Posts filed under '3rd Party Processors'
In the past 2 weeks a very confusing and upsetting situation has takes place in India with the respect to Paypal and personal Indian payments.
It all started around the 1st of February.
All payments sent from personal Indian accounts are reversed. This would basically be like accepting a credit card, and 5 days later (long after the merchandise or service has been performed) that money is given back to the customer!
When reversed, there are several immediate reactions. First off, it is confusing to anyone who sent a payment and had it returned a few days later. It is more confusing and upsetting to the business that accepted that payment as they are now without the money and without the service or product that was paid for. Additionally, this unbalances the accounts of thousands and possibly millions of account holders, not just in India. Many of these recipient account holders made payments to other businesses. When the original amount was reversed and subtracted from their account, any recipient account lost money, and many Paypal accounts went negative. Some people got paid, while others lost the money. Paypal was also blocking any withdrawals to an Indian bank account, so even if a business did manage to get paid, there was no way for them to take the money out of Paypal.
As usual Paypal was completely mum about the actual details of the events of what was happening, further compounding the frustration and confusion that was sweeping Indian paypal account holders and those who received a payment from an Indian account. On February 5th, I had speculated that there was some government intervention going on, as the scope and damage that these events were causing were absolutely massive. Even at this point an Indian Paypal user could send money, and at first would seem successful, but would be returned several days later.
On the 6th of February, with Paypal users continuing to panic still trying to send money, Paypal finally publicly announced that there was a problem with personal payments.
I’m writing to let you know that personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service.
While this was an unacceptably vague response to the seemingly massive situation that was unfolding, it was nevertheless some response.
More problems…
About a day later, a second problem had been discovered with many Paypal accounts. After being refunded, many Paypal users noticed that foreign exchange fees had never been refunded. Thousands of Indian freelancers, Indian businesses, and worldwide businesses who accept payments from Indian account holders are getting more upset and confused. Although Indian payments only make up a small portion of Paypal payments, it’s clear that there is a major problem affecting far more people and businesses than just Personal Indian account holders. Now there’s money, paypal fees, and separate foreign exchange fees lost in millions of payments and refunds, a true accounting nightmare.
Everyone knows there is a problem, but nobody knows what it is and Paypal won’t say a word.
On February 10th the truth finally comes out.
1. Why did you suspend local bank transfers and personal payments to and from India?
We temporarily suspended these services to respond to enquiries from the Indian regulators, specifically questions on whether personal payments constitute remittances into India.
We’re working with the regulators and our bank processing partners in India to get this resolved as quickly as we can. We realize that this is causing considerable inconvenience to our customers and I want to reassure you that this is a top priority for the leadership at PayPal
2. When will personal payments be turned back on?
The regulators recently let PayPal know about revised licensing rules that we are now actively engaged in securing. Personal payments to and from India will be suspended for at least a few months until we fully resolve the questions from the Indian regulators.
3. When will local bank withdrawals be available?
Customers should be able to withdraw their funds to a local bank within the next few days. In the meantime, we’re going to restore the money into the PayPal accounts of any customers in India who have initiated a recent withdrawal, so they know that the money is safe in their accounts. Customers will also be reimbursed for any withdrawal fee charges.
4.The PayPal reversal has left me with a negative balance. What shall I do?
If you bought something or transferred money out of your PayPal account to your bank account before we reversed the payment then you may be left with a negative balance.
If this was a payment for a purchase of goods or services, you should contact the sender and have him or her resend the payment as follows:
(a) click the Send Money tab, and
(b) select “purchase.”
If this was a personal payment, then the sender will need to find another payment method until we restore the service. We’re sorry about this.
If you can’t recover the funds from the sender, you can bring your PayPal balance current by logging in to the PayPal account and clicking the “Resolve Negative Balance” link on the Account Overview page.
5. My payment was reversed but it was not a personal payment. What happened?
Only personal payments should have been reversed. Customers who believe that their payments were reversed in error should request that the payment be sent again by following the steps above (click the Send Money tab and select “purchase.”)
The Reserve Bank of India (RBI) put a halt to all Paypal payments when they finally realized that Paypal was a acting as a cross border money transfer system due to a law passed in 2008, “Providers of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act,”. The reasoning behind the law is that many cross-border transactions are considered remittances, which fall under additional regulation by the RBI.
