Open Source Events Get Burned By PayPal

http://pydanny.com/we-are-not-using-paypal.html

by pydanny • 13 years ago

108 48 13 years ago

joering2• 13 years ago

This is nothing new, like article states. What interests me is that why would tech group that most likely knew PayPal shameful history still trust them with payment solution? Why is it that every one and each enterprenour or new startup has to go with paypal?? Do you really want to learn on your own skin?? This is not 2006 anymore! There is so many other alternatives, some less expensive, that you just need to let PayPal go. Also most of them are very trustworthy so that customers don't really care whether you use PayPal, Dwolla, Stripe or Authorize.net.

pydanny7• 13 years ago

The reason people are forced to use PayPal for events is that for many people credit cards are impossible to get. PayPal is often much easier for more people to use.

notdang• 13 years ago

How many of these alternatives work outside US?

jusben1369• 13 years ago

As a general rule of thumb. If you have a pretty predictable business then go with an all in one payment gateway and merchant accounts. By predictable I mean your growth is steady but not spectacular and not prone to any seasonal or suddenly dramatic spikes. Your price points don't move around dramatically. You're not something that will have a lot of chargebacks.

If your business DOES look like the above then engage a merchant account and explain to them what you are up to. It reduces the chances you'll get frozen.

If you can't qualify for a merchant account initially then use an all in one and build up a history that you can then take to a merchant account a little further down the road. (shameless plug for core.spreedly.com if you want the flexibility to shift and change easily)

hcho• 13 years ago

Maybe there's a business idea in payment processing for events.

lucb1e3• 13 years ago

I think there are enough payment services, we don't need another one. We need a central one. PayPal is really big and seen as many as the way for online payments. And I agree, it works really easily and good. Only there are the problems as mentioned in the article...

triplesec2• 13 years ago

Yes, and there are too many business software companies too. Why can't we just leave it all to Microsoft, and we'll all be happy?

paxswill• 13 years ago

Like EventBrite? http://www.eventbrite.com/

guan• 13 years ago

Eventbrite doesn't pay out until 5 days after the event, but at least they announce that up front and don't tend to randomly freeze accounts and hold on to your money indefinitely.

omfg3• 13 years ago

How is this related to just conferences? PayPal doesn't have an anti-conference agenda.. There seems to be two things that set PayPal off.

1) Small volume to huge volume in a matter of days. 2) Taking payments for something happening in the future.

Story after story about both of these scenarios.

It seems obvious at this point that PayPal is not a good processor for things like pre-sales or events. It may be annoying but it's a liability for them and they do what they need to minimize it.

PayPal may be attractive because it's quick to setup but it seems easier for people to get in touch with a proper merchant account provider, discuss what you'll be selling ahead of time so they're prepared, and not get your funds frozen.

Update:

For anyone who is interested, here is PayPal's policy on pre-sales.

https://www.paypal-businesscenter.com/content/presale-policy...

pydanny7• 13 years ago

You're right, it's more than just conferences. But conferences and the will of the developer community are a critical factor in PayPal's ongoing success. Stripe and it's competitors are making inroads because of PayPal's difficulty of use AND their forbidding anti-fraud policies.

As for proper merchant account providers, tell that to people in countries where the majority of residents can get PayPal but not credit cards.

omfg3• 13 years ago

I understand that. We're in the same boat. We have to use PayPal because it's what our customers want. But it's up to the business / organizer to minimize the risk, same as it's PayPal's job to minimize theirs. Could split processing between merchants, attempt to get authorization for capturing at a later date, etc.

Great book by the way, just picked it up yesterday.

InclinedPlane7• 13 years ago

Wow, I find it amazing that there is so much augery going on in this post. Ooo, maybe paypal hates python conferences! Maybe they just hate open source conferences!

And then they go on to describe how they refuse to kowtow to the obviously made up "needs of paypal's anti-fraud division".

There are lots of reasons to get mad at paypal but all too often the formula "We understood nothing about business, didn't even bother to familiarize ourselves with the law or financial regulations, and somehow problems resulted! We blame paypal!" is repeated all too often.

