How did PayPal beat BillPoint from eBay

PayPal

PayPal, Inc [ˈPeɪˌpæl] (literally Pay friend, inspired by pen pal, pen pal) is a subsidiary of the US company eBay (acquired in July 2002), which operates an online payment system under its brand name. It can be used as a micropayment system and to settle medium and small amounts, for example when buying and selling online. According to the German website, PayPal has almost 210 million member accounts[2] in 190 nations. The company's headquarters are in San José, which is the European subsidiary PayPal (Europe) S.à r.l. & Cie, S.C.A. and is based in Luxembourg.

functionality

The PayPal account is a virtual account: the identity of the PayPal account is defined by the PayPal member's email address, so there is no separate account number. The account can be used to make payments to third parties and receive payments from third parties. PayPal acts as a middleman for the transfer and acts as a trustee for the duration of the transfer.

An elementary advantage of PayPal - as of other micropayment systems - is that payments made via PayPal are immediately credited to the payee, thus eliminating, for example, the usual bank transfer time. Purchases made in mail order or on eBay can therefore be paid for very quickly. This shortens the delivery time if the seller sends the goods promptly after receipt of payment.

PayPal members must register with their personal and account details and wait for the details provided to be verified. To do this, PayPal carries out a test transfer to the specified account.

After that, PayPal members can send money to any email address in the supported countries. If the owner of the email address does not have a PayPal account, PayPal will notify him by email that a payment has been received at this email address. In order to have access to the amount sent, the payee must be registered with PayPal or register as a new member.

Furthermore, PayPal can be used via a web-enabled mobile phone. The support of web-enabled pagers and other handheld devices depends on the authenticity of the assignment to PayPal members.

The information of the participants is protected with SSL with every transfer. The financial data of the PayPal member, such as the credit card or account number, remain hidden from the payee, which is intended to prevent misuse of this data by the payee.

To send money to another participant with PayPal, there are several deposit options:

  • You can send money directly from a PayPal balance. In Europe, for example, the PayPal account can be topped up with a credit via normal bank transfer using a specific deposit code. The account-specific code provided by PayPal must be entered in the "Purpose" field of the transfer. Topping up via bank transfer usually takes about three days, but sometimes it takes significantly longer.
  • A credit card can also be used for payment. The money does not have to be paid into the PayPal account first, but is immediately credited to the recipient.

There are other payment options for German PayPal accounts:

  • It is possible to make direct debit payments from your own account. In this case, the amount is immediately credited to the payee's PayPal account and PayPal debits the amount from the payer's bank account within the next few days.
  • You can make the deposit directly via Giropay from your own bank account. The value date on the payee's PayPal account is immediate.
  • Furthermore, some payments are only possible via Direct debit with security check possible. If the amount is successfully debited by PayPal from the payer's bank account, the value date will take place after receipt of payment on the payee's PayPal account.
  • Payments via bank transfer bypassing the top-up process are also possible. A transaction-specific code is specified here. If the transaction-specific code is entered in the “Purpose” field of the transfer, the value will be entered after the transfer is received on the payee's PayPal account.

Withdraw credit from German PayPal account (transfer to reference account):

  • A credit on a German PayPal account can be debited to the German reference account stored in the PayPal account. This happens through a "reversible direct debit", which means that the house bank of the reference account is allowed to collect the amount of money via direct debit from the PayPal user account (PayPal then has the option of a return debit for 13 months). According to PayPal, the direct debit amount will be credited to the bank account within two to four working days.[3] According to PayPal, the credit may take up to seven working days. Only after seven working days does customer service deal with credits that have not arrived.[4]

PayPal's receivables management is handled by the Hamburg law firm in Germany ksp. Lawyers transfer.

Company history

PayPal headquarters in San Jose

PayPal goes back to the merger of Confinity and X.com in March 2000. Confinity was founded in December 1998 by Max Levchin, Peter Thiel and Luke Nosek in Palo Alto, California. It was originally a payment method and cryptography company for the Palm Pilot. Both Confinity and X.com started their websites in late 1999. X.com was founded by Elon Musk in March 1999, initially as an internet financial services company. Both companies had their offices on University Avenue in Palo Alto. Confinity's website was originally focused on reconciling beamed payments from Palm Pilots with email payment as a feature. X.com's website initially included financial services with payment via email.