At this point, Indian Paypal account holders cannot send or receive money through paypal, and even many Business account holders cannot withdraw into their Indian bank account. Paypal has indicated that it may takes months before payments get back on track in India, leaving very few payment options for freelancers and many businesses in India’s rappidly growing IT services industry.
What strikes me as simply baffling is how it took 2 years for the Indian government to realize that Paypal users in their country could transfer money to and from Paypal users in other countries, and why they would tackle this situation is such a disruptive manner. Seriously, Paypal has been in India for several years and nobody bothered to consider that the fastest growing payment mechanism in India might fall under this new law when it was being drafted?
Equally baffling is why Paypal didn’t completely suspend Payments when they were given the request on January 27th. Instead they reversed thousands of transactions that had already been submitted, allowed these recipients to forward the money they received as payments to other businesses. They also continued to allow transactions to be sent until after the 7th, 10 days after they stated that transactions had been halted.
The combination of gross under-sight by India’s financial regulatory systems, and Paypal’s gross negligence in adequately responding to a major operational casualty, caused one of the larger payment system implosions that we’ve seen. Most of the ancillary damage was completely avoidable, had Paypal responded immediately and adequately to RBI’s request. While I’m sure that Paypal will pull through unscathed as they have so many times before, I do believe that their position in the Indian payments market will be scarred for a long time.
February 11th, 2010
Until now, Google Checkout merchants who advertise on Google’s Adwords platform, have received credit for use toward Google Checkout fees they incur. However, due to Google tightening financials, Google Checkout is no longer free or even reduced for Adwords users. Un-Google like, they didn’t even notify current Google Checkout users prior to dumping the Adwords credit system in December. By doing this, all of the December holiday Google Checkout sales paid fees for the service.
Now, the question in the near future is whether Google Checkout can really stand on it’s own.
Google claims that there are enough consumers using and preferring Google Checkout, the system no longer needs to operate as a loss leader to function.
“Why have it as a loss leader if it’s doing OK?” he said. “We saw very healthy results after we decided to charge for the service.”
I think that Google Checkout is going to have a tough time keeping support without offering incentives for retailers to use it. We saw a massive drop when they stopped giving consumers incentives to use it. It simply doesn’t have the consumer support to make it sustainable for the merchants using it. In the past six months or so there’s been speculation of Google dropping the Google Checkout program. This may simply be Google way of letting the program die, especially since this change was never properly announced.
With Paypal stronger than ever and the emergence of Amazon’s payment service, Google Checkout will most likely need to find some new way to garner additional support, or be lost in the history of internet failures.
January 5th, 2009
We just got a sneak peak at the new way5000 wireless terminal.
Way Systems created their own terminal instead of using a re-manufactured Siemens phone. While they technologically regressed in some areas, they made a better product that works for what it is designed to do, process credit cards. By designing from the ground up they were able to use a single keypad for PIN debit processing (Their old models had 2 keypads due to encryption requirements). New features include the ability to add additional processing applications. Once certified, the terminal will support check services and gift cards through some select 3rd party providers. There are also no longer any log in/out requirements to use the terminal, and it has the ability to install new firmware when it becomes available. The new terminal still works with existing Way Systems infrared printers, and can now be charged through a mini-USB port. It is now supported by Apriva and eProcessing Network which allows it to be used with just about every US processor.
This terminal should be available early 2009, and should be a vast improvement to existing Way Systems 1581 terminals. If you were looking at purchasing a Way terminal, it would probably be better to wait for the way5000. We expect it to be about the same price as the 1581.
You can purchase the way5000 terminal from our main website.
December 12th, 2008
I’ve been expecting Paypal to take a shot at acquiring a buy-now-pay-later service provider, and Paypal just announced they are making a move to acquire Bill Me Later. Paypal’s definitely been missing out on a huge market that Bill Me Later owns. Bill Me Later’s only major competitor is a company called eBillMe.
While I personally think that this could be scrutinized as an anti competitive acquisition, especially considering Paypal’s monopoly over non-credit-card online payments, this should make Bill Me Later easier for smaller businesses t use. Until recently, Bill Me Later required ecommerce merchants to be processing in the seven figures per year, far out of reach for many smaller sites that could have greatly benefited from Bill Me Later.
