Welcome To The New PayPal

On November 1st 2010 PayPal’s newly renamed Purchase Protection policy expanded to putatively ‘cover’ buyers no matter where they shop. PayPal is not just for eBay anymore. You can enjoy the protection of the “faster safer way to buy” anywhere PayPal is accepted, from Auntie Zuleika’s tiny website to venues like Etsy or Bonanza.

As you can see, two scenarios are covered, an item is not received or the item bought is ’significantly not as described’, known as SNAD on eBay.

Sounds wonderful!

Buyers can sleep better at night cradled in the beneficent arms of PayPal the Protector (insert superhero background music here.) Sellers everywhere will undoubtedly reap the blessings of increased sales volume from confident and secure buyers. PayPal, aw shucks, will just be happy doing a better job all around.

How can this be a bad thing?

Primarily because for small sellers PayPal functions as prosecutor, judge, jury and executioner. For example, the old empty box scam lovingly detailed below, in which PayPal is unwaveringly likely to decide in favor of the zero feedback buyer while ignoring all evidence to the contrary and an impeccable multi year sales record from the seller.

Add a beautifully written primer (def.#2) on how to scam the system for neophytes (def.#3) to the great game of get something for nothing and a door into a world of grief is opening for sellers on all the venues they fled to from eBay’s punitive policies, exorbitant fees and ham handed micro-management.

The fly in the ointment for buyers, ‘putatively’ explained

It should be noted that these protections do not apply when shopping with the big boys, who would not tolerate this nonsense for a New York minute.

Real buyers, as opposed to crooks, are unlikely to know how to differentiate between the protected transaction and the unprotected. We wonder if they would even know where to find the eligibility requirements. (Look for section 13.2) The crooks already know exactly what they are doing.

For a seller overview or comparison of the three versions of Payflow which are exempted from the Purchase Protection Plan see this Red Ink link. Note that all the exempt payment channels are a la carte subscription models; generally inferior in fraud protection (that is another post) to comparable commercial merchant processing products; but cunningly (def.#1,2,4) priced to entice the unsophisticated entrepreneur.

By an amazing co-incidence, increased merchant movement (where possible) to their a la carte payment processing system will substantially increase revenue for PayPal.  Just multiply a fraction of the number of sellers currently using PayPal by $30 per month ($360 a year), whooo-eee!

In summary
Only you, dear seller, can assess the degree of attractiveness your merchandise has for crooks and only you know the amount of dollar loss you can afford or are willing to tolerate. Other factors for consideration are the alternatives available to you and the cost of those alternatives.

This year we expanded and upgraded our product line and the PayPal loss potential has, I believe, increased in a direct ratio to the increase in ASP.

As a low volume seller on Bonanzle Bonanza and my own website the cost of a standard Merchant Payment Processor is not yet a viable option, nor are they all totally problem free.

I have removed PayPal as an option on Bonanza and will find the money somewhere to have someone install Google Checkout on my Zen Cart. I have been ‘going to do it’ for years, it is time to stop procrastinating and just do it.

Y’all come back!


  1. Brave soul, fearless leader, oh Henrietta! I’ve been looking to see if people will drop PayPal; and YOU will.

    For myself, I’m still deciding. Some have suggested, in the meantime, getting a separate bank account, IN A SEPARATE BANK, just for your PayPal account. Then keep the bank account emptied out, and opt out of overdraft coverage, so they can’t take money that’s not there.

    An ideal response for all sellers, of course, would be for all sellers to revolt, notify PayPal they won’t stand for it, and remove the PayPal option from their selling sites immediately until, if ever, PayPal comes to their senses. It doesn’t appear like that PayPal WILL, even then.

    Someone encouraged me to try AlertPay.com. She said she and others had used it for about eight (8) months, with positive results. International buyers and sellers can use it, too. I haven’t used it yet. Anyone else?

  2. It is my considered opinion that the more safe payment choices you can offer a buyer without making checkout difficult, the more buyers will actually complete a transaction.

    I see you are offering Google Checkout, so add on AlertPay if that is what floats your boat.

    The separate bank account for PayPal theory has been around for years but there are flaws in the argument.

    • Refusing overdraft protection will not prevent you being charged enormous NSF fees by the bank
    • A separate bank account will not prevent PayPal putting a hold on your funds
    • A separate bank account will not prevent PayPal imposing rolling reserves

    A separate payment processor cures the PayPal problem. Period.



  3. I called PayPal last week and told them as of November 5, I was removing PayPal as a payment option from my website and using Google instead.

    In addition to the changes in the buyer/seller protection policies, I listed every other reason I could think why no seller (except for the above mentioned big boys) in their right mind would now allow PayPal on their own websites.

    The CSR’s response was that it all ebay’s fault.

    If every seller who reads your blog, AB, PSU, et. al. would do this, it could have a measurable impact on PayPal and therefore on ebay’s revenues.

    Go for it!

  4. Well, after ruminating way too long, I decided to “do the right thing” and remove the PayPal payment option from my Bonanza booth.

    Thank you for your courage, Henrietta, in taking a stand against, what you so aptly described: “PayPal functions as prosecutor, judge, jury and executioner.” (That’s not an American thing to do!)

    My hesitation was due, in addition to the usual benefits of the PayPal brand recognition for the buyer, I valued other benefits that, bottom line, constituted speed: Automatically-populated buyer addresses for quick printing of shipping labels. Instant money for shipping quickly, and instant cash for ME with a PayPal debit card.

    But, what’s the minor inconvenience of a two- to three-day wait for a Google checking-account deposit; and the minor inconvenience of copying/pasting the buyer’s address for the shipping label, compared to the risk of fraudulent charge-backs? And, worse yet, the demoralizing affect, and knowing we empower PayPal to treat other people this way when we go along with it.

    Thanks again for your example.

    By the way, removing PayPal as a payment option in my booth was so easy; I am half in disbelief that it’s actually done.

  5. For mass confusion and total lack of comprehension on “Seller Protection” read Ina Steiner’s Letters to the Editor post of November 11th, 2010.

    The truly interesting thing to me is found in the comments, look for Buck efay, twice on the first comment page and Elaine Rutherford, also on the first page.

    I am firmly convinced that any buyer who is not an utter noob is used to buying with a credit card and just as they enjoy shopping on Amazon with one click checkout, feel the same way about Google Checkout which is one click.

    I feel very sorry for sellers outside the USA & UK who do not at this point in time have a viable alternative to PayPal. Canadian and Australian sellers may need to start a letter writing campaign to Google.


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