At Confinity, many of the first employees were former employees of the student newspaper "The Stanford Review", which was also founded by Peter Thiel. Most of the early technicians came from the University of Illinois at Urbana-Champaign, where they had been recruited by Max Levchin. For X.com, Elon Musk recruited a wide variety of technical and business personnel, including many closely linked to the company's success such as Amy Klement, Sal Giambanco, Roelof Botha, Sanjay Bhargava and Jeremy Stoppelman.[5]

To block potentially fraudulent access through automated systems, the folks at PayPal devised a system that required users to enter numbers that were presented to them on a fuzzy image they called the Gausebeck-Levchin test.

eBay watched a number of online payment companies grow and saw that they matched online auctions. eBay bought Billpoint in May 1999, before PayPal existed. eBay made Billpoint its official payment system, calling it "eBay Payments", but cut the functionality of Billpoint by only allowing it for payment transactions for eBay auctions.

This is why PayPal was mentioned in auctions more often than Billpoint. In February 2000, there were approximately 200,000 daily auctions promoting PayPal's service. PayPal managed to become the first dotcom to successfully go public after the September 11, 2001 terrorist attacks.

One possible explanation for the emergence of PayPal are the peculiarities of payment transactions in the USA. Because of the long prohibition of cross-state transfers in cashless payment transactions, checks and credit cards predominate, which are not very suitable for the settlement of obligations from online transactions. In comparison, in Germany, for example, an invoice is usually settled by bank transfer. Due to the regulation of European payment transactions (IBAN / SWIFT), EU transfers are largely free of charge.

Acquired through eBay

In October 2002, PayPal was acquired by eBay for $ 1.5 billion.[6] PayPal was previously the most popular payment method of more than half of eBay users, and the service rivaled eBay's subsidiary Billpoint. eBay has since phased out its Billpoint service in favor of PayPal. Most of PayPal's major competitors have been discontinued or sold; Citibank's c2it service closed in late 2003 and Yahoo's PayDirect service closed in late 2004. Western Union announced the closure of its BidPay service in December 2005, but then sold it to CyberSource Corporation in 2006. A number of competitors who offer some PayPal-like services, such as Wirecard and Moneybookers, are still in business.

PayPal's total payment volume, the total value of transactions in the fourth quarter of 2006, was $ 11 billion, growing at a rate of 36% per year. The company continues to focus on international growth and the growth of its merchant service department to offer online payment services outside of eBay.

As of October 2008, payments on eBay in the US are no longer possible by check or wire transfer. Customers now have to pay by credit card or PayPal. eBay justifies this step with increased buyer protection.[7] However, this also increases the sales of eBay and the subsidiary PayPal.

PayPal in Germany

A German-language PayPal website has been available since February 2004. PayPal was integrated into the eBay online marketplace in June 2004. PayPal now has over 15 million customer accounts in Germany alone (as of August 2011).

PayPal users in Germany can pay by direct debit, credit card, online transfer (using giropay) and credit on the PayPal account.

In October 2010 PayPal acquired a stake in the German factoring company BillSAFE and since November 4, 2010 has also been offering its users the "on account" payment method.[8]

Bank status in Europe

On July 2, 2007, PayPal changed its status in Europe to a bank after receiving a banking license for Europe from the Luxembourg banking authorities. All PayPal accounts were opened on that day by PayPal (Europe) Ltd. transferred to PayPal Luxembourg. This also resulted in a revision of the terms of use. PayPal has since been regulated by the Commission de Surveillance du Secteur Financier (CSSF). A credit balance on a PayPal account is not protected by the deposit guarantee system. The change of account from PayPal (Europe) Ltd. to PayPal Luxembourg took place automatically. The exact name of the new company is "PayPal (Europe) S.à r.l. & Cie, S.C.A. ". The fees and buyer protection were not affected by the switch.

fees

PayPal offers two account types in Germany: PayPal private accounts and PayPal business accounts. The account named PayPal buyer account is not available in Germany.[9]

There is no basic fee, payment is free for the buyer, only the receipt of payments in Germany costs fees for payments from within Germany as well as those from abroad.[10] The fees are identical for all payment methods. Credit card payments can also be received by all account holders at no additional cost. The same conditions apply to private and business accounts, so there is no differentiation in terms of fees between customer groups; the business account only has a larger range of functions for the more convenient management of payments.

The current fees for a German PayPal account are:

  • Payments within Germany and the EU in euros: 1.9% + 0.35 EUR / payment. Payment received in Austria in EUR: 3.4% + 0.35 EUR / payment. These fees also apply to euro payments from Norway, Iceland and Liechtenstein to a German PayPal account.
  • All other payments: 3.9% + 0.35 EUR / payment (as of January 2010).

In addition, there is a conversion fee of 2.5% on the current exchange rate if a conversion takes place in another currency.[11] Business account holders with a turnover of 5001 euros or more in the previous month can apply for tiered preferential conditions.

criticism

eBay buyer protection

The buyer protection advertised by eBay when using PayPal as a payment option is essentially not a right that the injured party can claim from PayPal in court. In accordance with the PayPal buyer protection guidelines, PayPal alone reserves the right under point 4.2 to decide whether the seller has misled the buyer by the item description. PayPal excludes legal recourse against this decision.