It would probably be six months to a year before any reasonable integration with Paypal happens, but the acquisition is supposed to go through by 2009.
October 6th, 2008
Paypal issued a news release today stating that buyers no longer need to sign up for a paypal account in order to purchase from a Paypal accepting seller.
From a usability perspective this makes perfect sense, and has been one of the biggest hurdles for Paypal to overcome as a 3rd part processor.
However, I can foresee some major customer issues in regards to seller protection.
Right now, Paypal effectively removes traditional buyer and seller protection for credit card transactions by resolving disputes within the Paypalsystem instead of through the credit card chargeback system. This works explicitly because both the buyer and the seller are registered users of Paypal. Paypal has control over the entire transaction process, and has absolute power over both user’s accounts. Sellers currently have some piece of mind that their buyers have gone through a registration and verification process, albeit very limited. When the buyer is no longer required to maintain a Paypal account, a huge avenue for fraud opens up. The seller remains bound to Paypal’s dispute process, but the buyer is not. In this case the card issuing bank would take full control over the dispute, and unlike a traditional merchant account, the seller does not have a relationship with Visa or MasterCard. Paypal will become a liaison between the card issuing bank and the seller in the event of a chargeback, wherein the problem lies. Anyone who has tried to work with Paypal during an account hold or a dispute knows that yelling at a wall is more effective than trying to communicate with Paypal. Judging by Paypal’s already horrible customer service reputation, they are potentially adding an enormous workload on their plate in the form of chargeback handling. This could very well be a disaster in the making.
This is obviously an attempt to compete with more traditional Payment Gateways that have seamless API integration with websites (Authorize.net, Paypal’s Verisign, etc.). While this has the potential to improve Paypal conversions, I would be hesitant in enabling this feature in a Paypal account until more is disclosed about how non-account holder chargebacks will be handled.
February 29th, 2008
Google Checkout is about to end their free processing, and switch to a traditional 2% + $.20 / transaction structure. Businesses who advertise on Google’s Adwords platform can still get major discounts on GCO processing.
I have blogged about GCO in the past, on more than one occasion, and I have held mixed feelings about it in several areas. We’ve now been using it for about a year and a half, and it is now becoming clear where Google Checkout it headed, nowhere.
Initially, Google gave coupons and incentives to consumers and business owners. These helped push GCO usage past Paypal for a short period of time, but now that the incentives are gone, GCO is going with them. For us GCO topped at about 10% of all online purchases, but has since dropped to about 1.2 – 1.5% (“Generous estimate!”). Paypal has slowly, but steadily increased all the while.
Despite the difficulty in integrating GCO with a website, I still think that it is an excellent alternative payment method, assuming that there are still going to be people who want to use it. From a shoppers perspective, one you have a GCO account, it is much faster than paying with a credit card or paypal, but there has never been a solid reason to use it. As we all know, it is consumers that drive services, and not businesses. I think that unless Google finds a way to make many more shoppers want to pay with GCO, there is never going to be a wide adoption of it. Paypal was driven by eBay until it was big enough to stand on it’s own. Google needs it’s own eBay to really make GCO popular.
January 15th, 2008
This is probably the single most common question that I come across in discussion forums. Someones Paypal account gets frozen and they want to know what to do to get their account unfrozen and get their money back.
While I can’t do anything to get your money back, I have been in this situation more times than anyone I know and I have a bit of knowledge about how the system works. Prevention is always the best bet but sometimes account freezes are completely unexpected or unavoidable.
The first thing you need to realize is that Paypal freezes funds on the same grounds as Visa and Mastercard, and they can hold your funds for 180 days from the date of the transaction (Paypal will hold for 180 days from the date of your account freeze). Unless your funds are frozen for fraud or for some legal reason, you should get your money back after 180 days (worst case scenario). If you committed fraud, or obtained the money illegally, don’t count on getting any of it back, ever!
Why Paypal limit’s accounts:
Paypal is financially liable for funds that you accept, so if they feel your account may cause problems for them or other customers, they will freeze your account. Paypal has an automated system as well as a human managed system for fraud control. If they hold funds, it is because something with your account set off an alarm and either automatically or after human review, they decided that it is in Paypal’s or Paypal’s customer’s best interest to put a hold on your account. It nothing personal, and most of the time it was probably a computer that froze the account based on some fraud algorithm.
