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PAYPAL, the eBay-owned company that
facilitates electronic money transfers
to pay for goods and services online,
has earned the nickname “Payfraud” from
some disenchanted customers for its
approach to fighting fraud.
The company, which
has 63.8 million registered accounts in
45 countries, is promoted by eBay as
“safe, fast and easy”. One online
shopper in three uses PayPal in the UK,
but a growing number are closing
accounts over security fears.
Concern is growing mainly as a result of
fraudulent “chargebacks”. A chargeback
is a legitimate mechanism which allows a
buyer to retract a payment made by
credit card if he does not receive an
item or if it is not as it was
described.
But some buyers are
issuing chargebacks after they have
received the item in good order. A
payment is made, the seller is informed
by PayPal that it has received the money
and the seller sends the item to the
buyer.
The buyer then
requests a chargeback, which PayPal
debits from the seller’s account. The
seller may dispute the chargeback, but
unless he can prove that the item was
delivered to the buyer in good order, he
may lose both the money and the item.
Geoff Iddison, chief
executive of PayPal (Europe), says that
PayPal does everything in its power to
prevent this kind of fraud and is
working to improve users’ understanding
of it. “It is important for users to
understand that PayPal is an e-money
transfer service, not a credit
facility,” he says. “We have a
protection scheme for buyers and sellers
and back-end systems that enable PayPal
to detect fraud risk before it occurs.”
PayPal advises
sellers who are worried about becoming a
victim of a fraudulent chargeback not to
accept credit card payments and to
arrange another method of payment.
An operator of the US
website PayPalSucks.com says: “Overall,
PayPal is great, until you have a
problem. Then it is a total nightmare.”
The website says that
the problem most users are likely to
face is a frozen account. PayPal will
freeze an account, pending further
investigation, if it suspects there is a
risk of fraud. This could be if a user
has more than one account, or if a
seller has sold an item that is commonly
sold fraudulently. Consequently, many
innocent users could have accounts
frozen.
REBECCA O’CONNOR |
