non-profit or not, but that's not PayPals business.

Just because you say it's not PayPal's business doesn't make it so. It's very much their business. The belief that it shouldn't be their business shows a lack of understanding of the area that PayPal operates.

> Nobody denies that crowdfunding is not inherently risky.

Except no one understands all the risks that are involved. Otherwise, you'd understand why PayPal should be asking for how the money will be used, the business plan, etc. These are additional steps that should be taken precisely because of the risks that exist.

Stopping diligence at IGG would be horribly, horribly wrong.

> Either don't participate or live with the risk.

They are trying to participate. They are being denied.

Re: PayPal Freezes Mailpile Campaign Funds

#208

Post by rmc » Thu, Sep 05, 2013, 2:41 PM UTC

reustle wrote: post #60

kalleboo wrote: post #21

> They just don't want to, and we cannot help but wonder why. > Crowd funding is an adventure. I don't think PayPal are as enthusiastic in joining you in an "adventure" as you think. Especially if that adventure includes credit card chargebacks.

Sounds like an opportunity to create a crowdfunding site that only accepts cash in the mail. But then, I'm sure you open up a whole new can of worms.

Physically processing that would be too expensive. The crowdfunding site would have to take a massive percetage/flat fee.

Re: PayPal Freezes Mailpile Campaign Funds

#209

Post by speleding » Thu, Sep 05, 2013, 2:41 PM UTC

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.

I keep reading complaints about not being able to get someone on the phone, but the only two times I've had issues I've had someone on the phone in minutes and it was dealt with right away.

We do a fairly large volume through PayPal, so perhaps they have better service for larger accounts?

Re: PayPal Freezes Mailpile Campaign Funds

#210

Post by mseebach » Thu, Sep 05, 2013, 2:42 PM UTC

smackfu wrote: post #191

mseebach wrote: post #177

Earlier quoted context omitted.

> Unless I receive the goods before paying, I would never buy anything with Bitcoin online. Good, then you should be fine donating to Mailpile using Bitcoin. Because it's not a purchase transaction, it's a donation. There is no promise of a product. By clicking 'Continue', you acknowledge that you understand that you are contributing to a work-in-progress and not making a direct purchase. Perks are managed by the cam…

I know that's what all the crowdfunding sites says, but practically speaking, people expect their stuff, and get angry if they don't get it. I think crowdfunding would be a lot less popular if people actually understand it wasn't just a pre-sale. Because most people are not just donating.

> I think crowdfunding would be a lot less popular if people actually understand it wasn't just a pre-sale. Because most people are not just donating.

Exactly. In a world where caveat emptor doesn't apply for consumer purchases, this is a mild case of fraud. Naturally, PayPal is extremely wary.