Impact of removing paypal as payment option from website.(Very frustrated with them)

Pacing Mule

In summary I've had to make the decision to remove paypal from our website. At this point our exposure to losses from fraudulent transactions and paypals own actions is too great to justify continuing with them. In the last couple of weeks we've had the following happen:

3 separate transactions have their "funds frozen" (or in other words money taken from our balance) because the account holders reported their accounts had been accessed without their consent.

A further 3 transactions from one customer which had been spread over the course of 5 weeks "reversed" (or in other words again money taken from our balance) as paypal had been issued a chargeback by the customers card holder claiming the card usage was unathourised. To add insult to injury they have now deducted a further €16 per transaction to cover the chargeback fees they have incurred. You would imagine that a cardholder whose card had been skimmed would have the funds depleted quickly and not 5 weeks later still have transactions being processed on the account. It doesn't add up to me at all but we're still down the funds and fees.

Lastly and this one takes the biscuit - 3 transactions suspended because paypal (not the account holder) felt the transactions may have been suspicious. After we contacted the customer involved he assured us that he was the account holder and had authorised the transactions etc. He gets on to paypal who demanded some paperwork he was unable to supply so they have indefinitely suspended his account and frozen his funds. They have likewise indefinitely suspended our funds (deducted the money from our account) for all 3 transactions. He made a separate payment with his laser card to us to cover the transactions so we're not out of pocket on these thankfully.

We accept payments through our own merchant accounts and have always offered paypal as a convenient alternative to our customers. With our own payment processing we can see among other things

• The card holders address
• The card holders name
• The issuing country.
• Offer / request 3D secure.
• Have the transaction analysed by an external fraud protection company who can flag if the address, phone number or card itself is high risk (from a number of different viewpoints / ways)

With the information provided we can make an informed decision on whether or not to proceed with the transaction. In the past year we have had the grand total of 1 chargeback for fraudulent card usage that realistically we should have seen at the time was a dud but missed it. With paypal however we get none of this information. All we get is if the account holder is verified or not which makes no difference whatsoever if the account has been hacked.


What I can't understand is how if we can process thousands of transactions and catch nearly every single one that was fraudulent why can't paypal do the same ? (or is the answer in the fact that they are not liable for any of the charges or reversals as they just pass them straight to the retailer) The irony is that whilst on one hand they seem to miss so many fraudulent transactions they on the other hand can also deduct funds for perfectly legitimate transactions too. Add in that paypal fees are higher than our own card processing fees and it just isn't viable anymore.


So with that venting (and perhaps warning to others) done has anyone here gone down this route and what was the impact on sales ? At the moment approx 20% of our transactions are paypal. I'm hoping not to lose that 20% - but I know that a lot of paypal users use it for the buyer security it brings. It just seems that at this point we're going to take a hit (either by continued losses imposed by paypals chargebacks or by loss of sales) - I'd be interested in hearing other business experiences with the issue.

Peterdalkey

That is a truly disturbing situation and certainly worthy of wider dissemination, I suspect one of the journalists on thejournal.ie would be interested.
It is very difficult to know how many people actually chose the PayPal option simply because it is there and the feel somewhat more secure using it. In general the customers will have a credit card or Visa Debit to pay Paypal, I can't imagine very many actually deposit actual pre-payment funds with PayPal. Add in their excessive transaction charges and you are probably right to remove them from your site.
We have two sites, one Euro and the other £Stg, based on their charges alone I have been considering removing them from our sites. We have not had these issues, but we are boring B2B products. Your tale has tipped the balance and I will have them removed in the morning from both sites.


Cheers

Peter