Some reasons an account may be frozen:
- Increase in transaction volume (IE: More Transactions).
- Increase in single transaction amount (IE: Larger Transaction).
- Increase in disputes from customers.
- Increase in refunds to your customers (with our without any disputes).
- If a certain percentage of your transactions are disputed over a period of time.
- If fraud was reported against your account.
- Logging-in from multiple IP addresses (* Speculation).
- Withdrawing over a certain threshold amount (** Speculation).
In my experience Paypal most often holds funds when a business processes many more transactions, or when they process much larger transactions that previously in their account. Also when a business sees an increase in disputes or refunds it is often an indication that something is not right. I have no idea of the thresholds that Paypal uses to freeze accounts or how often a human is the person who presses the button, but most of this goes along the lines of credit card processing risk management.
* – The IP address theory I have heard many times, but I have never seen anything official from Paypal. I also haven’t witnessed it on a US paypal account, so it may be an international problem, or a problem with people logging in from restricted or close-to restricted countries. I’ve heard three IP’s is what it is based on, but I’ve personally logged into more than one account from at least 20 IP’s and have never had any problem. The other thought which seems most likely is when an account is accessed in a completely different area than normal (IE: Login from Russia, when the business is in California).
** – My large withdrawal theory is based on the fact that I have had an account held three times on different accounts, and the hold occurred almost immediately after I made a large withdrawal from the account. My guess is that this threshold is at most $5,000 per day, which would be on par with some long standing Federal Reserve regulations. It is may be less than $5,000 or it may vary depending on your history, but I’m 99% sure that it does exist.
Now if your account gets frozen:
The first thing you will get is an email from paypal stating that your account has been frozen. You probably already get ten spam versions of these messages every day, so most likely you will actually learn that your account is frozen when you log-in one day. Anyway, when you log-in to your paypal account you will get a big nasty screen stating that your account has been frozen, and that you need to visit the resolution center to clear up the issue.
In the resolution center, you will have a list of the steps that you need to complete to get your account limitation lifted. You will also have a summary of what you can and cannot do with your account in a limited status. This status varies depending on why your account is being held, and for how long it has been on hold. As for requirements, Paypal will normally have you fax documents to them, and they may be additional steps that you have to do within paypal. The internal steps will normally be confirming a bank account, or credit card.
Commonly Requested Documentation:
- Proof of business existence (Utility bills, DBA registration, Tax license).
- Proof of shipping (Tracking Numbers).
- Proof of person (Drivers license, Social Security Card, Passport etc.).
- Proof of products (Normally your supplier’s name and phone number).
After you fax Paypal the information, you have to wait for their response. They will typically send you an email the next day stating that they received your information. You will receive another email a few days later stating the results. The email will either announce that your account limitation has been lifted, or that they are unable to lift the limitation. If you account remains frozen, they will either ask you to provide more information, or they will tell you to wait 180 days to get your money back. In either case you can call paypal directly and talk to a customer service rep. In most cases they won’t be able to do anything for you, but they may be able to give you other options if you don’t have some documentation that is requested. I can’t stress enough, not to act aggressively with whoever you email or talk to at Paypal. This is the same with any Risk Management situation, yelling at the person on the other end will guarantee a 180 day hold of your money. Yes you’re pissed, but be nice until they hold your money anyway, then complain away!
If you can provide all of the documentation that Paypal requests and you were not reported for fraud or illegal activity there is a good chance of getting your account freed-up. However, Paypal will not always unfreeze an account even if you are doing legitimate business and you provided them with the proper information. It’s unfortunate but is simply a risk of using Paypal at the current time.
Recommendation on not getting your account frozen:
Risk is all about consistency. You could be accepting a million dollars a month, and as long as your business was consistent, and you didn’t get a lot of returns, there wouldn’t be any problem. When changes occur, especially large changes, red flags go up all over the place. New accounts are also at a much higher risk of getting frozen, as most fraud occurs very quickly after an account is opened.
If you have an average transaction size of $50, you should probably expect your account to get frozen if you take $5,000 on a single transaction. The same thing goes for volume. If you consistently do $1,000 – $2,000 per month, and suddenly you start processing $50,000, you should expect your account to get frozen.
