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EcommerceBytes-NewsFlash, Number 1641 - October 12, 2007 - ISSN 1539-5065    1 of 4

Risky Business - PayPal Launches Early-Warning System

By Ina Steiner
October 12, 2007

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PayPal will roll out a risk reduction program for eBay sellers in the U.S. and Canada over the next few months. PayPal first announced the Payment Review program in June at the eBay Live conference. PayPal said the program is an early-warning system designed to help protect sellers from fraudulent payments.

Payment Review is automatic (eBay sellers do not have to opt in to the program). When PayPal's systems detect a high-risk payment, it will send the seller an email alert within minutes advising them that payment has been put into a Pending status while it investigates. Payment Review investigations will typically take up to 24 hours to complete, according to PayPal.

If PayPal determines the payment is most likely legitimate, it will let sellers know via email and on the Transaction Details page that they can ship the item and that they will be eligible for the Seller Protection Policy. (Initially PayPal had said it would guarantee those transactions 100 percent.*) If PayPal determines that the payment is most likely fraudulent, the payment will be automatically canceled.

In June, PayPal had said that when it identifies a risky transaction and holds it under the Payment Review program, it will have clear messaging to buyers that it is PayPal - and not the seller - who is holding up the transaction (http://www.auctionbytes.com/cab/abn/y07/m06/i18/s03). PayPal's announcement on Thursday did not address buyer messaging.

ChannelAdvisor CEO Scot Wingo wrote on his blog that sellers could take a hit to their feedback ratings if buyers blame sellers for the delay in shipment. He also called Payment Review votes the "most likely to disrupt Q4 holiday sales" (http://ebaystrategies.blogs.com/ebay_strategies/2007/10/it-must-be-q4-e.html).

PayPal warned eBay sellers that the program is not a substitute for using caution when accepting payments. The company said it plans to roll out the program to eBay's global marketplaces assuming that all goes well with the program in the US and Canada.

eBay will hold a workshop on October 15 from 2-3pm Pacific time on how PayPal and sellers can work together to reduce the risk of chargebacks, claims and buyer fraud and will answer questions about Payment Review.


See October 17, 2007, AuctionBytes blog post for further clarification:

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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