PayPal: Dead Man Walking
“Bank customers of participating financial institutions will have the option to select a Visa account as the destination for funds when making a personal payment. By simply entering the recipient’s 16-digit Visa account, email address or mobile phone number, consumers can send funds directly from their bank account to a recipient’s Visa account.”—Visa (16 March 2011)
Draft Media Release re PayPal
“It is with great sadness that eBay’s Chief Headless Turkey, John Donahoe, announces the probable demise of eBay’s most ugly daughter, PayPal. Donahoe says that PayPal is expected to be soon stricken by particularly virulent strains of Visa/Mastercard simplified “online” payments processing, and these afflictions will be greatly aggravated by PayPal’s lack of any direct financial institutions support and a great deal of PayPal merchant dissatisfaction, particularly with respect to PayPal’s grossly unfair, “all responsibility avoiding” user agreement, most primitive risk management processes, and grossly unprofessional, buyer-biased and fraud-facilitating (indeed, effectively non existent) transactions mediation—to name just a few of the problems that PayPal “merchant” payees have to endure.
“Donahoe says that after such affliction PayPal’s health may be expected to deteriorate rapidly and, if ultimately not completely incapacitated, will most likely be kept alive only with the aid of the “life support” provided by eBay’s mandating the use of PayPal on what little there will eventually be left of the Donahoe-devastated eBay Marketplaces. There is no cure for this condition and the “eBafia Don” is particularly saddened by the inevitable presumption that it is unlikely that PayPal will be able to continue to underpin the eBay Marketplaces’ deteriorating revenues too far into the future.”
Yes, it’s a send-up but, still, it accurately describes PayPal’s unregulated, most unprofessional, “clunky” operation. Had the developers of the original “bankcard” concept ever behaved the way PayPal behaves, towards its payees in particular, credit/debit cards would never have gotten off the ground, and we would still be paying for all our purchases with bits of paper and little metal discs.
PayPal is not a “bank” and is not prudentially regulated as are the banks. PayPal has been forced down the throats of eBay merchants—much to the distaste of most of them. Without eBay’s mandating the use of PayPal it would still be little known (and conversely, without PayPal, the eBay Marketplace would be going down the toilet at an even faster rate than it presently is) and, regardless, PayPal is the most despised, unprofessional, unscrupulous, wire fraud-facilitating payments processor on the planet.
No thinking person should ever allow PayPal to draw funds directly from a bank account. PayPal should only be given access to funds via a retail bank-branded Visa/Mastercard credit card account: that is the only way to get any protection from PayPal’s fraud-facilitating practices and to get any effective transaction mediation—and then not from PayPal but from your retail bank via their real credit card transaction-mediation process.
All the payments processors that do not have the direct underlying risk-managing and real transaction-mediation support of the retail financial institutions (the “banks”) that are ultimately involved at either end of each transaction—as does have the likes of Visa/Mastercard—suffer all the same material handicaps that PayPal suffers. The “banks” may be disliked by some but they at least supply a “professional” payments processing service.
Undoubtedly, if and when the retail banks decide they want to take the final step (and probably the greater risk and extra work involved) and offer a simpler, “online” payments process, similar to that which PayPal offers, to the many amateur merchants who may otherwise not want (or not qualify for) a bank credit card “merchant” account, and the banks offer that service in their usual professional manner via the likes of Visa/Mastercard, the clunky PayPal will very quickly disappear into the history books—there is nothing surer than the sun will rise in the morning.
Enron / eBay / PayPal / Donahoe: Dead Men Walking.