PayPal Shuts Down Secure Messaging Service ProtonMail’s Crowdfunding Account

http://techcrunch.com/2014/07/01/paypal-shuts-down-secure-messaging-service-protonmails-crowdfunding-account/?ncid=rss

by aespinoza • 12 years ago

102 42 12 years ago

skizm• 12 years ago

I asked on the reddit thread but got no answer: Doesn't PayPal not allow accepting payment for non-existing goods or services? This would include things like pre-orders and donations. If that's the case, this seems like a legit reason to freeze the account. I might be wrong, but I could have sworn I heard that somewhere.

HNaTTY• 12 years ago

They definitely allow donations, if you're a 501(c)(3) charity.

timeuser• 12 years ago

PayPal has pretty clear direction and limits regarding crowdfunding.

https://developer.paypal.com/docs/classic/lifecycle/crowdfun...

m3rc• 12 years ago

Not sure what it used to be, but they've updated how they treat crowdfunding:http://arstechnica.com/business/2014/03/months-after-borking...

danielweber• 12 years ago

Their account is already turned back on: https://protonmail.ch/blog/paypal-freezes-protonmail-campaig...

higherpurpose• 12 years ago

Not even an apology for that ridiculous reason they used to freeze the account. They're acting as if it never happened.

laoba• 12 years ago

If I was paypal, and decided to reverse the freeze, I would immediately unfreeze it, and then take the time to write something up.

From a PR perspective, I would think it would be better to say "We wanted to unfreeze immediately so they could start take donations again." rather than "We kept it frozen until we had time to write an apology."

Not saying we're definitely going to get one, but I could see why it might not come immediately.

subudeepak• 12 years ago

I do not think so. I am not sure if you are aware of Hawala http://en.wikipedia.org/wiki/Hawala or so many other malicious instruments that can be used in a manner similar to crowdfunding. This also includes other factors when looking at international donations to a project which usually come under numerous regulations that need to be answered by PayPal. To not investigate such transactions would be a blunder and the freeze has not been very long. I see no need for an apology for a routine check when it has been clearly stated in their terms and conditions.

milesskorpen• 12 years ago

So many HN commenters have this gut hatred of PayPal, which honestly isn't warranted. You'd find trouble finding ANYTHING that can accept $300k in donations for an unreleased product without some kind of review. This is the case over and over again in these "PayPal froze my account" horror-stories/whines, and somehow people have trouble learning to just contact the company FIRST and let them do the investigation before funding begins, instead of while in progress.

I defy you to find a single other financial partner who'd let this kind of behavior slide without review. (And Bitcoin doesn't count ... not if you want to accept donations from any reasonably large number of people.)

rockdoe2• 12 years ago

It's nice to propose Bitcoin as an alternative, but there's no "they didn't make it so you get your money back" system like pledges, is there?

Also, I don't see how they qualify for PayPal donation status as a nonprofit, so the outcome of this was predictable by day 1 and entirely their fault.

tinkerrr2• 12 years ago

Yes there is. See Assurance Contracts on the Bitcoin Protocol (they haven't been implemented yet though, I think): https://en.bitcoin.it/wiki/Contracts#Example_3:_Assurance_co...

rockdoe2• 12 years ago

they haven't been implemented yet though, I think

That's kind of a show-stopper, then. Saying that Bitcoin is an alternative to Paypal for these kind of Kickstarter-like efforts is just disingenuous and exposing your "customers" needlessly.

smackfu3• 12 years ago

Bitcoin is better for the people being funded, but leaves no recourse for the funders if the project just runs away with their money.

VMG• 12 years ago

You can use multi-party escrow for that

couchand• 12 years ago

There's no reason that the crowdfunding platform couldn't hold the pledged Bitcoin in escrow, which seems like it would be pretty straightforward and transparent.

st22• 12 years ago

What is a good alternative to paypal if you run a business ?

spacefight• 12 years ago

Stripe.

conradk• 12 years ago

Does Google Wallet have a checkout service? If so, could be one alternative.

Otherwise, their is Braintree, Stripe, and more similar services.

EDIT: Seems like Braintree is owned by Paypal. So not really an alternative.

adzicg• 12 years ago

Paypal used to be the easiest thing to integrate - especially because they would handle the entire backend server workflow, and you just get a ping from their back end when the thing is done. They also have the instant payment button that would accumulate payments and consolidate orders without you even having a backend.

If you're looking for something similar to the payment integration, Stripe is pretty similar in terms of development effort and can even run a form on your (static) web site. You still have to do a bit of processing on your end, but we're talking about a few hours of work tops.

We ran a subscription business for a few months without a real backend or a database (validating that there is a demand) using stripe and JotForm. Jotform is a very simple forms builder and server online that can handle a trivial product selection, collect custom information, execute a payment workflow and send the customer and you an e-mail at the end, optionally showing the customer a confirmation page. Yes, all this is doable by a good programmer in a day or two, but it costs next to nothing on JotForm and allowed us to play with the process until we got it right. Their site can run paypal and stripe (and a few other things) so in case paypal blocks you it's easy to switch to a different provider without customers noticing anything.

