Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Fri Feb 24 2012 14:27:26

Fortune Calls Out PayPal for Holding eBay Seller Funds

By: Ina Steiner

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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.




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This user has validated their user name. by: TrentDep

Fri Feb 24 14:53:34 2012

" ...but sellers have little choice in online payments on eBay if they want to sell there.
"

And that is the problem in a nutshell.

What other entity in the US has that ability - to completely dictate a specific ( and self owned ) payment instrument?

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by: jpv1234me This user has validated their user name.

Fri Feb 24 15:15:36 2012

come V.me!!!  

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by: BetterThingsToDo This user has validated their user name.

Fri Feb 24 15:22:29 2012

v. me  HA HA HA You still have to have Fleecebay accept it. Doubtful that will ever happen.

It will be a long time before you can V.Me

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by: Patricia This user has validated their user name.

Fri Feb 24 15:25:07 2012

Why isn't the pairing of ebay/paypal rightly called a monopoly?  That's the problem right there!

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This user has validated their user name. by: Philip Cohen
Web Site

Fri Feb 24 15:36:07 2012

“When Do We Start Calling eBay A Payments Company?”

A tale of two clunky, unprofessional commercial entities: eBay and PayPal
 
http://bit.ly/wpl5DT
 
eBay / PayPal / Donahoe: Dead Men Walking

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by: jpv1234me This user has validated their user name.

Fri Feb 24 15:53:35 2012

@BetterThingsToDo

I left eBay business exactly one year ago…but still hate payypal fees…have to use paypal in my webstore because it is a monopoly, the customers don't suffer paypal grievances like sellers do so they choose paypal, although a higher number of them are using google wallet now…and i would like another competitor like v.me…...

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This user has validated their user name. by: Stockmiser

Fri Feb 24 17:13:29 2012

As I mentioned in a previous thread, V.me will initially rollout as a gateway for multiple credit cards (Visa, MC, Discover), but it will require that the seller have a credit card merchant account.  The only thing different from a regular CC gateway is that the buyer can use a login and password to pay instead of the CC#.

I got a V.me developer account just to see exactly what it does, and that's how it works.

Eventually they say they will allow person-to-person transfers, but there is no information on how or when this will be offered.

The main purpose of V.me seems to be more geared to facilitating easier mobile payments for those that already accept credit cards.

But if you already have a merchant account, you really don't need the V.me gateway - it's just another way to do what you are already doing.



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This user has validated their user name. by: Ric

Fri Feb 24 18:22:07 2012

Not that it will bring about any improvement, it is nice to see a major publication take the eBay/PayPal monopoly to task over their tactics.

The statement from Amanda Miller where she declined to address the issue of long time sellers being suddenly subjected to account holds with no apparent justification speaks volumes for the unfair underhanded tactics employed by this monopoly.

The unfortunate thing is that exposing these tactics will likely result in no change with the manner in which this company conducts business.

Any other company which treated their customers in such a condescending and dictatorial manner would be embarrassed to have these kinds of issues exposed by a national publication.

Not so for eBay/PayPal. Their corporate arrogance is a byproduct of their monopolistic strangle hold and reflects the complete disconnect between isolated management and everyday users. Their concerted efforts to maintain the existing monopoly necessitates the strong arm tactics they employ as a method of keeping buyers and sellers contained within the company's confines.

The company is willing to sacrifice customer satisfaction for the sake of revenue. As buyers & sellers leave and sales decline, they simply raise fees or create new ones in order to squeeze more profits out of fewer transactions and fail to address the root cause of their decline.

The perpetual downward spiral will not reverse itself until management of this company wakes up and treats their sellers in a fair, honest and reasonable manner including better transparency in every facet of their operations.



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This user has validated their user name. by: Philip Cohen
Web Site

Fri Feb 24 19:27:14 2012

@Stockmiser,

“But if you already have a merchant account, you really don't need the V.me gateway - it's just another way to do what you are already doing.”

Oh, nonsense! The whole idea of the V.me gateway is to make the online payment process simpler for both the credit card merchant and card user, and particularly to improve security for both. If the buyer would have otherwise paid directly by credit card then V.me is much easier (as is PreyPal easier); and for the professional, secure, V.me gateway, it’s no harder than paying via the clunky, unprofessional PreyPal for the buyer: enter login and password and choose the credit or debit card (note, or debit card) that you wish to use ...

For credit card merchants V.me is so much more efficient: merchants won’t have to worry about the genuineness of card information, that is taken care of by Visa; indeed, the merchant never sees the card information, and, I presume, as has always been the case, the funds arrive in the merchant’s nominated bank account the following day. In effect the V.me gateway is replacing the online merchant’s old card terminal.

Yes, on the surface, V.me is similar to PreyPal but otherwise they are chalk and cheese.

As far as non-credit card online merchants are concerned, I would say, talk to your bank about an internet credit card merchant account, otherwise be prepared to continue to put up with PreyPal’s shenanigans.

eBay / PayPal / Donahoe: Dead Men Walking

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This user has validated their user name. by: Doc
Web Site

Fri Feb 24 20:02:25 2012

The only thing wrong with the Fortune article is it claims eBay is tarnishing PayPal's good name. Obviously the author don't know much about PayPal.

