PayPal starts charging 2.9% for refunded sales

https://www.techspot.com/news/79545-paypal-new-refund-policy-has-sellers-up-arms.html

by starbugs • 7 years ago

61 38 7 years ago

techspot.com

bdibs• 7 years ago

Good, more people leaving PayPal for a more seller friendly payment processor is great for everyone.

They’ve been nickel and diming sellers forever, and it seems it’s finally catching up to them.

Traster• 7 years ago

Nickel and diming sellers is quite literally the payment processor business model. What else do you expect?

dominicr• 7 years ago

"PayPal has said that anyone who disagrees with any of their new terms is free to close their account."

That's not much of a surprise as Paypal has never been strong on customer service for sellers. They seem to see the relationship as adversial, often claiming it's for the buyers' benefit. But both buyers and sellers are customers to value.

mcv4• 7 years ago

I closed my PayPal account many years ago, but they keep mailing me updated terms. I haven't agreed with them in years.

NullPrefix• 7 years ago

Send a GDPR request.

BrockSamson• 7 years ago

From 7th May PayPal have lost my business, as has any business which uses paypal exclusively. This is a completely customer hostile stance and shows capitalism at its worst.

gbaygon3• 7 years ago

Capitalism is free market which allows you to switch providers freely and, if enough people agree with you, it will eventually create a market force that will make PayPal step back or lose it's business.

It may be greed and lack of sight from PayPal side, but capitalism tends to adjust itself.

mcv4• 7 years ago

The free market is one aspect of capitalism. The concentration of capital which can be leveraged to undermine the freedom of the market is another.

ShorsHammer• 7 years ago

Payment processing is not a free market by any stretch.

Tsubasachan• 7 years ago

Sadly in the US its creditcards or PayPal. Banking system is archaic as hell, no innovation in decades. The big American banks could digitalize and utterly rape PayPal if they wanted but why bother?

pmiller22• 7 years ago

Can I really switch payment processors freely as a consumer? Or is my choice mostly to eat higher prices (^F “cost of doing business” to see my other comment), or not shop using PayPal?

mehrdadn• 7 years ago

Louis Rossmann had something to say about his: https://www.youtube.com/watch?v=c1WPDVjXDj0

nickjj2• 7 years ago

The problem with this scenario is customers don't know (or care) about things like this, so from their POV PayPal is the best thing ever and not supporting it will absolutely result in lost business.

For reference I've sold many many thousands of digital courses and about 40% of the people who bought a course used PayPal (60% used a credit card where I'm using Stripe on the backend).

But from the user's POV, they just like popping in an email address and getting what they want. It's especially important if you're a small business where the average person might not trust your platform or brand with their CC info. As developers we know things are secure if we use Stripe, etc.. but they don't know that.

I realistically don't see how PayPal will ever go away in the foreseeable future. Zelle is a great step forward but it's no where near ready to replace PayPal for accepting arbitrary payments (but it's great for 1 on 1 payments when both banks support it).

starbugs3• 7 years ago

If everybody stays with PayPal at this point and just accepts these practices, then I guess it won't be long before the other payment processors follow the market leader.

I agree that you are likely going to lose some business in the short run, but is that business worth swallowing the refund fees with your own money?

Also times have changed a bit. It's not like eBay is still the biggest market on the web and auto filling forms with your credit card information has gotten a lot easier thanks to modern browsers.

nickjj2• 7 years ago

Sadly it's not some business in the short run. It would be forfeiting probably 20-30% of revenue for 5+ years or however long it takes for the general population to stop using PayPal (if such a movement would even happen). It's not quite a 40% loss because I imagine if the PayPal option were removed a number of people would use the CC option instead of aborting the sale.

