Mac Musings

2 More Strikes Against PayPal

Dan Knight - 2010.01.07 - Tip Jar

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PayPal, which bills itself as "the world's most-loved way to pay and get paid", is living in the past.

Strike One

PayPal security has come a long ways from the early days. Our business account was hijacked in 2002 while I was on a two-day vacation. By the time I came home, someone had changed the password and attempted to take over $3,000 from my PayPal account via multiple transactions. I don't fault PayPal for the account being hijacked - passwords can be guessed, brute force generated, or phished.

Since I didn't have that much money in my PayPal account, PayPal cleared out my business checking account, which was linked to my business PayPal account. It was easier to get the bank to reverse these transactions than deal with PayPal.

PayPal did end up putting a lock on that account, but it was a total loss. I was never able to reestablish ownership of the account or retrieve any of the money that had been in that account. Today my PayPal account is linked to an old checking account that has very little money in it as a way of protecting myself. Not linking to a credit card is another way to protect yourself.

In my article, I concluded, "to the people at PayPal: This is no way to run a business."

Strike Two

As I said, PayPal has come a long ways since then, and now the problem is just as likely to be a false positive. I received the following in this morning's email:

Hello Daniel Knight,

As part of our security measures, we regularly screen activity in the PayPal system. During a recent screening, we noticed an issue regarding your account.

We have reason to believe that your account was accessed by a third party. We have limited access to sensitive PayPal account features in case your account has been accessed by an unauthorized third party. We understand that having limited access can be an inconvenience, but protecting your account is our primary concern.

Case ID Number: DELETED

For your protection, we have limited access to your account until additional security measures can be completed. We apologize for any inconvenience this may cause.

To review your account and some or all of the information that PayPal used to make its decision to limit your account access, please visit the Resolution Center. If, after reviewing your account information, you seek further clarification regarding your account access, please contact PayPal by visiting the Help Center and clicking "Contact Us".

We thank you for your prompt attention to this matter. Please understand that this is a security measure intended to help protect you and your account. We apologize for any inconvenience.

Sincerely,
PayPal Account Review Department

Please do not reply to this email. This mailbox is not monitored and you will not receive a response. For assistance, log in to your PayPal account and click the Help link in the top right corner of any PayPal page.

Resolving the problem is going to take a while.

Kudos to PayPal: When I log into my PayPal account, there is a very clear notice that my account has been limited, along with a link to the resolution center. Once there, I learned that while I can receive payments, I can't send or request money, nor can I transfer funds to my checking account. In short, I can't bill Low End Mac Services clients and can't do anything with the money in my account.

PayPal also required me to change my password and security questions. It then had me verify my checking account number. And then came the step that tripped me up - and shows one way that PayPal is living in the past.

The next step was to confirm my address using my phone number, the same phone number I've used for years and years, and the only phone number linked to my PayPal account, since it's the only phone number I have. Problem is, it's a mobile phone, not an old-fashioned landline, and PayPal refuses to use it.

Instead of resolving this quickly, PayPal has to send me a letter with a confirmation code. When I receive that in a few days, I can enter it on the PayPal website. And with any luck, that will be that.

PayPal, one in four Americans no longer uses landline phones, and in some parts of the world, infrastructure costs make cell phones less costly to deploy than wired ones. PayPal is living in the past, and worldwide people are moving away from landlines.

Strike Three

Last month I ordered new PRAM batteries for my Power Macs through Amazon.com and paid with my PayPal debit card. The order was processed on December 9, the funds were taken from my PayPal account, and I received the batteries a few days later. No problem.

Problem is, that wasn't the end of things. By the end of December, PayPal marked that transaction expired, and Amazon.com put the charge through a second time on December 31. It's their right, as Amazon.com deserved to be paid for my purchase.

At this point, PayPal has taken the money out of my account twice. It should be no problem to log in, explain the double billing, and have it cleared up - but I discovered that PayPal won't let you do that online. Yes, there is a nice online form to fill out with all the pertinent information, but you can't simply click and send it to PayPal. No, you have to print it out and mail or fax it to PayPal.

Fax - one of those "technologies that should die in 2010". Fax - a technology that requires a landline. Or mail, which means printing and signing the form, addressing an envelope, affixing a stamp, and putting it in the mailbox. And then waiting while the US Postal Service delivers it and PayPal processes it.

There is no option for printing to PDF and emailing or uploading the form. Frankly, there shouldn't be. It's a form on a website, for Jobs' sake, why can't I just click "send" and have PayPal's servers process it? I've already logged in with my email address and password.

Or is PayPal hoping that some users won't bother because of the extra steps involved - or because they don't even own a printer. (I print so infrequently that I long ago gave up on inkjet printers, since the ink would tend to dry and clog the nozzles before I needed to print again. Give me a cheap laser printer, and I may never even need to change the toner cartridge.) And what of iPhone users?

PayPal, this is no way to run a business. This is the 21st century. Requiring people to print and then mail or fax a form on a website is hopelessly outdated and poor customer service.

What About Alternatives?

The problem is, PayPal is the Microsoft Windows or Internet Explorer of online payment services. Almost everyone uses it, and it's available to users around the world (not quite everywhere, but close enough). PayPal's rates are not unreasonable, and until you have a problem, everything runs smoothly.

PayPal is not a bank, and it is not governed by banking law. It can change its terms of service without warning. For instance, nonbusiness users used to be able to send funds at no cost to the recipient. Today the only way to move money from one PayPal account to another - basically a database operation with virtually no overhead cost to PayPal - without cost to the recipient is to mark it as a gift.

It's just one more way for PayPal to generate profits, and I don't begrudge them profits. However, it took a lot of personal users by surprise when PayPal started adding fees to nonbusiness transactions.

One alternative is to completely ditch PayPal and move to real credit cards, which are governed by banking law. One example is merchantinc.com, which charges 25¢ per transaction plus 2.19% of the total with no monthly minimums. That's better than PayPal's 30¢ per transaction plus 2.9% of the total, and the money goes directly into your checking account, not a PayPal account that isn't under banking law. (PayPal has additional fees for international transactions and currency conversion.)

Another option I've run across is AlertPay, which can handle credit cards (at 25¢ plus 2.5%) and direct deposit transactions (at a flat fee of 2.5% with a $4 maximum). AlertPay supports 21 currencies, although the link to the page listing them is broken. AlertPay is one of five PayPal alternatives recommended by CNN Money in 2008.

If you're looking for a low use business account, look for one with no minimum monthly fee, which both of these services appear to provide. I haven't used either of them, and they are far from the only options out there, but these two look like viable alternatives for those of us who can't afford to be locked out of access to our money.

PayPal: Yea or Nay?

In my case, that's three strikes for PayPal over eight years. It's not a terrible track record, but PayPal's ability to stop you from using the money in your account without warning is a good reason to consider alternatives. Even if you don't stop using PayPal, you may want to have a second option available before you run into an unanticipated account lockout.

And PayPal, it really is time to enter the 21st century where lots of people no longer use landline phones and Web forms are submitted online, not printed and then mailed or faxed.

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Dan Knight has been using Macs since 1986, sold Macs for several years, supported them for many more years, and has been publishing Low End Mac since April 1997. If you find Dan's articles helpful, please consider making a donation to his tip jar.

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