But it was nice of Fortune to publish the names of some of the better anti PayPal websites.

They have been screwing just about anyone for years. I say may the PR do them good!

It was a double whammy bad day for eBay and PayPal after MSNBC did a hatchet job on eBay for selling counterfeit Rosetta Stone software.
http://today.msnbc.msn.com/id/46484347/ns/today-today_ros
sen_reports/t/rossen-reports-are-top-websites-business-counterfeiters/#.T0gIwXmt3VE

Donahoe
loves those scamming Chinese sellers, and has ran the greatest majority of the old timers who believed in the principals Pierre founded eBay on, right off the site never to return again.

Like a seller i knew personally that was a member in good standing for 14 years. Life-is-a-beach god stung with a deadbeat bidder who lied and gave him a neg on a classic Mercedes.

Stick a fork in that Pig.. It's Done!  

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by: chatter This user has validated their user name.

Fri Feb 24 20:50:31 2012

Interesting in this discussion that no one acknowledges that "PayPal" is owned lock stock and barrel by EBay.

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This user has validated their user name. by: Philip Cohen

Fri Feb 24 21:52:39 2012

Oh Chatter, everybody around here know that already. Gee, and did you know GM makes chevrolets? Sheesh.

eBay / PayPal / Donahoe: Dead Men Walking

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This user has validated their user name. by: Doc
Web Site

Sat Feb 25 08:36:14 2012

So what are Ming's thoughts on this discussion?

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by: Biloxims This user has validated their user name.

Sat Feb 25 13:21:53 2012

So I can't take the money I made from a sale, put it into MY interest bearing account until Paypal/Ebay (to whom I have already paid fees to twice) takes the 21 days of hold so THEY can make interest?

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This user has validated their user name. by: Ming the Merciless

Sat Feb 25 18:24:28 2012

The "Fortune" piece is a start and ONLY a start.

The upside is that part of one cat is out of the bag. But there are still several more cats in that bag.

The downside is that the media needs weeks of education about the ebafia criminal syndicate's master plan to steal from and deceive customers.

The article barely began to scratch the surface of this issue and the multitude of other ebafia sleazy business practices that permeate their ENTIRE operation.

Contact Ms. Morrissey directly with more details -- especially if you've had a bad experience. Give her Ina and David's contact information.

Janet Morrissey
Fortune Magazine
1271 Avenue of The Americas
Bsmt SB7
New York, NY 10020
(212) 522-1212

The Scam isn't simply limited to money holds; it also includes many other issues which have been discussed here and which can reviewed in the AB arhives whose links are in the upper right hand column or box of every AB/EB blog page.

These reporters don't understand that this story is a Pulitzer waiting to be won.

Like Enron, ebafia is a poster child for the unbridled corporate abuses at best and criminalality at worst.

CALL JANET MORRISSEY. Be very polite. Be reasonable. Be specific. Gather your evidence before placing the call so it's right in front of you.

Then call CNN in Atlanta. Some bigger fish might get very interested in this story if it's developed just a little further.

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This user has validated their user name. by: Ming the Merciless

Sat Feb 25 22:00:28 2012

I should have mentioned about that two other ways that PreyPal steals our money are 1) bank withdrawals that take days which, in fact, are done in mot cases in seconds or a few hours and 2) the long wait for e checks to "clear" when this also in reality takes very little time.

Ebay's abuse of our PreyPal accounts, however, is only ONE of dozens of abuses heaped on sellers.

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This user has validated their user name. by: Stockmiser

Sun Feb 26 09:30:31 2012

@Philip

''Oh, nonsense! The whole idea of the V.me gateway is to make the online payment process simpler for both the credit card merchant and card user,''

Yes, easier for the buyer (login/password), but technically no different for the seller versus any other gateway (such as authorize.net).

''and particularly to improve security for both.''

V.me uses the same security and CC verification as any other CC gateway.  Other online gateways also handle the storing of the sensitive CC data so the seller doesn't have to.

''For credit card merchants V.me is so much more efficient: merchants won’t have to worry about the genuineness of card information, that is taken care of by Visa; indeed, the merchant never sees the card information, and, I presume, as has always been the case, the funds arrive in the merchant’s nominated bank account the following day. In effect the V.me gateway is replacing the online merchant’s old card terminal.''

I don't know too many online merchants that still use a ''terminal''. Online CC gateways have been around a long time. I used one back around '95 for an online business.  Again, from the seller's perspective, V.me works exactly like an authorized.net or ccbill.net.

''Yes, on the surface, V.me is similar to PreyPal but otherwise they are chalk and cheese.''

Actually, that's the opposite of my point.  V.me is nothing like paypal OTHER than the login/password thing.  V.me is JUST a CC gateway for sellers WITH MERCHANT ACCOUNTS. There are no ''payment holds'' or anything like that because all they are doing is processing the transaction between the merchant's CC bank and the buyer's CC bank.  If you lose a chargeback with a CC company, they will take the money out of your bank account.

