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Is PayPal A Better Bet?
Chapter 5: Is PayPal A Better Bet?
If we were to consider a comparative summary of the services
of the merchant accounts that we have looked at so far set
against those from PayPal, it would be very difficult to see a
great deal of difference.
In fact, it may even appear that PayPal has some major
advantages (simplicity, competitive fees etc) over many of their
competitors.
Thus you might ask yourself why many leading online business
entrepreneurs would still prefer to work with 2CO, for example,
when their fees are obviously considerably higher than those of
PayPal?
And, the answer to this question lies within one of those
seemingly unexplained or 'mysterious' aspects of PayPal, one
that you will not find mentioned anywhere on their website.
Put succinctly and at its most basic, PayPal are not a bank nor
are they a ‘finance’ company.
They are as previously established a privately owned payment
processing company.
Thus, PayPal have absolutely no need to follow any federal,
National or International banking regulations, and this is a
‘loophole’ that they have, over the years, sometimes been guilty
of using, and (some might say) abusing.
International banking regulations were created and established
to prevent the average man from suffering hardship and issues
such as having their bank account frozen for weeks or months
with no explanation.
PayPal are still (at the time of writing) not subject to such
rules.
They are still as close to being a law unto themselves as it is
possible to be, answerable to nobody but the bosses at eBay!
What this means is that PayPal can do exactly what they want
with your account, and there is little or nothing that you can
do about it if they decide to do something that cases you and
your business a major inconvenience or operating hiccup.
This matters a great deal, because of one other thing that
differentiates a ‘real’ Merchant Account from PayPal.
You now know that, if you are using a real Merchant Account from
a large scale globally recognized financial institution then
your interests are heavily protected by International banking
laws and regulations.
However, under those same regulations, a Merchant Account is
legally obliged to directly deposit your monies into your
personal or business bank account. Thus, you have total control
over those funds and they are protected by applicable laws and
regulations at all times.
With PayPal, your money is deposited and retained in a PayPal
Account, and guess who has complete control over that?
Of course, PayPal do, and they can do exactly what they want
with your account and any money that is in it.
Now, I stress again that for the vase majority of folks, this is
probably never going to represent a big problem, but it is a
fact that you are trusting an unregulated, privately owned
commercial entity to take care of your money.
PayPal can, for example, freeze or suspend your account at any
time without any real reason.
And, once an account is frozen, PayPal can literally make you
jump backwards through hoops to get it unfrozen, with absolutely
no guarantee of success.
Remember, PayPal are answerable to no-one except PayPal, so they
can limit your account for how ever long they believe there is a
problem.
Once the account is frozen, that is it, your money is tied up
until further notice, and there is no-one who can help you!
You can lose access to your cash for months on end with no
recourse whatsoever to any form of independent arbiter.
Imagine if your PayPal account were to be the one that you rely
on to fund your business, then you could potentially suffer a
very rapid ‘domino effect’ in this situation.
If, for example, you are a merchant who supplies customers with
tangible, real world goods (rather than someone who makes and
sells digital products) then you need to be able to pay your
suppliers.
If you cannot, then they will not fill your ‘parts’ orders
either.
Your customers will in all likelihood try to be patient with you
for a while, but inevitable they will eventually want to know
where their goods are.
When you cannot answer their questions satisfactorily, then
perhaps they lose patience, and start lodging disputes and
credit card chargeback claims.
This gives the appearance that you are trying to cheat your
customers (by accepting money but not delivering the goods)
making it look for all the world as if you are engaging in
fraudulent behavior!
The bottom line is that PayPal have total and absolute control
over your account, and are still not answerable to any
independent third party should they do anything that you are not
happy with.
And, despite the fact that they do seem to be making genuine
steps towards satisfying all of the requirements for attaining
true bank status, they are not there yet, and, until they are,
then this situation will, in all likelihood, continue to apply.
So, to return to the original question, why are businesses and
entrepreneurs all over the world willing to either pay
considerably higher charges (2CO) or make a lot more effort to
get a Merchant Account rather, than use the far simpler PayPal
system to accept credit and debit cards?
Firstly, because they know that many potential customers still
perceive businesses that use PayPal as ‘small time’ operations,
those that cannot get a ‘real’ Merchant Account who have little
or no financial standing or credibility (or credit).
And secondly, because dealing with a real Merchant Account
provider is the only safe and secure way of making sure that
your money comes to you in your time frame, and not according to
the internal rules of a relatively unregulated privately owned
business like PayPal.
Real businesses want to have as much control over their own
destinies as possible, and using PayPal is perceived by many as
giving away far too much control at the end of the day.
PayPal News:
Bing: paypal site:msnbc.msn.com
Search results
PayPal - Latest news, videos, and information- msnbc.com
Latest news, videos, images of PayPal ... Yahoo CEO says he never provided a resume: source. SAN FRANCISCO (Reuters) - Yahoo Inc Chief Executive Scott Thompson, at ...
PayPal backs down on erotic e-book ban - Technolog on msnbc.com
In an about face of a policy that in recent weeks threatened to cut off the accounts of erotica e-book publishers that may publish "obscene" content, PayPal has ...
PayPal settlement e-mails confuse recipients - Technology ...
Millions of PayPal users received an e-mail this week offering them a chance to receive a little money just for filling out an online form -- and for once ...
PayPal fraud process scrutinized - Technology & science - Tech and ...
Online payment processor PayPal.com said Monday it would clarify the rights of consumers hit by fraud as part of a settlement with the New York state ...
PayPal spawns scores of tech entrepreneurs - Technology & science ...
PayPal used to be a tight-knit group. But after eBay bought the startup for $1.5 billion in 2002, the tight-knit group dispersed. Many have gone on to ...
PayPal service restored, company announces - Technology & science ...
Most members of the online payment service Paypal should be able to log on to the Web site after five days of intermittent service outages and furious ...
PayPal cuts WikiLeaks from money flow - US news - WikiLeaks in ...
Online payment service PayPal has suspended the WikiLeaks' account that the organization used to collect donations, it said in a statement. U.S.-based ...
PayPal backtracks on 'obscene' e-book policy - Technology ...
SAN FRANCISCO ? PayPal, the online payment service owned by eBay Inc., is backtracking on its policy against processing sales of e-books containing ...
Nine ways to stay protected while using PayPal - Technology ...
To many users, PayPal, the world's most well-known online payment system, seems like an entirely secure method of sending and receiving funds. The company ...
Bottom Line - PayPal aims squarely at rival with mobile payment device
David Marcus, vice president of PayPalMobile, announced Thursday that PayPal is rolling out a mobile credit card reader that plugs into a smartphone's ...
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