Stripe doesn't offer seller or buyer protection - which is another benefit of PayPal. I don't know anyone else who does that.

RamDave• 12 years ago

As per https://www.chargebee.com/partners.html businesses can choose Authorize.net, Braintree, Paypal, PIN, WorldPay, eWay etc.

joeblau• 12 years ago

It depends on what countries/currencies you do business in and which types of transactions you need to support.

dangrossman4• 12 years ago

Yes, financial institutions do typically have "questions" they need "answered" before making quarter million dollar loans to anonymous e-mail addresses. There's no reason to put those in scare quotes, and it is very much a loan. PayPal is the company making the credit card charges, and if they end up being part of a scam or simply a poorly managed venture, PayPal is on the hook for all the chargebacks -- the account holder could easily disappear or be insolvent months later when they come in.

All the raised funds are at risk, for PayPal, for the 6-12 month period they can be reversed. Even if donors do so without a valid reason, PayPal gets hit with chargeback fees and needs to maintain a <1% reversal rate company-wide just to do business with Visa and MasterCard. They're willing to let their algorithms evaluate small risks (the typical eBay buyer/seller), but a human steps in to do the underwriting for larger volume accounts, just like at every MSP and bank.

The account got flagged for manual review, answered some questions, and was open to accept payments again within the same day. That's better than most banks I know which will take at least a few business days to approve a merchant account. If you're going to be accepting hundreds of thousands of dollars with PayPal, it might be smart to call them in advance instead of waiting for them to call you.

josefresco• 12 years ago

"anonymous e-mail addresses"

Doesn't PayPal urge you rather strongly to connect a bank account with your PP account? I regularly advise clients on creating these accounts, and bank account confirmation is typically the next thing they do after account creation. Does this not apply worldwide ... or do some people actually trust PayPal to hold their money?

dangrossman4• 12 years ago

Neither an e-mail address nor a bank account number really provides any of the information PayPal would want to know to risk large sums of money on an account: who they are, who's paying them, what those people expect to get for their money, whether that thing is legal in their jurisdiction and not a disallowed use of the service, etc.

smackfu3• 12 years ago

It's kind of odd that this project is using crowdfunding at all. As far as I can tell, they are just selling software as a service, and the service already exists.

dangrossman4• 12 years ago

It's freemium, and no doubt like most freemium services, 99%+ of the users will pay nothing for it. They are raising funds to host that free service until it becomes self-sustaining through the optional upgrades.

ilamont• 12 years ago

This also points to the urgent need for BTC adoption by both major crowdfunding organizations because PayPal is dangerous.

Bitcoin has its own issues -- see "Bitcoin crowdfunding sites find funding difficult" (http://www.coindesk.com/bitcoin-crowdfunding-sites-find-fund...).

Even if the legal/security issues are worked out, it will take a lot of convincing to get mainstream users/potential crowdfunding donors on board. People don't trust what they don't understand, and the fact that the value of BTC is so unstable is a giant red flag. Would Joe Shmoe plunk down fiat for X $BTC, with the knowledge that the exchange may fail or the value of his investment may plunge the next day?

DennisP• 12 years ago

Those legal issues only apply to equity crowdfunding, not presale/donation crowdfunds like those on Kickstarter and Indiegogo.

happywolf• 12 years ago

PayPal may not explain things clearly, however if we imagine we were the risk management team in PayPal, here is the picture:

An account gets a lot of money from different funding sources (credit cards, ACH, etc.), the velocity is high, and most of the sources didn't have prior transaction records with this said account. To the RM team, they cannot tell if this is a legitimate transfer, or a massive transfer of booty by hackers.

Nevermind how famous this startup maybe, if your credit card were stolen, and PayPal shows you an HN article "well, I thought you wanted to donate to this startup X", how impress would you be? On top of that, the chance of CC customers with hefty chargeback is something that no sane business entity can take lightly.

PayPal may suck, but I don't see how a company with similar scale and footprint will do better. Doing differently very likely will mean losing so much money that it has to go out of business, or, have to partner with some foreign company that sells products of questionable quality.

paulschreiber• 12 years ago

When will people learn to stop using PayPal for these things?

al2o3cr• 12 years ago

"This also points to the urgent need for BTC adoption by both major crowdfunding organizations because PayPal is dangerous."

Yeah, because having exactly zero recourse when the crowdfunded thing turns out to be a scam is totally what people are looking for.

Paypal is can be quite a pain in the ass with fraud prevention etc, but pretending that switching to a system with NO dispute resolution is better is ridiculous.

giancarlostoro• 12 years ago

They didn't shut down their account, they froze it, huge distinction.

tzar• 12 years ago

Previous submission is here: https://news.ycombinator.com/item?id=7968737

PayPal Shuts Down Secure Messaging Service ProtonMail’s Crowdfunding Account

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