''As far as non-credit card online merchants are concerned, I would say, talk to your bank about an internet credit card merchant account''

But they can do that right now - even on ebay.  Although it's often said, Ebay doesn't actually ''require paypal'' - they require that you accept online payments either through several online services (including paypal), or via your own merchant account.

The problem with smal; businesses getting your own merchant account is that your bank might not even talk to you about an ''online'' business - it's considered risky.  For those just wanting to sell a few garage items, it's not even a possibility.

So we are back to the same issue - which is that V.me doesn't seem to even be competition to paypal as much as it's competition to existing CC gateway providers, like authorize.net.

And the big bottomline for sellers - IF YOU DO NOT HAVE A MERCHANT ACCOUNT YOU CANNOT USE V.ME.

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This user has validated their user name. by: Philip Cohen
Web Site

Sun Feb 26 10:58:28 2012

I knew I’d leave myself open by mentioning a card terminal; otherwise, I stand by my previous comment.

As far as the small professional eBay sellers are concerned, not even eBay wants them, so you are correct in saying that the banks probably don’t want them either, especially if they are persons that the banks know to be, as you say, “risky” because they are of no financial substance. Those people can stay with PreyPal and put up with PayPal’s shenanigans: rolling funds holds and clunky buyer-biased transaction mediation process—if it could actually be called “mediation”.

It was certainly never my intention to suggest that anyone wanting to “sell a few garage items” should apply for a credit card merchant account. Those sellers can stay with PreyPal too.

Regardless, apart then from the practicality of PreyPal for those very small professional or occasional sellers who probably could not otherwise get, nor even want to get, a credit card merchant account from their own banker, the only thing that PreyPal offers is its simplicity for buyers and, of course, it’s buyer-biased mediation process.

The V.me gateway will offer the same simplicity for buyers, and more in that multiple funds sources may be recorded and selected therefrom from, including a “debit card”. Hopefully a form of direct crediting of payments to banking accounts will indeed follow.

For the professional seller of any substance, V.me offers a professional, dynamically integrated process. PreyPal offers …?

The point I make is that regardless of the convenience that PreyPal offers online buyers, it is the merchants of substance that already have, or who could get, a credit card merchant account who will drop PreyPal like a hot potato once V.me is up and running.

Or are you suggesting that such merchants will choose to, or indeed should, continue to offer PreyPal? Of course, the question is moot with respect to the eBay marketplace as I doubt that Donahoe would ever allow the V.me gateway thereon as it would undoubtedly be considered by him to be insufficiently “secure”, notwithstanding that V.me will effectively be PreyPal death warrant elsewhere.

Then there is Donahoe’s idea that, by waving his phone around, the clunky PreyPal will have an effect at B&M POS; well, I find that simply laughable; Scotty Thompson obviously though likewise: with literally a day’s notice, he abandoned the struggling eBay for the struggling Yahoo …

eBay / PayPal / Donahoe: Dead Men Walking

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This user has validated their user name. by: Stockmiser

Sun Feb 26 12:37:54 2012

@Philip -

I guess my point is that for the vast majority of sellers using paypal right now for their online CC processing (and I do not believe that many have marchant accts), V.me is irrelevant since they cannot use it.

For those that already have merchant accounts and still offer paypal, I suppose I can grant you that most would be willing to give up paypal IF buyers actually embraced V.me and IF their shopping cart software was modified to use V.me and IF V.me was cheaper than paypal.

But when I look at Google Checkout, which does not require a merchant account, is cheaper than paypal for the seller (in fact, it was even free for a long time), has a reputable name behind it, offers a free API and wealth of developer tools, and has had years to integrate into existings shopping carts - hey wait a minute...we already have a direct PP competitor.

Actually...it's now "google wallet"  and they practically own the android market since it's required for purchases in the official android marketplace.

Now that we're talking about this, it would seem that google wallet has a huge step up on V.me right now...

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This user has validated their user name. by: Philip Cohen
Web Site

Sun Feb 26 17:14:38 2012

@Stockmiser,

Then we don’t disagree on that much ...

Google Checkout/Wallet. Mmmmm. Does the buyer via Google Wallet have the same statutory protections that apply in many countries to purchases made directly by credit card or do they also lose those protections as is the case with purchases made via PreyPal?

The same question hangs over all payments middlemen such as the telcos who are offering mobile payment services that are debited to your telephone account (the funds for which then have to be sourced from you bank account); these people are not licensed banks and are not statutorily or prudentially regulated with respect to such activities as are the retail banks and their systems. You use such non-bank systems at your risk.

Regardless of Google’s statue, which is impressive, all other things being equal, I'll go with the people whose primary business has always been the handling of money, with whom I have never had a problem and with whom I have confidence in: my retail banker.

PreyPal, in particular, has clearly demonstrated itself to be not deserving of such confidence.

eBay / PayPal / Donahoe: Dead Men Walking

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