THE HATE FOR PAYPAL: PayPal is by far one of the most functional
apps in the world.
We use it to pay rent, private teachers, contractors, freelancers, friends, family, and even certain
purchases.
PayPal made sending and receiving money through the internet more straight forward than ever
before.
All you needed was someone’s email address.
You didn’t need to deal with bank accounts or routing numbers or any of that.
Just make sure you typed in their email correctly and hit send.
Ironically, this is not what PayPal was actually created for.
The founders envisioned that PayPal would be an internet based financial management
system, and sending money using email addresses was just a side feature.
Yet, it quickly became the main feature.
We can’t forget about Venmo either who PayPal acquired back in 2013.
In the US, Venmo is so popular for splitting bills that it has become a verb like Google.
Considering the popularity and functionality of PayPal, I don’t think you’d be surprised
to hear that PayPal boasts a market cap of $100 billion.
And that’s with a 75% sell off.
But, what is surprising to me though is that people aren’t exactly fans of PayPal.
In fact, PayPal has a quite a negative reputation.
Several months ago, I posted a video about the downfall of PayPal stock, and most of
the comments were actually happy that PayPal was getting destroyed.
“Paypal is old tech and its total garbage.”
“I hope this company goes bankrupt.”
“Good I hate that company.”
“PayPal is a terrible company that I only deal with when I have to.
Glad there are other options now.”
It’s not just my YouTube comments that were so critical of PayPal either.
After a little digging, I quickly realized that people don’t just have qualms with
PayPal.
They actually utterly despise the company.
Take TrustPilot for example.
They have a solid 23,000 reviews, but 87% of those reviews are literally 1 star, and
only a mere 8% are 5 star.
But, how did such a useful and seemingly neutral company earn such a terrible reputation?
SIDING WITH SCAMMERS: One of the most common use cases of PayPal
is to pay third party sellers that you don’t fully trust.
If the seller does try to pull a quick on you, you would hope that PayPal would side
with the customer and help facilitate a refund.
But, according to the vast majority of online anecdotes, PayPal never sides with the customer,
even when they’re are several red flags and a bunch of evidence.
Take RedHat27’s experience for example.
RedHat tried to buy one of these Wyze security cameras from a third party reseller using
PayPal.
As you would guess, RedHat would never receive his camera, so he would file a claim with
PayPal and do some digging on his own.
First, he tried calling the seller’s phone number, and the person that picked up was
some tow truck driver.
Apparently, the tow truck driver was receiving over 300 calls every day from people who have
fallen for this scam, and he had already reported it to the police and the Better Business Bureau.
You would think that this information alone was enough for PayPal to side with RedHat,
but RedHat had even more evidence.
He went ahead and called UPS, and UPS would confirm that the parcel wasn’t even being
shipped to his home address.
What the scammer did do though was ship some sort of parcel to the same city and state.
This way, when you track the package online, where only the city and state are displayed,
it looks like the package was delivered correctly.
PayPal would take this as evidence that the package was indeed delivered and close the
case against RedHat.
All PayPal had to do was call UPS about the shipment, and it would’ve been clear who
was on the right side.
But, PayPal couldn’t even do that.
While the vast majority of complaints surrounding PayPal are buyer related, it would be unfair
to say that it’s the only the buyers that are getting scammed.
The vast majority of PayPal customers are buyers, and that’s why their stories dominate
the internet, but there’s plenty of seller horror stories as well.
One of these stories come from a man named Andy Dollinger who sells electronics online.
One day, Andy received an inquiry from a customer regarding if he’s willing to ship products
to India.
Andy had no problem shipping products internationally, but he was a bit concerned about the buyer's
account.
Apparently, the account was created within the last month, and only had two positive
feedbacks.
Nonetheless, Andy decided to give the buyer the benefit of the doubt and shipped him a
$1,500 iPhone 12 Pro Max.
It took some time for the product to reach the scammer, but as soon as he received it,
he filed a complaint that the box didn’t contain the phone.
Andy would reach out to DHL who graciously provided CCTV footage that proved the weight
of the box.
Andy also contacted his supplier who provided evidence that the box with the phone weighed
the same amount, and he turned over both of these pieces of evidence to PayPal.
At first, it seemed like PayPal actually sided with Andy, but two weeks later, Andy received
an email letting him know that they had decided to side with the buyer.
Since then, Andy has called the Indian police, the European Consumer Center, and sent over
more evidence to PayPal, but none of this has gotten Andy his money back.
As you can see, PayPal doesn’t necessarily always side with the buyer or the seller per
se, but it does seem like they usually side with the scammer.
The reason for this is that scammers are keenly aware of exactly how PayPal conducts their
dispute investigations.
And they precisely structure their frauds to fall through PayPals gaps.
For example, the first scammer knew to send the product to the same city and state.
And, the second scammer knew to use a new account without a bad track history.
You would think that PayPal would be aware of these loopholes in their system, and maybe
they are.
