Burning man defeats PayPal

http://www.fastcompany.com/1680570/burning-man-defeat-paypal

by alexandros • 16 years ago

200 98 16 years ago

ck2• 16 years ago

There are precious few "victory" stories over PayPal.

Unlike a credit card company, if they feel they might have to dip even 1 cent into their own profits to deal with a bad transaction, they will immediately kill an account, no matter how large or how old.

I simply do not understand why there are not more competitors to PayPal - don't these corporations see the billions PayPal has made (THREE BILLION profit per YEAR) and how they get to skirt all the rules and regulations that banks have to follow? Why not jump onboard and give consumers some choices?

wallflower2• 16 years ago

> I simply do not understand why there are not more competitors to PayPal

If you read the excellent interview with Max Levchin in Founders at Work, he alludes to the fact that PayPal is really just a state-of-the-art, best-in-class fraud detection system with a payment frontend. He also says that Banks are more conservative than PayPal - in that they can't go after a business model where there is going to be fraud - and the game is to minimize the losses.

nkassis• 16 years ago

Yeah that probably explain why their customer service is horrible, they see it as an afterthought. I don't have an issue with them trying to kill fraud but there needs to be better communication between Paypal and it's business customers.

I wouldn't be surprised if at one point the government come in and tries to apply credit card regulation to them if thats not already the case.

tomh-2• 16 years ago

He forgot to mention it has an extremely large number of false positives using that system. The reason it might work is because they take/freeze money from innocent customers. The amount of horror stories about Paypal significantly outnumber the horror stories about regular banks or credit card companies.

jimbokun2• 16 years ago

"He also says that Banks are more conservative than PayPal - in that they can't go after a business model where there is going to be fraud - and the game is to minimize the losses."

It seems to me that deal with fraud is an important part of any bank's business.

jacquesm2• 16 years ago

Are you familiar with epassporte?

https://www.epassporte.com/

One of the reasons why newcomers have relatively little chance is because credit card companies hate start-ups that do wallet systems.

wccrawford• 16 years ago

I hear way too many stories about this. I was even paying a company through PayPal when they had their account frozen and their money taken. 3 times. The company continued to use them because so many of their customers demanded PayPal. They had continued to use PayPal because it was cheaper to lose their funds (they regularly withdrew) than the customers. After the third time losing everything in their account, they finally had to tell their customers 'no PayPal' and live with the consequences.

Yes, you read that right... PayPal took every cent in their account 3 times. And there's no law against it.

ido3• 16 years ago

What is a better alternative?

I understand Google Checkout also had similar issues in the past?

Throlkim• 16 years ago

I've yet to use it myself, and I'm not sure if it's entirely been released yet, but Amazon has a payments system in the works: http://aws.amazon.com/fps/

kmfrk2• 16 years ago

It's all fairly muddled: http://www.merchantequip.com/merchant-account-blog/1027/a-co....

I imagine PayPal gets the worst rep because of its larger user base - though I could be wrong. Google Checkout has some horror stories, too.

One of the last times this was discussed, a YC-funded start-up was mentioned: http://ycombinator.posterous.com/need-to-process-payments. I haven't seen nor heard anything about it, and it's US-only, but maybe pg can give us the inside scoop on the progress.

thinkcomp2• 16 years ago

(My startup) ThinkLink / FaceCash

http://www.thinklink.com

moultano• 16 years ago

That seems like something you could sue them for. Is this not an option for people? (In small claims court at least.)

rpledge• 16 years ago

Opencamp had similar issues, which only got resolved under public pressure http://openca.mp/blog/the-paypal-and-opencamp-resolution/

jasonlbaptiste• 16 years ago

I refuse to go near PayPal. We don't accept it for PadPressed. We might be losing some revenue, but I can't support paypal / leave ourselves open to the shit they pull. Same thing with a conference we're putting on in October. Not allowing PayPal as an option. I hope WePay or someone else succeeds as being a viable+robust alternative.

helveticaman• 16 years ago

Use daily sweep.

iamelgringo• 16 years ago

Can I just say, kudos to WePay for picking up the drop and landing the account. These guys kick ass.

Ixiaus• 16 years ago

Burners are an innovative, sharp, and down to earth bunch; I'm not surprised PayPal got "burned" by pulling what they did. Burners are also a big(ish) community, some of which are influential people in mainstream society.

Glad to see someone met their needs, WePay just got some damn good publicity.

blakejennelle• 16 years ago

We had a nightmare like this when we first launched MyDunkTank and were using PayPal for our payment processing. They suspended our ability to accept payments without warning or notification and then dragged us through a ridiculous and costly paperwork process for over a week.

We supplied everything they asked for and more. They denied our appeal and then locked $2,600 in our account for 180 days without explanation. We worked every channel we could to get a more reasonable outcome and it was to no avail.