My advice is to slowly ramp up sales (This obviously isn’t always possible), and initially specify an amount in the estimated monthly volume and transaction size higher than what you actually expect to do. Make frequent lower amount withdrawals, and try not to keep a lot of money in your account. Be especially careful of making large withdrawals in a single day.
If you have any related experiences or comments, please feel free to share. However, this thread is not Flame Paypal, so any ‘Paypal Sucks’ or related comments will not be posted.
July 12th, 2007
I have sold a lot on eBay, probably over $300,000 worth of merchandise over the past six years through my company’s sales and through personal auctions. Due to the nature of eBay I have accepted most of this money using paypal.
Recently I started few auctions on eBay and collecting payment through paypal. I haven’t sold much on ebay in several months. Paypal subsequently froze my account, and wont release he funds (We’ve all heard this story about one million times). This isn’t the first time it has happened to me with paypal. I had a lot of money frozen last year, which took a while to clear up, but I got my account un-frozen after a few days of sending documents to paypal. This time was a completely different story. I think that I may have had either a complete imbecile review the information I submitted, or maybe he was just having a bad day or something. But, Paypal wont un-freeze my account until I send them some documents that I don’t have, and cant get, and there isn’t anything else they will do for me. I understand risk, how to determine it, what situations are higher risk, and this is not one of those situations.
The irony behind all of this is that I run a division of a payment processing company. I have experience in risk management and underwriting, probably more than most of the people working in that department at paypal. I am selling tangible products. I haven’t even processed a large sum of transactions, under $5,000 total.
But, they don’t care.
They don’t care that my customers will back me up and let paypal know personally that my products were legitimate. They don’t care that I have a processing history with paypal of over $200,000 in past transactions without more than one or two frivolous disputes. They don’t care that I have processed over 2,000 transactions using paypal. They don’t care that my company is a merchant account provider that has been in business for 10 years. They just don’t care…
I see the question often whether companies like mine are worried about companies like paypal. The answer is NO. Not in the least bit. Not now, and probably not ever.
Paypal, you have a long way to go.
There are several ways that this situation differs from an actual merchant account. First off, this situation can happen with a merchant account, so don’t think that paypal is completely unique. The two main reasons would be, if a business processes a much higher total volume than what they stated on their application, and if they run much larger transactions than what they stated as their average on their transaction. The specific processing bank that a business is with also determines how much buffer they have to go over their predicted volumes.
Now for the differences:
With a merchant account, you can actually get a person on the phone within 5 minutes, or even 10 minutes. Paypal (-5). Secondly, you can usually talk to someone that actually has a clue about what is going on or at the least they will try to figure it out, and they will actually listen to you and not just look at a report that says ‘freeze’. Paypal (-5)
With a merchant accounts, your provider actually wants to keep your business, (Paypal -2) and they work with you to clear up the problem. (Paypal -1) You are given the benefit of doubt that this could possibly be just good sales. (Paypal -5) Paypal immediately assumes that you are a criminal and then works against you trying to prove you wrong. (Paypal -5)
The risk management business for merchant services is as strict and numbers based as any screening system I have seen, but it doesn’t touch upon the bureaucratic chaos that paypal operates.
Basically, paypal fails because the way they handle these situations. They fail to give you the support that you need, when they took the steps to freeze your account. At least make it easy to contact a real person to clear up the situation, or get some additional information. The only communication they accept is by fax. Lets be realistic here, last time I checked, fax was not considered a secure, efficient, or easy way to communicate with someone.
Finally, paypal needs to get some policies in place to help the people that they make their paychecks from when those people do get in situations like these.
November 17th, 2006
I have had Google checkout on my main ecommerce website for about 3 weeks now. In the first week we had one Google checkout order, making the entire idea hardly worth the effort. If not for the AdWords Google checkout badge 
, we probably would have stopped using it altogether.
Week two and three offered a completely different experience. Google checkout orders jumped up to one or more per day, and have passed paypal in percentage of orders on the website. This is something that I would not have thought possible.
