|Fri Feb 24 2012 14:27:26|
Fortune Calls Out PayPal for Holding eBay Seller Funds
By: Ina Steiner
eBay's got a PayPal problem, according to an article in today's Fortune Magazine about PayPal's 21-day holds policy on seller funds. The article says, "At issue is a mundane-sounding decision to send out notices to sellers informing them that all payments they receive through PayPal for items sold on eBay will now be put on hold for up to 21 days."
The article seems to imply that all sellers are getting this email, but that's not true, and the article goes on to state:
"Ebay spokesman Amanda Miller says the policy is being applied to sellers who "pose a higher than average risk of future transaction problems," but declined to explain why customers, who had been selling for years without complaint, were suddenly considered risks."
Fortune Small Business took a look at this issue in 2008, and EcommerceBytes has covered the issue of PayPal holds and rolling reserves for years - we recently did an in-depth piece for the Newsflash newsletter.
Today's Fortune article includes some interesting quotes from sellers impacted by PayPay's holds policy, and it confirms that PayPal does earn money from sellers' funds: "(Miller) declined to say how much money eBay earned on sellers' money, except to say it was "not material to our business." She also did not respond to questions asking if any of the money was invested in other instruments."
Previously PayPal allowed sellers to hold money in a money market fund, and claimed customers would earn interest on holds if they chose that option, but as I reported in June, PayPal no longer allows accountholder to earn interest on their accounts, be they buyer or seller.
Surprisingly the article doesn't mention the rolling reserves (see this Letter to the Editor, for example), nor the lawsuits sellers have filed against PayPal for the holds policy (see this Newsflash article from November).
Fortune asks if this could be PayPal's "Netflix moment." It's unlikely: consumers have a choice in how they watch movies, but sellers have little choice in online payments on eBay if they want to sell there.