PayPal Analysis
I've been meaning to write an analysis of
PayPal for a few years now. I've been using them well before they were acquired by eBay and still continue to use them to this day. In fact, slightly over 50% of all of my incoming revenue is paid through PayPal with the rest through credit card merchants. Therefore, PayPal is very much a part of my life as I continue to do thousands of transactions each month through their system.
Why PayPal is Liked
There's a lot to like about PayPal. They've streamlined and secured -- well, debateably -- the online payment process. There are many people out there that won't pay for something online unless it's done through PayPal and vice versa. Why do these people like PayPal so much? Why isn't the conventional use of credit cards in brick and mortar stores not used exclusively on the Internet as well? You certainly don't see PayPal as an option in stores, although they do offer you a debit card/credit card of sorts.
I believe that PayPal is well liked for a number of different reasons. I think the first and foremost is that it is easy to sign up. The sign up process is ridiculously easy. While other sign up services have become more difficult -- like, say, for a Hotmail account -- PayPal's has actually become easier during the past year. You simply fill out a few details about yourself and you've instantly got an account to play around with. You can receive money, but you cannot send any until you've added in your bank account or credit card information. However, that's also an easy step and rather painless. So you've got easy sign up without any strings attached. You don't pay a sign up fee and there's no monthly fee, so no risk.
The sign up process is just so incredibly simple and risk free that there's no reason not to have an account. You can store it away for safe keeping like you store cans of soup in the cupboard. Next, you have ridiculously helpful and easy phone support. It didn't always use to be that way, but lately in the past year, PayPal has become incredibly good with answering questions over the phone. Admittedly, I've never tried that email support, because I prefer to do everything having to do with my financials over the phone. (Why leave a paper trail if you don't have to?) So, it's easy to sign up and they've got great support. What else?
Everyone is doing it. I don't really know someone with an online business that doesn't have a PayPal account. What's not to like about being able to quickly send or receive cash without having to exchange credit card numbers? It's very beneficial that almost everyone around you has a PayPal account, because I definitely don't trust everyone around me with my credit card number. This has become even more the case since eBay purchased PayPal for $1.5 billion in 2002. Not only is everyone doing it, but research has shown that many people trust PayPal when doing financial transactions online more than credit cards. Therefore, if you're offerring PayPal as a payment option than you're opening your business up to them.
In sum, PayPal offers easy hassle-free sign up, great support, and everyone is using it and therefore if you're not at least allowing your customers to choose PayPal as a payment option than you may be losing customers to your competition. In fact, Dell just wised up about this and is now allowing their customers to pay through PayPal.
Why PayPal is Disliked
The biggest problem with PayPal, which desparately needs to be ironed out, is their chargeback policy. It is absolutely ridiculous how they handle things. On several occasions, I've had shady customers chargeback their service from me after several months. I argue the chargeback through PayPal's dispute system, but because I don't offer a tangible good the money is automatically passed back to the buyer no matter what kind of paperwork I provide PayPal. I might as well just sit back and not even dispute the chargeback, because I cannot win.
Why is this the case? I understand that, sadly, it's my word against the buyer's word whether or not my "service" was adequetly provided to the buyer. However, they know my business as having done tens of thousands of transactions through PayPal, so why don't they give me the benefit of the doubt over the buyer? That just doesn't make sense to me. There needs to be some sort of systme in place that takes into account how many honorable transactions that my business has done through PayPal. Based on a certain precentage of those transactions, PayPal should rule in favor of me rather than the buyer. But this won't happen.
I don't see PayPal changing their dispute process anytime soon for intangible service, but I really wish they would. Other than that, though, there's not too much wrong with PayPal. As much as I would like to come up with some more complaints to help stimulate change, I cannot think of any. A year ago I would have asked for better support, but they fixed that, so I'm left only to remark about their chargeback system and how ridiculous it is.
PayPal Verdict
You basically cannot live without PayPal as an Internet businessman, so you better get use to using it. It is a very great system. However, I warn you about the chargeback system: not that it doesn't exist with credit card merchants, it's just that with credit card merchants you actually have a good chance of winning the chargeback granted only if you provide the clear evidence.
One thing I do recommend, though, is that you read over the User Agreement that you're agreeing to when signing up. There's been some controversy here and there from certain individuals about policies where PayPal can hold your money for up to 180 days if they deem the content of your website being inappropriate or in violation of their policy. However, I tend to lean toward agreeing with PayPal here. You did in fact agree to their policy and therefore they do have the right to act on it if they see fit to do so. Just be careful and make sure that you obide by the rules in their policy.
I do wish PayPal had some sort of competition out there, though. We all know that competition is best for the consumer and it would be great if there was some. However, it probably won't happen anytime soon unless Google or another large Internet business steps into the playing field. I did hear rumors about Google coming up with something, but I doubt that'll actually maticulate. We'll have to wait and see.
© Copyright 2005, Spencer Fry.
No replication or republication in any printed or electronic format is permitted without permission from the author. 
PayPal Analysis 
Linear Mode
