EcommerceBytes-NewsFlash, Number 1449 - January 10, 2007     1 of 4

eBay Limits Buyer Protection to PayPal-Funded Transactions

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eBay will double PayPal Buyer Protection on its site, offering up to $2,000 of coverage for qualified transactions on eBay.com, but is eliminating buyer-protection for non-PayPal transactions. The move is a dramatic effort by eBay to push buyers to use its PayPal online-payment service at a time when it faces increasing competition from Google Checkout, a method it prohibits sellers from accepting on its site.

eBay has had a buyer protection program since 1999. The eBay Standard Purchase Protection Program provides buyers coverage of up to $200, less $25 to cover processing costs, in cases of non-shipment or significant misrepresentation. eBay is eliminating the program as of January 17.

eBay is keeping the PayPal Buyer Protection program, but doubling its coverage from $1,000 to $2,000. However, the program covers only transactions with qualified sellers who maintain a 98 percent positive feedback rating and have at least 50 feedback points.

For all other qualified transactions on eBay.com that are not covered by PayPal Buyer Protection, PayPal will provide up to $200 of coverage with no processing fee, no minimum purchase price and no seller requirements - as long as the buyer pays for the item with PayPal.

eBay spokesperson Catherine England said eBay's original standard protection plan had been in existence since 1999, before eBay acquired PayPal. Over time, the community has moved to using online payments, she said, but the old plan continued to offer coverage on the riskiest forms of payments. "This rewards safe behavior for buyers," England said, adding that the doubling of protection through the PayPal Buyer Protection program "is a vote of confidence for our sellers." Note that when the PayPal Buyer Protection program launched in 2003, it covered buyers up to $500.

eBay plans to notify buyers of the change in coverage through a posting on its Announcement Board, workshops, and messaging as a user goes through the transaction process. In addition, qualified items will indicate the amount of coverage available on the item page in a green box in the "Buy Safely" section.

Rob Chesnut, senior vice president of Trust and Safety for eBay, said in a press release, "This is a huge step in building even more trust in shopping on eBay, because it makes the message very simple - Pay with PayPal and you're covered."

Asked whether sellers would feel they are being forced to accept PayPal, England said eBay is not forcing sellers to take PayPal. She pointed out that the soon-to-be-discontinued eBay Standard Purchase Protection Program had a $25 processing fee, so purchases up to $25 had effectively lacked coverage. And, she said, some folks are comfortable with other payment methods and will likely continue to use them.

eBay allows sellers to offer credit cards, which provide chargeback protection to consumers. But with the new policy, eBay will provide no buyer protection to consumers who pay for transactions with checks, money orders, postal orders and bank-to-bank wire transfers. eBay had already banned sellers from offering cash and instant cash transfer services like Western Union as payment methods in their listings as part of its "Safe Payments Policy," rolled out in October 2005 and later renamed the "Accepted Payments Policy."

The policy was introduced as talk of a "PayPal-killer" from Google picked up steam in 2005, and some remain skeptical over eBay's motivation in banning Google Checkout, believing it's a competitive issue, not a trust & safety issue as eBay has stated. eBay has also prohibited third-party vendors from integrating with Google Checkout in their checkout features that integrate with eBay through eBay's Checkout Redirect.

On January 3, eBay North America President Bill Cobb told users to expect more initiatives. The company already launched an anti-counterfeiting initiative in December and extended its "Safeguarding Member IDs" initiative this week. The company's PayPal payment service is also testing a new device from Verisign called the PayPal Security Key, which offers two-factor authentication, in a bid to reduce the success of phishing emails.

Related Stories

"eBay's PayPal to Thwart Phishing Scams with New Device" (PayPal Security Key)
http://www.auctionbytes.com/cab/abn/y07/m01/i10/s02

"eBay Rolls out Major Initiative to Fight Counterfeits"
http://www.auctionbytes.com/cab/abn/y06/m11/i29/s01

"eBay Limits Seller Payment Choices over Safety Concerns" (Original "Safe Payments" policy)
http://auctionbytes.com/cab/abn/y05/m10/i17/s01

"eBay Extends Initiative to Protect Bidders from Spam" (Safeguarding Member IDs)
http://www.auctionbytes.com/cab/abn/y07/m01/i09/s02


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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