PayPal may be in trouble......


FYI

MasterCard to stop third-party transactions
Fri Apr 19, 6:29 AM ET
Andrew Backover USA TODAY
A new rule by MasterCard could crimp online commerce by stopping merchants from taking credit card payments via third parties, such as popular PayPal, USA TODAY has learned. On May 1, unless new terms are reached, Internet merchants that rely on third-party billing, most often small merchants, could miss out on sales via the USA's No. 2 online credit card. And MasterCard holders could have a harder time using their cards at many sites, including auction sites, that use PayPal and similar services, says Gartner analyst Avivah Litan. ''The promise of the Internet was that anyone could set up shop and get paid,'' she says.
''It's not a level playing field anymore if this rule goes through.'' According to MasterCard, its 15,000 card issuers won't be allowed to process credit card transactions using third-party services. Such services are most often used by small merchants because they can't afford to take credit cards. PayPal is the biggest third-party service, with about 13 million registered users. It does 240,000 transactions a day worth about $13 million -- about half of which is done via credit cards. Sellers on auction sites such as eBay and Yahoo may use PayPal to process transactions. Earlier this year, PayPal was used for about 28% of eBay transactions, Litan said. The change would not, MasterCard says, affect people who occasionally use third-party services to sell goods online -- only entities who sell goods or services ''on an ongoing basis,'' according to a MasterCard memo. The change would require those merchants to set up deals with banks so they could take MasterCard directly.
Even if the change is made, consumers could still use their MasterCards to buy goods from Web sites that deal directly with MasterCard. The reason for the change, says MasterCard spokesman Alex Lau, is to protect financial institutions and cardholders from fraud and identity theft. The change is likely aimed at porn and gaming sites that have higher occurrences of theft, Litan says. PayPal is working hard to get exempted from the change. It became the first company to
offer a viable alternative to credit cards on the Net by approaching eBay merchants who previously had to wait for checks to clear before sending out merchandise. PayPal signed the merchants up with fewer hassles and charged lower fees than banks. It uses its agreements with banks to process credit card payments for them. PayPal has been one of few Internet initial public offerings of late. Its shares closed Thursday at $24.46.
PayPal spokesman Vince Sollitto says PayPal is ''hopeful and confident'' it will come to new terms with MasterCard. Visa still accepts PayPal, as does American Express.

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tkmetz
Paypal is very useful for online purchases,almost a necessity if you are buying and selling very much.It's a pain to send a MO for small purchases and very slow[snail mail].I prefer Paypal or Billpoint.Faster!Paypal takes funds from your Paypal balance 1st,Then your Bank account and then your credit card last.Best to keep your Paypal balance and bank account small so they use your credit card for purchases[I assume you are protected through your credit card co.ASK!]The BEST idea is have a bank account for Paypal /Billpoint transactions ONLY.Easier to track payments, balance and limits funds that can be accessed.Always use credit cards/Paypal or COD for large purchases and get phone numbers at home and work from the seller!If you pay with a money order ALWAYS use a USPS MO and send Certified then they get involved if fraud occurs.Cashiers checks from banks they don't.I always wonder who's buying $200 plus items when the seller is new and has no feedback here or on E Bay and expects buyer to send them MO's or checks only.I see newbe's selling here for the 1st time $1000+ items in this manner.I don't send $ into the Blue.Use common sense!Hope this helps!JD
I found browsing this site interesting.
http://www.paypalwarning.com/
It is worth a look. And, JD, I am one of the "newbies" trying to sell an expensive item without using Paypal. All my feedback is on eBay!
It makes no sense why all these small dealers (including a few here on AudioGon) who process credit-card transactions day in and day out resort to a seedy operation like PayPal It makes no sense why all these small dealers (including a few here on AudioGon), who process credit-card transactions day in and day out, resort to a seedy operation like PayPal. None of the reasons that I can think of are very confidence inspiring. It removes too many checks and balances from a system that has otherwise worked well for many, many years. PayPal, with it's gross incompetence, is inadvertantly screwing over consumers, businesses and the CC companies alike. MasterCard is probably just plain sick of getting stuck with all the complaints.

Watch the other cards follow suit. Then PayPal and the like are history.
I love paypal and I think it really increases the number of sales in general. It allows everyone to accept credit cards.

JMC, I think the reason small dealers use paypal is because I think you can transfer money out of your checking account as if it was a credit card through paypal.
And Perfectimage...I'm sure the main reason that small dealers use PayPal is the huge difference in fees. There is a huge difference, isn't there?? What percentage of sales do the credit card companies charge small volume dealers? Isn't it much more than the 2%-3% that PayPal charges?? Isn't it closer to 5%-10%, depending on volume?? Any small dealer could accept credit cards directly, couldn't they...if they're willing to pay the high fees and deal with chargebacks, etc??