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Original Post
“Reducing the Anxiety of Paying Online”
http://www.nytimes.com/2010/03...cs.html?pagewanted=1
“‘The strongest protections are when you pay by credit card,’ says Carole Reynolds, a senior lawyer at the [US] Federal Trade Commission. Under the Truth in Lending Act, consumers’ maximum liability for unauthorized use of their credit card is only $50, and when a card is used online, it’s zero.”
…
“If you report fraud quickly, banks will typically reverse the charges rapidly and without much fuss, though in these tight times banks are scrutinizing fraud claims more closely, says Avivah Litan, a payment-fraud expert at research firm Gartner.
…
“… Ms. Litan warns that if your PayPal account is used fraudulently, it may be harder to get your money back than if you use a credit card.”
Now, that last sentence would be the classic understatement. What more can be said (or not said) about good old PayPal?
The convenience of the PayPal system is not in question—from the buyers’ perspective PayPal is very convenient. The problems are PayPal’s totally primitive and for many sellers, extremely inconvenient, risk management processes (PayPal can never ‘know’ the entities to any transaction the way the banks can) and their totally unsatisfactory mediation process if something does goes wrong, as it can do, particularly with purchases transacted on their slowly sinking hulk of a mother ship, eBay.
PayPal is an unregulated, unprincipled, systemically dysfunctional, amateur organization (just like its ugly mother, eBay).
PayPal and Bill Me Later are not a bank, are not regulated as banks are, do not subscribe the banks’ credit card code of conduct, and yet offer banking-type services, services that would be more appropriately and more competently carried out under the auspices of the real banking community (via their credit card organization partners).
The simple fact is that without the bankers’ knowledge of the entities involved in the transactions, PayPal, or any other non-bank provider, will always be handicapped. Non-bank providers will never guarantee anything for the buyer or seller because they simply cannot ever have the bankers’ level of knowledge of the entities involved.
The head turkey at eBay, ‘Noise’ Donahoe, has occasionally floated the possibility of spinning off PayPal, because he is just barely smart enough to know that when the major credit card companies do get off their butts and introduce a similar card/terminal-less payments system to complement their card system, they will do it properly, and the dysfunctional PayPal will then sink like a stone—other than, possibly, on what is by then left of the Donahoe-shrunken eBay marketplace.
For the banks, as far as merchant accounts are concerned, it’s only a matter of calculating the risk and charging an appropriate fee therefor: the banks may simply vary that fee (as they already do across their existing card merchant accounts); after all, they will give a credit card account to just about anyone; why not a merchant-type account? Assess the risk: set the fee.
Alternatively, the banks might even let PayPal keep those problematic customers that the banks, who will always better ‘know’ the entities involved, might prefer to not allow a merchant-type facility. PayPal could then, quite appropriately, become the “payments processor of last resort”.
If Donahoe has any brain at all he will be actively trying to sell PayPal to the banks to complement their credit card system; but I doubt the banks would want to lower their image any further by associating themselves with the likes of PayPal; not even for a peppercorn consideration would the banks touch such a dysfunctional amateur operation as PayPal, I suspect.
Does anyone then think that ‘the banks’ are not watching this market segment with interest, and is it possible that PayPal could be having some negative effect on the banks’ card business? Why then would ‘the banks’ not be considering a similar system to complement their existing card systems? The simple fact is that anything that PayPal can do ‘the banks’ can do better (read ‘properly’) and, after all, every internet banking user is already set up to receive such a service directly, efficiently and securely, from their bank.
Do we then need to offer the banks and the major credit card companies another such monopoly-type situation? Ideally not. But, having said that, within the credit card system the individual banks do (marginally) compete with each other on terms, interest rates, etc.
Regardless, it would be nice to have a card/terminal-less system that worked efficiently and effectively—as does the banks’ credit card system. Regrettably (or thankfully, some say), PayPal does not have such a partnership with ‘all the banks’ and so PayPal can never offer that same effectiveness.
My only surprise is that ‘all the banks’, via their credit card partners, have not yet offered their own card-less system for merchants. When they do, I suspect that it will be bye, bye, PayPal—you most ugly of daughters. And, more importantly, we will then have a system that works properly, just like our credit cards do!