Let's look at this from the flip side. You decide you want to defraud a bunch of people, so you gin up a fake conference, it's easy to put up a fancy web page and sucker people in, then you take the money and run. You think this doesn't happen?

Paypal does have pretty crappy customer service, but if you expect to accrue a significant fraction of a million dollars in a paypal account and you don't think that somehow there might be some hoops to jump through then you are living in a fantasy world.

There's a reason why there is a lot of markup in event ticketing agencies (such as brown paper tickets, or event brite, or the hated ticket master), and it's not because it's such a fundamentally easy problem.

Edit: I'll say this again. It sucks when people who are working based on perfectly good intentions get hurt by the system but we live in a heavily regulated era. Expecting that you can operate a business without taking heed of the relevant regulations and business rules is massively naive. More so, it's a disservice to your customers. Imagine that you were running a 100% cash business. It would certainly make some parts easier, but don't you think people would start asking questions?

pydanny7• 13 years ago

How hard is it for PayPal to pay 10 people as community managers or developer evangelists to take care of this issue? Heck, smaller companies like Heroku do it with about 8 people and cover the globe.

Answer: They've already done it. They have the staff in place.

The problem is their community managers and developer evangelists are sticking to PayPal specific conferences. They aren't in touch with people like me and dare I say you, i.e. the little guy.

omfg3• 13 years ago

It's not a conference issue:

https://www.paypal-businesscenter.com/content/presale-policy...

alain94040• 13 years ago

Agreed. I organized a startup conference (http://thestartupconference.com) for 3 years in 4 cities, always with PayPal as payment. Some advice: make sure you are incorporated. Definitely don't use a personal account to receive payments. Assume that most of the money may be stuck for a while, but know that you'll get your payments eventually, so arrange for backup financing.

Bottom line: if you do this as an amateur, expect to be treated like one. You can't script banking like you'd script ssh.

derefr4• 13 years ago

> know that you'll get your payments eventually, so arrange for backup financing.

How easy would you say it would be to get a loan with "I have $N-thousand dollars stuck in my Paypal account, expected to clear" as collateral?

...actually, wait, that sounds like a [banking] startup idea:

> "We accept payments for an event into an escrow pool, then lend you (with interest) a percentage of the escrow-pool as an advance to set up the event, then release the escrow-pool to you automatically if-and-only-if there aren't too many complaints after the event [otherwise the issue goes to a set-length arbitration, and then we either release the money to you, or refund it in its entirety.] For trusted repeat event-creators, we may increase the loan percentage up to 100%, and may delay loan-interest accrual until after the event-date. We're also partnered with an event underwriter who you can allow us to ensure your event with automatically, in case of black-swan event failure."

Is anyone doing this? Is it even feasible?

lucb1e3• 13 years ago

I can't help but mention Bitcoin here. For international things like open source events, it would work just perfectly. Especially given the tech audience that is attracted to these, Bitcoin might be the easiest way to pay for opensource conferences.

rishimoko• 13 years ago

They'll figure it out someday. Give them time.

InclinedPlane7• 13 years ago

This is just fantasy. You might as well tell people to trade in gold. If you want to operate a legal business above board there's no reason not to use the existing suite of financial services out there today.

lucb1e3• 13 years ago

Can you fax gold? Thought so. And cash, which is as traceable as Bitcoin, is not illegal either is it?

So what was your point exactly?

Daniel_Newby• 13 years ago

Most Bitcoin owners do not use secure hardware for storing their digital money, and payee identities are poorly verified. Therefore if Bitcoin became popular, it would be eaten alive by fraud and computer intrusion.

marze• 13 years ago

All PayPal would need to do is contact by email 50 of the people who already paid and ask if the are confident the event is legit.

Since they don't, it shows they are a criminal organization.

aardvark179• 13 years ago

I've seen this problem come up multiple times, and had to talk to my bank when I got hit by it myself, but I absolutely understand why it happens. In our case it was because we moved from taking registration fees to taking accommodation deposits as well, and suddenly a large amount of money appeared in our account, and it does look very odd.

