[Article] Will eBay force customers to use PayPal?

Ruu_Old

Full story here.

— EBay Inc. is exploring whether to require customers to use its online payment service PayPal, a move that has angered users and prompted antitrust scrutiny in Australia, where a PayPal-only rule takes effect next month.

It's unclear whether eBay will institute a similar policy in the United States and other countries. However, the online auction company often tries big changes in smaller markets before expanding them worldwide, and says it is open to that in this case.

"We are going to take learnings from it and apply them accordingly," said eBay spokesman Usher Lieberman.

EBay says it wants to reduce disputes and restore trust in its marketplace with the PayPal-only plan. Because eBay and PayPal can share information on each transaction, eBay says use of PayPal allows it to stop fraud more efficiently than outside payment services. Pressing that safety argument in a heated discussion with Australian users, an eBay executive compared the new rule to banning the sale of heroin on street corners.

But critics lament that PayPal is costlier than other payment options, and they suspect eBay is just interested in increasing PayPal's revenue. Australian banks say the plan will eliminate competition for the sake of exaggerated benefits.

"Competition will be restricted, innovation and development will be constrained, new entry will be discouraged and PayPal will be able to increase fees and charges to eBay users," the Australian Bankers Association said in a filing with regulators Thursday.

Because eBay sellers are commonly independent merchants who don't accept credit cards, PayPal acts as a go-between. Buyers use their credit cards and bank account information to make payments, and PayPal relays the funds to sellers' PayPal accounts, charging them 30 cents plus a commission — up to 4.4 percent in Australia. The second-most common method of payment on eBay Australia, bank transfers, cost 20 cents each.

Australia's bankers group says PayPal is not as immune to fraud as eBay claims. While PayPal does keep bank and credit card account information secret between trading partners, the bankers group decried that it does not verify identity as banks do.

EBay's financial reports indicate that PayPal, while hardly fraud-proof, is getting better at cracking down. Its loss rate is 0.24 percent, down from 0.33 percent a year ago. That means that for every $100 transacted with the service, PayPal has to eat 24 cents because of fraud. That is slightly lower than the rates seen in credit and debit card transactions involving the top 20 online retailers, said Avivah Litan, a payments security analyst with Gartner Inc.

EBay contends that when users opt for methods like bank transfers, their transactions are four times more likely to result in a disputed payment. EBay says reducing that risk will attract new buyers to the site.

And, the company adds, it doesn't stand to profit directly from the PayPal rule. It claims its investments in new buyer protections could outweigh any gains from increased PayPal fees. For instance, under Australia's new plan, if a buyer doesn't get what he or she paid for via PayPal, eBay will refund the buyer up to 20,000 Australian dollars ($18,600).

To make the PayPal rule possible, eBay has applied for — and automatically gets — immunity from Australia's anti-monopoly Trade Practices Act. But the Australian Competition and Consumer Commission, which is investigating, could revoke that immunity if it finds the plan will harm the marketplace. A decision is expected soon.

Critics say eBay is just trying to fatten its bottom line. Growth in eBay's core auction listings has slowed in recent quarters, pushing eBay to expand other parts of its business, which includes PayPal, classifieds sites and online telecommunications service Skype. And eBay has already taken other steps viewed as protecting PayPal, such as banning Google Inc.'s rival Checkout service on alleged safety concerns months after it was launched in 2006.

Sellers in Australia are "absolutely furious" and resent that they are subjects of an experiment, said Phil Leahy, president of the 600-member Australia chapter of the Professional eBay Sellers Alliance.

Colonel Sanders

ebay/paypal fees are pretty steep so this will only increase their revenue. i have delt with a number of sellers who only accept cheques as it cuts down their costs. More awkward for me, the buyer, but I don't blame them

Vikings

Interesting article - actually thats the first i've heard of that.

I know I work for PayPal so you can take from this what you will but if I am buying something on eBay there is only one way that I am going to pay for it and that is PayPal. eBay/PayPal fee's affect only the seller, if they don't want to accept those fee's thats fine but I won't be buying from them as the other payment options don't offer me any protection.

If I pay by Western Union I am never going to see my item, if I pay by bank transfer and I get a broken item the bank are not going to do anything for me. If I send a cheque then get sent a fake item thats the money gone too. I'm protecting myself by using PayPal, even if it is at the expense of the seller.

jor el

I only deal with sellers who take Paypal, as it's just easier for me. I hate having to send cheques or money orders, and dealing with bank transfers can be a pain, not to mention there's no comeback for the buyer with any of these.

Because eBay and PayPal can share information on each transaction, eBay says use of PayPal allows it to stop fraud more efficiently than outside payment services.

Bah, sure it will. They'll protect themselves against fraud, but they'll often do feck all to help a buyer or seller who has been defrauded. If an end-user is defrauded by using an outside payment source, eBay won't do anything for them anyway, so this a mute point.

byte

This probably wouldn't go down well in Germany, where many seem to solely use bank transfers.

Design_Dude

yea same in uk, loads of sellers use nochex, a paypal rival.

ruprect

I am still shocked google have not set up a decent rival to ebay. Google listen to what users really want, seems the programmers in google actually use the internet. Ebay has so many things wrong with it that it is comical, it is like a textbook "what not to do" for many of its features. A user friendly auction site that could be trusted would be great.

Google were going to (or have?) set up a payment system of their own, any word on that?

I still use paypal, some of these bank transfers etc can be a little cheaper, but what is your time worth? it can take 30mins to set the deal up, at minimum wage I doubt it is worth your time.

jor el

ruprect wrote: »

Google were going to (or have?) set up a payment system of their own, any word on that?

I have used Google Checkout on a couple of sites, this what you mean? I guess they need to be able to allow transfer of money, but that shouldn't take too much.

j4vier

its quite obvious that buyers prefer paypal for maximum protection, but if sellers are only forced to accept paypal payments , it will make it worse for the buyers as well, as more than likely prices will be higher to cover fees, some sellers will eventually stop selling and it will mean less competition and again higher prices for buyers

mike65

I only sell to paypal-ers I have to say.

Mike.

A Dub in Glasgo

I sell to anyone who pays me. As a seller, I much prefer bank transfer (no fees), bank lodgement (no fees), cheque (no fees), postal order (no fees) and then Paypal (loads of fees).

ebay used to offer protection irrespective of paypal (when paypal was not bought by ebay). Now that paypal is owned by ebay and they take a large chunk, ebay will force sellers to only accept paypal as they will get higher profit.

A Dub in Glasgo

j4vier wrote: »

its quite obvious that buyers prefer paypal for maximum protection, but if sellers are only forced to accept paypal payments , it will make it worse for the buyers as well, as more than likely prices will be higher to cover fees, some sellers will eventually stop selling and it will mean less competition and again higher prices for buyers

If sellers were to adhere to the T&C's of accepting paypal (ie send the item by trackable means for protection), prices would increase as the trackable means of posting are much more expensive

*Dallas

eBay and google have agreements ( ebay items appearin in google, google adverts appearin on search papges) so i dont think google will set up a rival anytime soon ..

also, i heard google checkout fees are kicking in soon, so it will more or less the same as using paypal