In support of the above comment I offer an introduction to the full sad/ugly story of eBay/PayPal at
http://www.auctionbytes.com/fo...wtopic.php?p=6502877
http://www.nytimes.com/2010/03...cs.html?pagewanted=1
“‘The strongest protections are when you pay by credit card,’ says Carole Reynolds, a senior lawyer at the [US] Federal Trade Commission. Under the Truth in Lending Act, consumers’ maximum liability for unauthorized use of their credit card is only $50, and when a card is used online, it’s zero.”
…
“If you report fraud quickly, banks will typically reverse the charges rapidly and without much fuss, though in these tight times banks are scrutinizing fraud claims more closely, says Avivah Litan, a payment-fraud expert at research firm Gartner.
…
“… Ms. Litan warns that if your PayPal account is used fraudulently, it may be harder to get your money back than if you use a credit card.”
Now, that last sentence would be the classic understatement. What more can be said (or not said) about good old PayPal?
The convenience of the PayPal system is not in question—from the buyers’ perspective PayPal is very convenient. The problems are PayPal’s totally primitive and for many sellers, extremely inconvenient, risk management processes (PayPal can never ‘know’ the entities to any transaction the way the banks can) and their totally unsatisfactory mediation process if something does goes wrong, as it can do, particularly with purchases transacted on their slowly sinking hulk of a mother ship, eBay.
PayPal is an unregulated, unprincipled, systemically dysfunctional, amateur organization (just like its ugly mother, eBay).
PayPal and Bill Me Later are not a bank, are not regulated as banks are, do not subscribe the banks’ credit card code of conduct, and yet offer banking-type services, services that would be more appropriately and more competently carried out under the auspices of the real banking community (via their credit card organization partners).
The simple fact is that without the bankers’ knowledge of the entities involved in the transactions, PayPal, or any other non-bank provider, will always be handicapped. Non-bank providers will never guarantee anything for the buyer or seller because they simply cannot ever have the bankers’ level of knowledge of the entities involved.
The head turkey at eBay, ‘Noise’ Donahoe, has occasionally floated the possibility of spinning off PayPal, because he is just barely smart enough to know that when the major credit card companies do get off their butts and introduce a similar card/terminal-less payments system to complement their card system, they will do it properly, and the dysfunctional PayPal will then sink like a stone—other than, possibly, on what is by then left of the Donahoe-shrunken eBay marketplace.
For the banks, as far as merchant accounts are concerned, it’s only a matter of calculating the risk and charging an appropriate fee therefor: the banks may simply vary that fee (as they already do across their existing card merchant accounts); after all, they will give a credit card account to just about anyone; why not a merchant-type account? Assess the risk: set the fee.
Alternatively, the banks might even let PayPal keep those problematic customers that the banks, who will always better ‘know’ the entities involved, might prefer to not allow a merchant-type facility. PayPal could then, quite appropriately, become the “payments processor of last resort”.
If Donahoe has any brain at all he will be actively trying to sell PayPal to the banks to complement their credit card system; but I doubt the banks would want to lower their image any further by associating themselves with the likes of PayPal; not even for a peppercorn consideration would the banks touch such a dysfunctional amateur operation as PayPal, I suspect.
Does anyone then think that ‘the banks’ are not watching this market segment with interest, and is it possible that PayPal could be having some negative effect on the banks’ card business? Why then would ‘the banks’ not be considering a similar system to complement their existing card systems? The simple fact is that anything that PayPal can do ‘the banks’ can do better (read ‘properly’) and, after all, every internet banking user is already set up to receive such a service directly, efficiently and securely, from their bank.
Do we then need to offer the banks and the major credit card companies another such monopoly-type situation? Ideally not. But, having said that, within the credit card system the individual banks do (marginally) compete with each other on terms, interest rates, etc.
Regardless, it would be nice to have a card/terminal-less system that worked efficiently and effectively—as does the banks’ credit card system. Regrettably (or thankfully, some say), PayPal does not have such a partnership with ‘all the banks’ and so PayPal can never offer that same effectiveness.
My only surprise is that ‘all the banks’, via their credit card partners, have not yet offered their own card-less system for merchants. When they do, I suspect that it will be bye, bye, PayPal—you most ugly of daughters. And, more importantly, we will then have a system that works properly, just like our credit cards do!
In support of the above comment I offer an introduction to the full sad/ugly story of eBay/PayPal at
http://www.auctionbytes.com/fo...wtopic.php?p=6502877