I haven’t determined whether normal credit card paying customers, just diverted to using Google checkout, or these customers were actually looking for a store that accepted Google checkout, as sales haven’t increased proportionally. But either way, people are willing to use Google checkout. A lot of these purchases were for fairly high dollar transactions, so there is definitely a degree of trust that rarely exists with any new system.
Anyone in an industry where you have a good chance of getting tech savvy buyers, may want to look again at using Google checkout, as there definitely are people who make purchases with it.
Original Post: Google Checkout vs. Everything else…
October 17th, 2006
Google recently released their payment systems called Google checkout. Google checkout is a fairly easy to use merchant account alternative for businesses and individuals. Google checkout offers very low fees for use, and can be completely free, if a business advertises using Google AdWords. For every $10 a business spends in AdWords advertising, they get $1 free in processing fees.
Google Checkout Implementation:
Despite what Google would like everyone to think, Google checkout is not easy for websites to implement. With the exception of a few very simple and limited uses, it is not easy to get Google checkout into an existing website, especially if the website is using a custom shopping cart system. The Google checkout API is an XML based system and is not something that most beginning programmers could easily tackle. Google does provide a handful of good scripts, but even with these, integrating Google checkout can be a daunting task. The integration scripts can be obtained by signing up for an account with the Google sandbox.
The current requirements to be eligible for the Google checkout program are a US bank account. Google is planning on making Google checkout available to more countries, but for the time being US is the only country allowed. This single fact is probably one of the biggest reasons that Google checkout isn’t more popular.
The benefits of Google checkout:
The biggest benefit right now that I see with Google checkout is for AdWords advertisers. AdWords advertisers get to display a small next to their AdWords listings. This small image could definitely help distinguish a particular AdWords ad from the others, creating a high click through rate. Since most web users have no idea what Google checkout is, this could be taken as an unfair advertising advantage to Google Checkout customers.
The use of Google checkout on a consumer level is very limited. It is slowing growing in usage, but at this time is not a widely adopted payment method. Expect the number of consumers using Google checkout to grow over time, but unless Google really makes it beneficial for consumers, it is unlikely that Google checkout will ever compete with Paypal or Credit Cards.
I am a firm believer in making the online shopping experience as easy as possible for website shoppers and this includes making all popular payment methods available to website visitors.
The negatives of Google checkout:
The biggest complaint that I have, apart from the difficult integration, is that Google requires website’s using Google checkout to display Google checkout buttons all over the website. There are also a ton of regulations that are simple unnecessary.
Display a Google Checkout button immediately beside, above, or below every existing checkout button or link on your website.
Lets be honest here. Google is really turning off the desire to use Google checkout by forcing Google checkout users to place large Google buttons all over a website. It’s also against policy to host the Google checkout images yourself, and it is against policy to alter the images (including resizing) in any way.
Google needs to have some consideration for website owners wanting to maintain the integrity of the look of their websites. Not many respectable websites want to have Google checkout buttons all over the place. Obviously Google doesn’t care about this, because they just want more users at this time. Another deterrent to putting Google checkout on your site.
The other major problem with Google checkout, is that it is not an accepted or allowed payment method with eBay. This means that it is against eBay policy to pay or offer to accept Google checkout on an eBay auction, and doing so can result in getting suspended, or banned. Any Google checkout purchase made on an eBay auction, immediately removes all eBay buyer and seller protection. If you get ripped off as a buyer or seller, there is no recourse.
Overview:
If you are an AdWords customer, and you sell products, then Google checkout is a good system. You can get that little next to all your AdWords listings, and this is bound to help your AdWords click rate.
As for businesses just looking to accept Google checkout from their customers, my vote goes for hold off. There are simply not many people wanting to pay with Google checkout. The amount of purchases from Google checkout customers isn’t going to be worth the trouble to integrate it into your website, and wont be worth clogging up your website with a bunch of ugly Google checkout buttons designed to circumvent your existing checkout process. Anyone that uses Google checkout also has a credit card, and most likely has a paypal account. If you’re going to add another payment option for your customers, go with paypal. Wait until Google gets some people using it, wait for them to relax on their rules, and wait for it to be allowed on eBay.
The Google Checkout Blog has some good information about the Google checkout program, but expect it to be extremely biased as it is a Google blog.
Related Posts:
Google Checkout Sign-up Open
Google Payments, Update
October 2nd, 2006