There were a few good people in the PayPal bureaucracy who became champions for us but they were powerless. It was very discouraging.

The irony is that PayPal originally challenged the man. Now they are the man.

maushu• 16 years ago

When you look into an abyss, the abyss also looks into you.

pinksoda2• 16 years ago

PayPal once made me refund every customer in the last 6 months. They said it was the only way to unfreeze my account. I gave them the thumbs up because I had no other options at the time, and they said, "you have to manually refund them one-by-one yourself and then call us when it is done". It was really strange.

They permanently froze my account after I refunded everyone and refused to talk to me when I called. I wasn't able to get a merchant account and I lost thousands of PayPal recurring subscriptions. This was the death of my first start-up.

PayPal is a scam and it's not as uncommon as you think. If you're using PayPal, your time will come. I didn't think they would do it to me either, they never bothered me once until all of this went down.

CamperBob• 16 years ago

Well, that certainly sounds like half of a good story.

russell• 16 years ago

Your point is well taken, but I have never seen a comment, here or elsewhere, where someone lauded the great PayPal service or the quick conflict resolution. It's always about being blindsided. Folks, if you have GOOD stories, those are worth posting for balance.

MichaelSalib• 16 years ago

Yeah, this is the sort of thing that happens when a business decides that it will simply terminate communication with a customer without explanation. We don't get to hear their side of the story. The customer has no idea what's going on. That's a pretty bad business practice.

I've heard enough insane PayPal stories from enough people that I trust such that I have no trouble believing pinksoda.

almost2• 16 years ago

Except that's probably is most of the story. Seriously, PayPal do this kind of thing. I'm sure they do it to loads and loads of scammers (who presumably set up a whole lot of accounts) but they also do it to normal people just trying to use the service.

mironathetin3• 16 years ago

Interesting to read that. I thought it is only Paypal Germany whose customer service is bad. My experience with Paypal is, that they deliberately freeze my account and ask for private information and business details, that you really don't want to distribute. If I don't send them, the account remains frozen - well, I may upload money any time ;o).

And indeed, Paypal also doesn't talk to me anymore. They don't close my account on request, they don't respond to any kind of mails. Only the list of problems to resolve gets longer and longer.

Please read their terms and conditions. It is one document with numerous extensions, 48 pages as I counted them the last time! The way it is done looks to me like they want to make it impossible to understand (my personal interpretation). Try to find out under which circumstances Paypal may freeze your account or under which circumstances they transfer your money , as you request: It is their personal decision. There are no clear criteria given. It is a matter how much they think you can be trusted. Check it yourself.

Sorry for the rant. Hearing the name of Paypal really makes me angry.

Steve Jobs once said: I don't sign a contract that is longer than 1 page. Good advice.

blahedo• 16 years ago

He did?? Does he know the iTunes Music Store contract is a whopping 23 pages long, with some 112 sections? At least, it was as of early 2009, which was when I A) really read the thing and B) decided I was done with iTMS. (Full details at http://www.blahedo.org/blog/archives/001060.html .)

(EDIT: iTunes ≠ iTMS)

hendrakieran• 16 years ago

well, to be fair he never said what's the dimension of "the page" ;)

callmeed• 16 years ago

We've been processing 5 figures a month with PayPal subscriptions for over 5 years (we've since moved to a different system but have a lot of legacy customers still on PayPal).

While I've had some odd issues here and there and the user experience for clients is poor, I've never had anything close to what you've described.

I have to say–either you're wrong about "your time will come" or there's simply more to your story.

nod• 16 years ago

It sounds like your time hasn't come yet.

pinksoda2• 16 years ago

My guess is that you got lucky, flew under the radar and now the amount you're processing is substantial enough that they won't try to pull anything.

Either that or your time just hasn't come yet :)

lsc• 16 years ago

my experience with paypal has also been largely positive. I process between USD$10K and USD$20K a month in paypal payments.

As far as I can tell, they aren't much worse than most other payment processors. Most payment processors, if someone with bad credit comes along, or someone gets lots of chargebacks, or if someone is in a funny business sector, they keep some percentage of your money in escrow for a certain number of months.

Now, personally, I have a very liberal refund policy (and really, I think anyone who accepts paypal or credit cards should do the same... because anyone who wants to, with either of those methods, can get their money back, if they really want to.) so I generally don't get chargebacks on my papal account. My last 'dispute' in fact, was an accident... the guy says he meant to dispute the next transaction, with a different company.

and hell, if you tangle with the IRS, your regular bank account will get frozen.

Now, I have heard many, many paypal horror stories from non-profits.

I wonder if paypal is going overboard in cooperating with the US government (in this case, the government harassing not-for-profits who haven't lawyered up enough) to avoid the fate of e-gold?