But given the raw number of PayPal horror stories online, it doesn’t seem like they’ve
made any quantifiable change.
EXORBITANT FEES: With such terrible customer service, you would
think that PayPal would atleast charge lower fees, but this is not the case either.
If you’re a buyer or simply sending money to friends and family, you probably haven’t
noticed this because PayPal is free for you.
But, the same cannot be said about merchants.
You see, whenever a customer uses PayPal for checkout, the merchant has to fork over 3.5%
+ a fixed fee straight to PayPal.
This might be viable for large retailers like Walmart and Target, but for small merchants,
landlords, and private teachers, this fee is substantial.
For example, let’s say that you’re renting out your parents old house for $1200 per month.
At 3.5%, $42 would go straight to PayPal every single month.
Through the course of an year, that works out to over $500, and that’s just for domestic
transactions.
If you’re engaging with international customers and deal with some sort of currency exchange,
you’re gonna have to fork over a conversion fee to PayPal as well.
By the time international merchants pay all their fees, they’ve often lost 5% of the
transaction value.
Even credit cards who are known for high fees have lower fees than that.
VISA and Mastercard, for example, charge 1.5 to 2.5% and even American Express only charges
2.5% to 3.5%.
Not to mention, all of these networks provide fraud protection and customer service that
are leagues ahead of PayPal.
So, with PayPal, merchants are often forced to pay higher fees for a worse service that
neither them nor their customers are happy with.
One work around for these fees is to just complete personal transactions instead of
merchant transactions.
However, this is not only against PayPal’s terms of service, but most customers are hesitant
to choose this optino especially when it comes to online transactions with unknown sellers.
So, while most sellers would love to ditch PayPal, they can’t because PayPal is often
the standard and that’s what many customers are used to.
Fortunately, friendlier options like Zelle which charge no fees are starting to grow
in popularity.
But, in the meantime, sellers can’t do anything other than be frustrated by PayPal.
THE FINANCIAL INSTITUTION THATS NOT: While customers often cite a wide variety
of complaints when it comes to PayPal whether it be scammers, high fees, or frozen funds,
it seems to me that the key reason for almost all of PayPal’s issues is that they’re
not regulated like a traditional financial firm.
One one side, they’re kind of a bank, but they don’t have to follow the same rules
as Wells Fargo or Chase.
On another side, they’re kind of a payment network, but they don’t offer the same consumer
protection services as American Express or VISA.
Initially, this lack of regulatory oversight was thanks to PayPal’s unique business model.
They were one of the first to jump into the world of internet finance, so regulators simply
didn’t know how to regulate them.
PayPal fell into this gray area similar to crypto brokerages today, and I think we all
know how that turned out.
Just take a look at Voyager or Celsius.
PayPal hasn’t been engaging in anything anywhere near as risky as those two, and that’s
why they haven’t completely collapsed.
But, that isn’t to say that PayPal’s services are making anyone particularly happy.
I mean, there are reasons that there are rules and regulations surrounding cash reserves,
fraud protection, and fees that traditional banks must follow.
Throughout the past 100 years, regulators have figured out that without these rules
and regulations in place, it becomes increasingly likely that consumers are taken advantage
of.
Now, this isn’t to say that PayPal doesn’t have to follow any rules whatsoever.
As regulators better understand the internet, they have been getting stricter when it comes
to the activities of institutions like PayPal.
For example, PayPal has to abide by the following government regulations: Payments regulation,
banking agency supervision, consumer financial protection bureau, anti-money laundering,
and interchange fees.
While this is definitely a step in the right direction, PayPal still doesn’t deal with
anywhere near as much oversight as traditional financial institutions.
And I’m sure that PayPal’s lawyers and lobbyists are being paid extremely well to
make sure that that doesn't change.
And honestly, you can’t even blame them for that because any business owner would
do the same.
But, that doesn’t mean that this choice doesn’t have consequences for their customers.
THE FUTURE OF PAYPAL: In the end, while regulation may fix some
of PayPals shortfalls, regulation is rarely an ultimate solution.
For PayPal to really turn things around and improve their reputation and business, change
has to come from within.
One of the easiest places that they can invest in is their customer support.
It seems that their dispute teams just want to close cases as fast as possible while following
PayPal protocol when they’re goal should be to uncover the truth and side with the
correct party.
I mean this sounds like a no brainer, but given all of the stories online, this is obviously
not what’s taking place.
In terms of their fees, while they’re fees are high, I don’t think PayPal has to reduce
their fees per se.
Usually, it’s not high fees alone that trigger customers.
What actually triggers customers is paying high fees for crappy services.
There are so many businesses that charge high fees and offer a premium service, and they’re
customers love them.
I mean one of these companies is literally the largest company in the world: Apple.
So, PayPal could definitely play this card as well.
But, as long as there’s a gaping disparity between the cost of PayPal and the perceived
value of their services, I doubt that PayPal’s reputation will improve, but that’s just
what I think.
Do you have a positive opinion on PayPal?
Comment that down below.
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customers.
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