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
I believe that part of the agreement with PayPal (the terms that you agree to when you sign up with them) absolves them of any responsibility for your transactions. I'm sure they do what they can to help someone solve their problems because it's in their best business interest, but in the end they have no real power or control...especially if the criminal party wasn't registered and verified with them...and I highly doubt PayPal has the right to remove funds from their bank account to make up for an allegedly fraudulaent credit card transaction. You do have consumer protection when you purchase goods with your credit card, but I don't think many credit card companies can offer that same protection when you go through a third party like PayPal (although it's worth filing a claim with them...just in case). You have protection when you use your card with a merchant because that merchant has legal agreements with the card companies...those companies can always charge the merchant back if they don't act responsibly...they have a lot of power over the merchants. PayPal can prove that you agreed to waive their liability for your transactions. Whether or not that would actually hold up in court...I don't know.

I do think this is going to become a huge issue in the future. THe amount of internet-based sales keeps growing and growing and PayPal has become a huge business. They're currently trying to have the best of both worlds. They want to make money by accepting credit cards for individuals and small businesses, but they don't want to deal with the costly fraud and liability that comes along with the accepting of credit cards. Any credit card accepting merchant has those responsibilites and PayPal should too. The amount of fraud and merchandise complaints for their type of business must be unbelievably high. I'm sure they can always survive as a conduit to transfer funds from people's bank accounts, but their profits will disappear the day they're held responsible for their credit card transactions. I'd sell that IPO stock as soon as you're able. :-)
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.