The e-gold guys, as far as I can tell, were told 'freeze your business or we will throw your asses in jail.' I've still got around a hundred bucks in e-gold I can't access because of that.

E-gold was set up a the way a privacy nerd would set up a banking system, and they built a fairly secure system, but they ignored fraud, saying they were trying to be 'like cash' and first accumulated a reputation for serving the shady and outright fraudulent market, before being shut down by the government.

loewenskind• 16 years ago

Uhm.. there's another option you know? Like maybe your time hasn't come yet?

jimbokun2• 16 years ago

How in the world has PayPal managed to not be perpetually in court fighting off class action law suits?

cubicle67• 16 years ago

I have a client who owns a bricks and mortar store that's been in business for about 15 years and employs about 20 people. They were using PayPal for payment processing on their website, when one day PayPal decided they didn't like the way the company was structured, and froze all funds.

Nothing they could do to appease PayPal. Six months later they got their money back, they now hate PayPal with a passion, and use eWay who have been great

bluelu• 16 years ago

To every story there is also the other side of the story. They obviously don't freeze accounts account just like that for fun, so they certainly had some reasons to do so.

matrix• 16 years ago

The story isn't really about them freezing the account. I think everyone accepts that PayPal needs to be vigilant against fraud, given the amount they deal with. The story is that that legitimate customers are pretty much powerless to unfreeze their accounts; there's no due process, no oversight, and no accountability. If PayPal decides to screw you, that's it. Game over. Thanks for the free money.

absconditus• 16 years ago

This kind of story about PayPal is extremely common.

almost2• 16 years ago

No, they freeze accounts when their automated system flags them. Things like you had more sales this week than normal. Then they won't talk to you or the people who will talk to you are so brain dead that they actually don't seem to understand what Paypal has already done or don't realise when they're asking you to do impossible things.

That's my experience with them anyway. Eventually got it all sorted out but at the cost of not being able to get at my money for about a month.

Just having friendly helpful customer support who can explain what's going on would make a huge difference.

ericz• 16 years ago

Can we start the move to Google Checkout and Amazon Payments? They both charge the same amount of fees as PayPal yet do not have draconian policies and downright retarded treatment of their customers

dhimes2• 16 years ago

Customer service with PayPal is a hundred times better than customer service with Google, in my experience. I've never had a problem getting CS on the phone with PayPal. Google is a different story.

jrockway2• 16 years ago

And Amazon?

smackfu2• 16 years ago

Personally, I think the only options are PayPal or taking credit cards directly. Any other choice is just an obstacle to your customers, another account that they need to sign up for. Yes, people have Google accounts but do they have a credit card on file?

The funny thing is that the competitors don't undercut PayPal. It's no wonder they aren't getting much traction.

gimmejimmy• 16 years ago

Here is another example of how PayPal is a bit shady:

Sign into PayPal to send money. If you have a credit card as a payment method and a bank account as a payment method, PayPal will auto select your bank account. That's fine, except when you change your payment method from the default bank account to your credit card. A confirmation page comes up and tries to change your selection back to your bank account. There are two options: Use Bank Account / Use Credit Card. These options are randomly changed back and forth to confuse the user. Even the highlighting of these to option (which one is yellow) is randomized to make you accidently select the Bank Account option.

christonog• 16 years ago

Yes! I mainly use my credit card for everything online, including paypal, and that trick does get me on some occasions when I'm not paying close attention. It's probably a cost saving measure as credit cards most likely cost more to transact with than bank accounts.

oasisbob2• 16 years ago

Indeed. ACH processing is dirt cheap. I also wouldn't be surprised if the terms of ACH transactions are more favorable to PayPal than those of MasterCard/VISA.

The ACH system has very strict rules guaranteeing payments once they clear the network, as opposed to the more consumer friendly rules that the card networks offer. ACH, afterall, is meant to be used by financial institutions that know exactly what they're doing.

fuzzythinker• 16 years ago

Based on your description, your use of "a bit" is too generous.

Pistos2• 16 years ago

I recently sent a payment from my Paypal account to someone else's. I thought I specified that the payment should be taken out of the credit card source, and not the bank account source. I saw a success page, closed my browser tab, and thought nothing more of it. Later, I received an email indicating that the recent payment I made "failed" to get funded by the bank account, and that the credit card was used as a fallback.

pyre• 16 years ago

I think that PayPal has the same problem as many police departments. The police spend so much time dealing with criminals and looking for criminals, that soon everyone that isn't a police officer looks and feels like a criminal.

