Wednesday, July 28

When It Comes to Selling Virtual Property, PayPal IS NOT Your Pal

This has new meaning. I'm actually posting it for a friend who wants to get into eccomerce.
"... Sometimes the buyer retracts the payment saying that a transfer never took place at all. After all, there is no receipt. Sounds a bit like the Diebold e-voting scandal, eh? PayPal yanks the money back out of the seller's account EVEN IF IT HAS ALREADY BEEN TRANSFERRED TO A BANK ACCOUNT. One minute the money is there, the next minute it isn't, and the seller has almost no recourse at all."
This scam regards ficticious goods or virtual goods that don't physically exist (such as software) but even when you're selling physical goods a scam artist can easily contest your delivery of the physical goods and paypal will rollover like a dog and yank the money from your paypal or bank account (as stated above) leaving you with the possibility of bounced checks, fees, or worse and you will be on your own to track down said dead beat or scam artist, prove that they recieved your goods and attempt to extract payment from them. Finally there is always the strong possibility that you will never recoup your merchandise or payment let alone the time, fees, and costs you will likely inccured in the process.

Paypal is cool between friends, acquintances and people you know and trust, but when it's more than just pocket change there is no substitute for real world trust systems. If you don't know the person you're doing business with use an escrow. If you want to do business with the general public (i.e. e-commerce/store front) then you are doing business with people you don't even know and should protect yourself accordingly by using a merchant account or business account and incorporating or creating an LLC. You get what you pay for. Paypal is not your friend and isn't going to watch your back when somone cancells a check or reports your goods as "undelivered" they're just going to yank the money back out of your pocket and leave you standing there with no support, no money, no merchandise and little to no possibility of recourse.

PBS | I, Cringely | PayAcquaintance: When It Comes to Selling Virtual Property, PayPal Isn't Always Your Pal


Anonymous said...

Paypal truly sucks. They shut down Adland due to a perfume ad that didn't even break their terms of service, without warning (as they never warn). (see Also read some of the stories at - they are NOT
a bank and completly untrustworthy.

Michael Meiser said...

Thanks for the tip. That's annother thing: Simply turning off your service with little to no reason and no forewaning. That's money out the window, down the drain and lost. You get what you pay for I guess. They refer to themselves as a "merchant account" when they most clearly do not offer the same protections. They don't claim to be a bank, do not offer the same legal securities and protections as a bank, but they offer and encourage users to treat them like a bank with ATM cards and Visa/checking cards. I think it's a dangerous game to use Paypal for anything but the occasional 1:1 transaction.