More reasons to believe in decentralized cryptocurrency: Revealing PayPal´s incredible fund retention policy for business clients [a true story]
When relevant market sectors are controlled by a monopoly that holds a large share of it, then you will rarely find a fair market economy there.
'Monopoly controls have been the excepction in free societies; they have been the rule in closed societies.' Lawrence Lessig
PayPal Holdings, Inc. is an American company operating a worldwide online payments system that supports online money transfers. It is a digital alternative to traditional payment solutions. PayPal is such a monopoly in the worldwide sector of financial services.
Yesterday, when I logged-in to one of my PayPal business accounts and opened the 'Reports' section there was a highlighted little notification symbol at the top right. What I read after clicking on the symbol really shocked me:
PayPal has just informed me that they are going to cap my monthly funds (the money that I earn by payments received from my clients). They will retain these funds partly when exceeding a specific amount for the time of 21 days. Just for the records: these funds are MY money.
How PayPal casually informed me about their new rules of the game [original screenshots]
NOTIFICATION ALERT:
DETAILS:
For a better read, I hereby copy the original text from my PayPal account:
* * * Start of PayPal notification * * *
You can access the first 25.000,00 USD you make each month. Money from additional sales will be available 21 days after the payments are processed.
We moderate available funds to reduce the likelihood of negative buyer experiences and ultimately increase their confidence in your business (Note surfermarly: What do they mean by negative buyer experiences? I haven´t had one in 10 years!).
The amount available to you is determined by information we collected when you created your account, public information, and your business’s performance. As you use PayPal and we get to know your business, we may automatically adjust your available funds (Note surfermarly: It´s not thet they get to know my business, they are willing to control it!).
By releasing some money after 21 days, we help reduce any potentially negative impact on our buyers. This gives them more confidence to shop and the more we understand you, your business practices, and your response to customer complaints, the more likely you are to get a higher limit (Note surfermarly: What about my own confidence? What about the trustworthiness of our common business?)
Over time, your available funds may increase if you:
- Ship promptly and add tracking information
- Work closely with buyers to avoid chargebacks and claims
- Avoid long refund times
Need access to more money?
You can request an increase once every 30 days. Provide a few details and we'll respond within 3 business days. (Note surfermarly: 3 more business days you are holding my money and do whatever you want with it, probably using it for your own investment and speculation.)
* * * End of PayPal notification * * *
Just for the records: there was no official update of PayPal´s general terms and conditions, no approval neither signature from my side required. They were just informing me that I won´t be able to access part of my money due to their new rules of the game starting from now. I prefer not to know what they are going to do with the not released money during these 21 days... 21 days, that´s almost one month of trading for them!
PayPal luckily isn´t subject to institutional bank regulation
Some months ago @hilarski published an article titled Paypal Shenanigans? Time To Use Bitcoin and Crypto-Currencies. Yes, it seems that they are shenanigans, exploiting badly their monopoly position.
The PayPal co-founder Peter Thiel said once that PayPal isn´t a bank because it does not engage in fractional-reserve banking. Rather PayPal´s funds have not been disbursed are kept in commercial interest-bearing checking accounts. (Source: wikipedia)
In the US, PayPal is licensed as a so called money transmitter, on a state-by-state basis.
Honestly, I have no idea what Thiel is talking about, I am not a banker. But what counts for me is that NOT being a bank per definition, they are not entirely subject to regulation. The state laws in the United States vary, as do their definitions of banks, narrow banks, money services businesses and money transmitters. Although PayPal is not classified as a bank, the company is subject to some of the rules and regulations governing the financial industry.
Regardless of the rules defined by the financial industry, being a monopoly provides you with untouchable power as there is no competition. No matter how expensive the transaction fees might be, no matter how bad their customer services might be, no matter how many of the B2B clients´ money they retain and how long, clients - both B2C and B2B - will be forced to use their services since there is no alternative product. That´s the core of the problem!
By 2016, https://www.consumeraffairs.com/ had received already over 1,200 consumer complaints relating to PayPal policies. There are also numerous anti-PayPal Facebook sites and Twitter accounts which air customers´ complaints.
Release time - the unbeatable asset of cryptocurrencies and their markets
PayPal had a net income of 1.4 billion US dollars in 2016 (source). They are charging fees out of scale. My business is currently paying a fixed fee of 0,36$ + 2.9% of the transferred amount per received payment - incredible! However, since my product is exclusively sold online, my clients are from all over the world and being PayPal positioned as a monopoly in the market sector of online payment systems, it seems that I have no choice! The only thing I can do is to accept the rules they provide. End of story.
Have you made similar experiences with classic financial services? Is there any possibility to defend oneself and impede that financial institutions control our own money? Are any jurists or lawyers here? Or do we just have to be patient and wait for the big crypto revolution to come?
Looking forward to reading your comments!
Marly -
Picture sources:
Title paypal: http://pctechmag.com/wp-content/
Business man: http://investorplace.com/
Deep breath quote: http://img.memecdn.com/
Western Union ad: https://www.saveonsend.com/blog/wp-content/uploads/
Quote Mahatma Gandhi: http://quotes.lifehack.org/media/quotes/
The question is, how much are these 21 days worth to you. What you describe is typical in banking and a result of how the banking system works.
Cryptocurrencies will solve these issues. However your customers won't use bitcoin much.
Nonetheless you could accept bitcoins (and even other cryptos). There are a few payment providers that allow you to accept bitcoin and get EUR in your bank account right away (so you are not subject to the exchange fluctuations).