PayPal seems to have the same issue with fraudsters. They spend the majority of their time dealing with fraud and looking for fraud (the good transactions are automated and therefore abstracted away from human eyes for the most part) that everything that comes across their desk looks like fraud and is treated as guilty until proven innocent (hey, just like the IRS!). The assumption probably is that 'the system' detects fraud and 'the system' is practically infallible, so when it flags something as fraud they need mountains of evidence to prove that 'the system' is wrong (because 'the system' is perfect, didn't you know?).

stevederico• 16 years ago

Congrats to wepay. Great job on seizing a customer in trouble and meeting their needs. There are plenty of other frustrated pay pal customers, this could be a great starting point for wepay. Go get em wepay

techsupporter• 16 years ago

My organization had this same problem. We formed a cooperative corporation, filed for tax exempt status, and then opened bank and PayPal accounts. Within 7 days of opening the PayPal account for our org, it was frozen on the grounds that extra documentation was needed. Before I could send those documents, PayPal then turned around and froze my personal account since the organization's account had my name as the "responsible party" contact.

The resolution? There hasn't been one. I tried to get PayPal to accept our tax-exempt documents, but they've refused because we're not a 501(c)3 charity (we are 501(c)12) and both the org and my personal accounts stay frozen.

inc• 16 years ago

http://i.imgur.com/DaLcV.gif

techiferous• 16 years ago

My wife is organizing a conference using a non-profit and is going through the same PayPal headaches.

This is extremely bad customer service. All PayPal has to do is (1) refuse to do business with non-profits or (2) present non-profits with an accurate description of what could happen (account freezing, etc.) before they sign-up. (Burying this in the terms of service doesn't count, by the way.) Customer service is as much about expectations as it is about delivering.

HeyLaughingBoy• 16 years ago

The bigger news here is that PayPal is getting more negative publicity in mainstream press and that will, over time, force them to become more responsive.

A few hackers bitching in online forums is one thing, A large social media response in connection with a well known festival threatening to close accounts is going to be much more effective

miah_• 16 years ago

I find it amusing that people still use Paypal. Its been widely documented that they're a horrible company for years now. I closed my account a few years ago and haven't looked back.

Paypal will not change their ways so long as people keep giving them money.

Paypal is not a bank and thus doesn't have to follow the same rules as a bank. Please people, quit treating it like its a bank. Do not store your money there. Do not link it to your primary checking or savings accounts.

Remember! Paypal will cause you great pain and serious amounts of anger. Its only a matter of time.

InfinityX0• 16 years ago

This is ridiculous. PayPal is not some evil "big brother" - they are a company whose entire business model relies on stopping fraudulent activity, and as such, things like this often occur. Pick your poison - either have this happen on occasion, or have your money frequently stolen and more likely, be made essentially impossible to transfer safely on the web.

I will take the occasional inconvenience in exchange for a payment method that makes my life much, much easier.

mironathetin3• 16 years ago

You say it is only occasional inconvenience that Paypal freezes/keeps their clients money?

Gobiner• 16 years ago

I don't doubt that you'd accept the occasional inconvenience to other people. Try having your own money taken away from you and report back to us about the "inconvenience."

markbao• 16 years ago

PayPal is absolute trash for payment processing. Horror stories aplenty. Take the time to obtain a merchant account.

edj• 16 years ago

Reading this thread made me a little paranoid. So I logged into my high school reunion account (I'm the organizer) to withdraw the funds into our bank account, and lo!, of course there's a hold on one classmate's payment. That's $75 we may never see... at least not in time to pay our caterers and such.

Mistone• 16 years ago

seems like they folded to social pressure of the burner community which is vocal and well connected, but their change of heart was driven by wanting to further avoid a PR shit storm. Joe Q web company or individual has no chance of getting similar treatment.

donaq• 16 years ago

Wow, I did not know there was so much bad karma for Paypal. Does anyone know of alternatives for businesses not located in the US?

elblanco• 16 years ago

The tl;dr version, "Burning man defeats PayPal by routing around it."

cloudbrain• 16 years ago

This is why I withdraw all funds from PayPal every weekday morning.

PayPal has been the sole payment solution for my software company for more than 5 years. 99% of all of my money, my families money and my employees salaries goes through PayPal. When I bought my first home (at the end of 2005, oops...) I had to call PayPal to get some financial details for the mortgage company. I spoke with a nice person on the phone from PayPal and they faxed me the documentation I needed write away. Every time a new payment processor comes on the scene I check them out, but none have been able to offer the pricing or features I get via PayPal.

That being said. I have read all the horror stories. So I just assume that any money left in my PayPal account overnight could be potentially lost. No problem, I just withdraw it every morning so my lost potential is always minimal (a few grand).

I don't de recurring subscriptions. I imagine things would be different then. If I did subscriptions I think I would want my own merchant account - you want to own as much of the customer as you can.

Burning man defeats PayPal

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