Merchant Guide

Effective tomorrow (March 1, 2011), PayPal will be imposing a set of regulations on the users from India to comply with the restrictions that are set to it by the Reserve Bank of India. According to the one-month advance notice provided by PayPal to the Indian users, the PayPal account holders will have to comply with the following requirements.

1. The money in the PayPal account cannot be used to buy any goods or services online. The money can only be withdrawn to the bank account of the user. Moreover, the person cannot keep the money in his PayPal account for more than 7 days since the receipt of the money from the buyers.
2. PayPal account owners having the Indian account will also not be allowed to have any transaction of more than $500 for sale of their goods or services from a non-Indian PayPal account.

Before delving into considering that, it is the RBI, which is manhandling PayPal; it is important to understand the actual rules that RBI has stated. The first rule from RBI is that any online gateway that keeps the balance of its user for more than 7 days requires to pay interest to the user, and should be regulated as a bank. PayPal wants the users to withdraw their money in less than 7 days because it just wants to remain a payment processor and not a bank.

For the second point, there is an RBI rule, which has stated that, any financial transaction that is paid to an Indian person or entity should be reported to the official government or RBI, provided the transaction is more than $500. Thus, by imposing the rule of maximum transaction value to be $500, RBI has ensured that it does not need to work with the Indian Government in explaining or reporting the transactions.

Overall, with these compliances in place, PayPal is trying to workaround RBI’s policies to gain more information. However, what PayPal should also consider is that India is a growing economy where many freelance workers make use of PayPal’s services. In fact, there are more than 200 thousand Indian PayPal accounts, and not all these people have credit cards and other financial services linked to their PayPal accounts. Thus, putting these restrictions in place to avoid dealing with RBI may not be a very good move, since this may result in people opting for other alternatives in place of PayPal.

Merchant Guide merchant account, PayPal, PayPal con

3 Things You should know about PayPal

Check out Part 1 – is PayPal the alternative, a review about PayPal to get fast facts about the good and not-so-good sides of PayPal. In a nutshell PayPal is a great provider and may be just the right choice for you. This article will tell you what PayPal won’t tell you, the three things you should know about PayPal. If you’re ok with these risks, a PayPal account should be just about the right option for you. If you do have a problem with either one of these points, PayPal still might be a solution; you can decide best what is best for your business.

As the author of this article, I thank you in advance for your comments and posts. Feel free to let me know your two cents about this article; find me on Twitter @ SBBSam.

Sudden Account Termination

As such a huge provider like PayPal, they’re confronted with heaps of fraud every day and that makes them sensitive, very sensitive when it comes to protect their assets. Being huge unfortunately often also comes hand-in-hand with a “we don’t really care”-attitude. Mark, who’s running a small business for instance, woke up one day to see his PayPal account with over $50,000 balance frozen. “After weeks of trying to get my account activated, sending document after document, I was finally told that my account will remain suspended and that I could never use their system again” he writes in his post on Alexa.

Alex Tew, this name might ring a bell with you already, we featured him in our viral marketing article already, had the idea of the “million dollar homepage”. In a piece featured in the Entrepreneur magazine, Alex talks about the problems he had with PayPal when they went ahead and blocked his account (high volumes of transactions are often blocked by PayPal automatically in order to avoid money-laundering schemes.) just when his idea started to become big. It’s also a great article to get inspired; you can find the full article here.

PayPal’s Reserve Policy

It’s all about security and risk management. Unfortunately this can become quite problematic, particularly if you are relying on stable cashflows. The consumerist had a feature article about some customers that were hit by it. Melissa, a at-that-time PayPal customer said in the interview: “On July 1, without any notification or explanation whatsoever, PayPal has (daily) deducted 20% of our money from sales and put it into a “Rolling Reserve” account.”

Bill, an analyst at the risk department of PayPal, eventually came around and wrote a blog post after PayPal received massive critique from businesses and media alike. Please note that PayPal does not automatically run a rolling reserve on your payments, however, they may do so if they feel it is necessary.

Reputation

Most of PayPal’s success comes through eBay, its parent company. As an internet giant, eBay uses PayPal as a supported tool to run its daily auction transactions. Hence, many people immediately link PayPal with eBay and on-the-side businesses that are run in the basement in the evening hours after your regular job.

In short, PayPal doesn’t stand for much credibility. Many customers (like me) prefer to use a credit card directly. In my particular case for instance, I have my credit card linked to an old PayPal account which I’ve lost the access information for. PayPal support proofed unhelpful to get the account deactivated or removed so that I can link my card in my new account. So my new PayPal account cannot accept my credit card since it is already “in the system” but I can’t delete my old account either.

Paypal’s reputation isn’t the best after all. Alexa users rate PayPal services at a modest 2 ½ stars, with twice as many 1 star vs. 5 star ratings. Wikipedia even has a separate section where former PayPal customers vent about frozen accounts and rolling reserves.

It’s in the details; trust and reputation are very important. Did you know that PayPal generally keeps all the fees they charge on each transaction, even if the seller is forced to refund the monies received? It’s actions like these which gets people to even setup a separate website dedicated to the blunders of PayPal: http://www.paypalsucks.com

If these three points are not so important to you and not critical to your business success, PayPal can indeed be a great partner. Stay tuned for upcoming articles. Till then, I’m waiting to hear some feedback from you. Contact me personally at Twitter (personal account).

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Everybody knows PayPal; just in case you’re an astronaut who’s been discovering Mars for the past 10 years, Wikipedia covers the company and its history extensively. In short, PayPal allows you to send and accept payment and was bought by eBay, a giant in the online business, in 2002.

Particularly for start-ups PayPal is often referred as “the alternative” to a full merchant account. Today we’ll take a closer look at PayPal; there’s a big controversy about this topic here at SBB. On the one hand we feel that writing about PayPal might be interpreted as bad-mouthing a competitor, though on the other hand – being a merchant account acquirer ourselves – we can bring a lot of market insight and knowledge to the table. We did our best to point out the great aspects of this company along with the not-so-good sides possible merchants should be aware of.

As the lead author of this article, I thank you in advance for your comments and posts. Feel free to let me know if you liked this article or not, find me on Twitter @ SBBSam.

1. Pro #1:

Being part of a huge internet giant like eBay, PayPal is very unlikely to go out of business tomorrow. PayPal itself accounts for 10% of eBays total revenue already and is likely to become even bigger in the upcoming years. So apparently they must do something right; after all why should so many people go with PayPal if it wasn’t working, right?

1. Con #1:

Being big often times means that you’re just a number. Even larger companies, I mean the big guys processing north of $100 Million annually, share these kind of problems because for an $8 billion dollar giant it still means peanuts.

1. Pro #2:

With a global reach like PayPal’s, many people can pay you through their system. Implementation is fairly easy which makes it a prominent payment system particularly for start-ups and on-the-side businesses and most importantly, the technology in use is proven and works.

1. Con #2:

PayPal’s technology works; if they want it to work. All too often that’s exactly the problem. There are many angry customers out there who vent publicly in forums and internet pages about PayPal’s customer service. There’s even a full website dedicated to “PayPal nightmares”, though one must add to PayPal’s defense, it’s a pretty big organization and you can’t make everyone happy all the time.

Stay tuned for Part 2: 3 Things You must know about PayPal. Till then, I’m waiting to hear some feedback from you. Contact me personally at Twitter (personal account).

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Merchant Guide credit card processing, merchant account, PayPal, PayPal con, PayPal pro, PayPal review, PayPal secrets, pro & con PayPal, start-up, startup