Of course you can also simply accept bitcoin and exchange the money yourself when you have to.
Anyway, check out these companies:
And there are some other ones in EU. I am sure if you ask how to accept this there will be people here to help you.
I think what you would have to do however for it to be effective is give customers a discount when they pay in cryptocurrency, otherwise very few will likely use it.
"The question is, how much are these 21 days worth to you. What you describe is typical in banking and a result of how the banking system works."
To me typical banking means "sheet". For example, in England I got 100 pounds for opening and using a student account (nice example of typical customer care)
Back in Spain I am told I have to pay 4 euros to get cash from a cash machine (excuse me??????)
Typical is far away from fair or acceptable.
I forgot to mention it's the SAME bank
Different countries, different rules.
But yes, Spain is extremely expensive. I live on the Canary Islands which is Spanish territory and have made similar experiences.
Thanks for stopping by, Philly!
My core challenge is the acceptance of the payment system I use.
I by myself may switch to bitcoin, but my customers wouldn´t follow me.
PayPal is THE worldwide accepted digital payment platform right now. There is bank transfer and PayPal, that´s at least the small world my customers live in. Plus: My target group is not mainly composed by early adopters, it´s the complete opposite.
Yeah man! PayPal is the DEVIL!!
21 days! And they will be fighting against the big money makers.... Good luck to them
I don´t think they can be retaining money from the US government, for instance, which also uses PayPal services. I paid my ESTA application with PayPal some days ago.
Thank you! :)
This royally pisses me off. Thank goodness Crypto Currency was the answer for my business. We only have a few clients who are still using Paypal.
Lucky you! I am not sure if I will be able to use crypto in my business soon. But I will definitely check the alternatives recommended here by the other users. Viva la community! :-)
Thanks for your kind support, Randy!
Great overview of what is going on with these 'money handlers' - don't know if you read a recent article @badquakerdotcom about Rent-Seeking and Wealth Desturction...similar vibes!
Oh no I haven´t seen that one yet. Thanks for the tip, I will have a look at it! And thanks for stopping by and taking to time to give some feedback :)
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hi
Maybe I missed something. How is PayPal a monopoly? They aren't the only payment processor around. Also, I think one of the features of PayPal is they try to fulfill the role of an escrow account for transactions. They can only do that by holding funds long enough to allow for disputes. By using cryptocurrency alone; that feature is lost. Anyway, I don't know if this would help you at all, but I just read this blog post for another company that is a money transmitter. see: https://uphold.com/en/blog/posts/uphold/payzing-integrates-with-uphold-to-help-online-merchants-and-ecommerce-platforms-reap-benefits-of-cloud-money
Unfortunately that western union /bitcoin banner is false now. And we all understand why the founders of paypal are called the paypal mafia.
paypal is a ridiculous ripoff. And they are definitely not the only alternative.
If you need to accept funds, use stripe or square. you have way better access to your funds, a better proccessing rate, and a better alternative to make sales to those who don't accept crypto. Stripe has pretty good btc proccessing too.
Also, the 21 day thing has been around forever. Something happened on your account that triggered it (or just a periodic review).
IMO, its pretty absurd on a platform that wants to increase engagement for a top witness to be DVing a helpful comment without explanation.
Hi guys, i'm sorry I have unwittingly downvoted your comment. I have a follow bot running specifically for @kingscrown via the Streemian.com. But I was under the impression that I had setup my bot to not follow downvotes.
I am really sorry this happened. Unfortunately I tried to reverse it now, but the payout occured and I can't remove my downvote.
If you repost your comment I can upvote that one instead. Again, sorry for this. I'm looking into my Streemian.com settings right now.
Thanks for looking into it and working it out, it's appreciated :)
I'd like to hear that explanation? This comment might actually solve a large problem for me...
You may ask @roelandp and @kingscrown directly to solve that.
Yes, I spoke to @roelandp, he said he would look into it.
i did the downvote, didnt know roel is following my downvotes
since i almost never downvote i wasnt aware of this. will be fixed
He let me know, thank you.
80% of my market is German and the remaining 20% are distributed all over the world. I definitely need a service that is widespread and commonly used. Do stripe and square fulfill that need?
January is the strongest month, but that was the only 'anomaly' during the last weeks.
stripe is everywhere, and they definitely have a strong presence in EU countries. Theyre strictly credit card acceptance (though they do now have a btc plugin), but for most businesses they settle in 2 days with money in your bank account.
Also, they do all the PCI, so you don't have to worry about taking or storing your customers credit card info. You just plug a little javascript checkout button into your website and presto.
Its tough to know what the anomaly was... it might have been your monthly volume. It might have been a single customer that sent you money then did something bad later. It might have been a single customer that sent you money that came from someone else who sent him money that did something bad. Its very easy to get paypal pissed at you. And in fact, youre pretty lucky. Typically, that email says you get the first 500 bucks immediately, and have to wait for the rest. I can only assume that you have significant volume to justify a 25K limit.
That sounds very interesting to me! I´ll definitely check out stripe, though. Thank you for the tip!!!
The volume is fine, that´s actually not the problem :) Even though I am willing to ensure not losing too much of it paying unnecessary fees to a service that isn´t really a service. Plus: I only work with pre-payment, which means that no package is sent before having registered my client´s money. Therefore I need a quick handling. Besides PayPal I have a regular bank account. SEPA transactions of clients which are done by Friday usually cannot be displayed on my account before Tuesday of the following week. That´s crazy but our current financial world...