What I'd be interested in seeing would be somebody like eventbrite handling accommodation deposits and so forth as well as registration, then I could funnel everything through that. It's important that any such service release the funds to the event early so they can actually be used for running the event.

jmodp• 13 years ago

It is better not to use advance sales funds to run the event. Fund pre event expenses from sponsors and/or a line of credit. Then if, for some reason, you have to refund the advanced sales, the money will still be there. Board of directors should insist on such a policy.

QuantumGood• 13 years ago

Before we expanded our events (from 10-15 to 50-80) we dropped PayPal for WePay. Works great, and I can sleep at night.

secalex• 13 years ago

Paypal is a long-time client of my consulting firm, and several of their trust and security people are good friends. They are not stupid or malicious. Unlike the author, they are cognizant of a basic truth about the Internet:

In any situation involving money, every loophole or mechanism for scamming people will eventually be discovered and then exploited to an extent you never believed possible. Just as the Internet has massively changed the basic economics of almost every industry, it has greatly reduced the risk and costs of widespread fraud to a level that would make Charles Ponzi cry with joy into his spaghetti.

There are teams of extremely intelligent and motivated people who spend their entire working careers figuring out ways to rip off Paypal (and Amazon, eBay, Google, Baidu, Bitcoin merchants, etc...) If a top tier company that deals with money on the Internet is problematic for a certain transaction, then you can be sure that is due to a real problem in the past that resembles that transaction.

Pydanny believes that Paypal's actions are without basis, so he has clearly identified a market inefficiency that is ripe for "disruption".

I think pydanny should take this opportunity to pitch his payments startup, PyPal, to pg and several other top-tier angels/VCs. Make sure to include a slide on fraud and loss prevention, and clearly outline the policy that will differentiate you from Paypal:

"The developer community is critical for the success of PyPal. In a situation where a PyPal account identified only by a Yahoo email address and with limited transaction history receives hundreds of thousands of dollars in deposits for a service that will not be delivered for months, we will not freeze that account under any circumstances. Especially if they self-identify as a Python developer."

Let me know how the pitch meetings go.

triplesec2• 13 years ago

This is the best counterargument I've seen, and you're right, professional fraud is a huge problem. However, it's trivial for such a huge company to be a LOT better at z. customer service and b. dealing with highly-publicised and repeated problems for entirely public and transparent small-medium sized events. They will lose their monopoly. It's up to them how much they lose.

derefr4• 13 years ago

At its heart, though, this isn't a service problem; it's a customer service and UX problem.

Imagine that instead of the current Paypal interface, you had the following:

> Instead of having one email address to accept all payments, you created a new sub-account for each event/product/other "stream of payments" that you want to send/receive.

> Creating a "receive payments" sub-account pops up a wizard, that asks you what these payments are expected to be relating to--a product you sell, a subscription service, an event, donations, etc.

> If you pick "one-time event"--the fraud department is called down to verify you and your business up-front. It all gets explained in the interface, your sub-account just will be in a "verifying" state for a few days/weeks, you'll get phone calls and have to submit paperwork to make it "active." Meanwhile, the rest of your account continues to work and none of your other payments get frozen.

> This is on top of the fraud detection that already happens. If you suddenly receive $50k, no matter what the sub-account said it was for, then sure, pause that sub-account and have the fraud guys take a look. But if they pull up the account and the payment pattern exactly matches what they themselves already OKed you to do up-front--then turn right around and unpause it.

...

Now, this all already happens with Paypal! Big corporations know what to do to make Paypal work like this--create a new Paypal account for each venture, get Paypal on the phone yourself and submit all the paperwork and get them to OK it before you declare it safe to start using that account, etc.

But none of this is obvious to the average small-business owner who may have never used an online payment system before. They just use one account for everything, get popular for whatever reason, accept a bunch of payments or donations all at once, and get their entire funding stream suddenly frozen while Paypal does due diligence that should have happened at the beginning of the process, not right when the money is needed most.

the_mitsuhiko• 13 years ago

There is a good chance I will not attend your conference if it's not payable through PayPal. As a customer the extra safety net is very reassuring.

Open Source Events Get Burned By PayPal

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