Still though, that's a huge loss for an extended period of time. I definitely don't like what PayPal is doing but Stripe is also pretty evil in a similar fashion. If someone disputes a charge (due to fraud that Stripe is supposed to prevent but doesn't) then you lose the processing fee and you (the business owner) also get billed a static $15 fee on top of that.

dexen• 7 years ago

it won't be long before the other payment processors follow the market leader

Fortunately this goes both ways:

On one hand, other payment processors will be able to squeeze even more revenue out of the sellers (or buyers).

On the other hand, any competing payment processor will be able to collect more revenue to finance its growth, thus helping them to grow and out-compete PayPal.

Contrast that with Amazon, which is ran very close to zero margins, thus making it harder for any competitors to generate growth-inducing revenue and at the same time offer competitive prices.

tssva2• 7 years ago

Not that I think PayPal's terms here are correct but they are far from the only payment processor with such terms. This is especially common with credit card processors that offer fixed fees, such 2.9% + 30 cents, and bundled processing instead of interchange plus pricing.

tssva2• 7 years ago

Stripe's default terms also don't include refunding fees when processing a return, so unless you have negotiated terms with Stripe you are in the same boat there as you shortly will be with PayPal.

Fjolsvith• 7 years ago

Actually, you are in a better boat with Stripe.

With PayPal, a customer can easily request a full refund without contacting the seller. With Stripe, they have to go to their bank and try to make a case for fraud.

I used to have PayPal for my shed business which has an average of $4k for the transaction. A customer would order using PayPal and then call the next day to arrange immediate delivery, despite my store telling them we were backordered. They would get angry when I explained that, and request the refund. We got hit with fees both ways.

bluedino2• 7 years ago

I don't get this at all. Does it apply when you do a refund or only when the customer requests it?

floatingatoll2• 7 years ago

It creates a financial disincentive to consciously fail to deliver reliably.

If you ship 100 people a $100 product with a 5% defect rate, earning $10,000:

Previously, you would refund 5 people $100 each, at a cost of 5 * $0.30 = $1.50 (effectively, 0.3%) + $500.

Now, you would refund 5 people $100 each, at a cost of 5 * $2.90 = $14.50 (fixed at 2.9%) + $500.

I imagine Paypal hopes that this increase in financial cost to refunds will diminish what, presumably, is an excessively high rate of refunds that resulted in the otherwise-unpopular rule change.

Apple does the same for iOS app purchase refunds, except at their 30% rate instead of 2.9%, there is a much higher price to pay for selling something so bad that people manage to refund it (which Apple makes much more difficult than Paypal, from a pure UX perspective).

bluedino2• 7 years ago

I ran into this issue yesterday, which made me go back to check my account (who read their ToS?)

I was selling a small item online, and a few people were inquiring about it. I said the first person I get payment from gets the item, I would not “hold” the item if another buyer wanted it.

Person X sent me a payment, and an hour later so did person Y. I had to refund person Y so I lost what looks like 30 cents.

dotdi• 7 years ago

PayPal has said that anyone who disagrees with any of their new terms is free to close their account.

And this is why we cannot have monopolies.

oliwarner3• 7 years ago

Huh? Paypal is big but they're a long way from being a monopoly.

Sellers need to show a little backbone. If Paypal is charging you for things you don't want to be charged for, cut them off. There are plenty of other payment service companies out there, and some of the smaller ones are going to give you a much better percentage on your business (assuming you're not high-risk).

HNLurker2• 7 years ago

But will they fall the same way payza did?

segmondy• 7 years ago

Not a fan of paypal but can't fault them. Refund costs twice the work. There's the cost of the initial transaction, then the cost of a refund. If someone used a CC to pay and it went through the card's network, the card network will charge paypal for both the transaction and the refund. It's sort of like a physical return, if you shipped it, there's a shipping cost to and from the customer. Question becomes who should eat that cost? The payment processor, the seller or the buyer? Frankly. I don't believe it's the payment processor. If the buyer is the cause of the refund then they should eat the cost. If the seller is the cause, then the seller should. Unfortunately this is now how things are currently done, but that's how I personally feel about it.

PayPal starts charging 2.9% for refunded sales

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