TLDR – PayPal’s updating its terms for sellers, potentially opening small businesses to fraud from shady buyers.
Yet another reason to ditch PayPal has surfaced.
Buyer protection is one of the reasons that made individuals so willing to give eBay and Amazon a try when those sites were first getting started.
Unfortunately, in the last few years, unscrupulous buyers have taken advantage of these policies at the expense of sellers.
The scam is simple: order an item from an eBay or Amazon seller, then when you get the item in hand, file a claim with Amazon or eBay saying the item never arrived. In almost every case, the company will side with the buyer, not the seller, and offer a refund out of the seller’s pocket.
Even worse, since PayPal users have their bank accounts connected to the service, PayPal will automatically withdraw the funds in question directly from the bank account if there’s any dispute.
This means the seller is out cash and his or her item.
The frustrating part is the buyer-centric policies – necessary to give hesitant buyers confidence to use the service and thus grow the company – are at the expense of seller protection. In every case I was able to find in researching this article, Amazon, PayPal, or eBay always sided with the buyer, not the seller who was scammed.
Many sellers, frustrated with these policies, moved to digital-only products. Those selling digital-only products (such as songs, videos, and information downloads) had more control over what to do with scamming customers.
Now, it seems PayPal is trying to take that control away. This could leave thousands of online sellers in danger of giving their wares away for free.
In a recent email, PayPal announced they would be implementing buyer protection policies for virtual products. While this sounds like a great idea in theory, in practice it opens sellers up to fraud.
This could work just like it does with tangible products. All a buyer has to do is download the product, then file a claim with PayPal stating the product didn’t download properly and get a refund.
Alternatives for Sellers
Due to these kinds of policies (and many others), more and more sellers are moving away from PayPal’s service.
I’m personally a fan of Stripe, but it requires sites use SSL to implement (kind of confusing for some businesses).
Looks like its time to find a new simpler payment processor.