In addition, buyer protection is often understood as meaning that you can simply cancel your payment in the event of fraud. This is a widespread mistake that PayPal also points out, because PayPal must first agree to a reimbursement after several weeks of checking. In some cases, applicants are required to submit supporting documents (by fax) or to notify the seller (even for small amounts) even after weeks; The latter in particular is difficult to imagine for sellers in other countries. In addition, the account of the injured party is first debited with the fees for the reversal (currently $ 25). According to its own information, PayPal tries to then invoice the seller for this fee. Also with regard to the treatment of data protection,[12] Identity verification[13] and rights of the individual countries are some concerns.[14]

Data comparison with suspect lists from the US Department of Homeland Security

Reports appear again and again in forums and magazines that PayPal blocks its users' accounts if there is even the slightest suspicion that the customer is engaged in terrorist activities, or if there is alleged suspicion of fraudulent activities. This also affects many innocent people who are then excluded from access to their credit. According to the 12/2006 issue of the computer magazine PC Professionell, PayPal's customer data is compared with lists of terrorist or drug trafficking suspects maintained by the US Homeland Security Agency. The similarity of the name with one entry is enough to be targeted by US investigators. Under certain circumstances, the account will be blocked and the user will no longer get their money for a long time. Instead, he is asked by email to provide official proof of his identity and to submit personal documents to an unspecified location in Omaha, Nebraska, USA. Copies of ID and credit card or electricity bills.[15][16]

Blocking of the WikiLeaks donation account

On December 4, 2010 PayPal closed the account of the Wau-Holland Foundation, through which a large part of the donations for the Internet platform WikiLeaks flowed, and gave as the reason for this Terms of Use Violation at and that one does not illegal activities want to support.[17] Hundreds of users canceled their PayPal accounts in protest. The foundation has taken legal action against PayPal. The background to this must be seen in the political pressure of the US government to make it more difficult for WikiLeaks to find funding through donations.[18] WikiLeaks had repeatedly published z. Some confidential or secret documents on US foreign policy, the Iraq war and the Afghan war caused a sensation.[19]

Lockdown of related person accounts

Furthermore, cases have also become known in which PayPal not only blocks the account of the person concerned in the event of a conflict, but also the independently managed account of a relative. Under German banking law, such a link between two accounts is not permitted due to the mere relationship of the owners, but the European PayPal subsidiary operates under Luxembourg law and occasionally refers to the fact that it is not a bank, but an internet payment service for which other regulations would apply .[20]

High fees

The fees are also repeatedly criticized because they are well above the usual fees of banking institutions. In August 2011 the fees in Germany were:[10] Receive money in euros from Germany or other EU countries (and Norway, Iceland, Liechtenstein)

1.9% + 0.35 euros

Receive money from other countries or in other currencies

3.9% + 0.35 euros

Convert money into another currency (e.g. dollar or British pound)

2.5% on the market exchange rate

management without order

Some time ago it was also announced that PayPal, without having been commissioned to do so, concludes legal transactions on behalf of customers.Specifically, PayPal GmbH has often canceled its customers' subscriptions to third-party companies, and in some cases payment was not yet due.[21] In Germany, this procedure constitutes a Appropriate management without a mandate and is forbidden. In addition, PayPal commits a Breach of contract according to § 280 BGB to the third company.[22]

In a published case[21] justified the PayPal GmbH to be able to cancel subscriptions, as this is in the "General Terms and Conditions" (GTC) of PayPal[23] is fixed. However, the management without an order is not even listed in those terms and conditions.

Enforcement of the Cuba embargo in Europe

In July 2011, complaints arose from various European online retailers who deal in Cuban products, in particular rum and cigars. Your accounts have been completely blocked and the account has been frozen.[24]

The company justified the decisions with a US trade embargo against Cuba from 1962. After an ultimatum to remove the goods from the range, the goods were blocked.[25] The implementation of this embargo is illegal under EU law.[26]

The drugstore chain Rossmann terminated its cooperation with PayPal due to the ultimatum, since in their view there is no reason for the practice of US law in Germany and since PayPal's request patronizes customers and deprives them of their free choice.[27]

Supported Countries

PayPal is available in the following 57 countries:

literature

  • Ernst Stahl, Thomas Krabichler, Markus Breitschaft, Georg Wittmann: Payment processing on the Internet - importance, status quo and future challenges. Regensburg 2006. ISBN 3-937195-12-2, 229 pages, over 80 illustrations, details on the study and management summary as PDF
  • Ernst Stahl, Markus Breitschaft, Thomas Krabichler, Georg Wittmann: Risks of payment processing on the Internet - significance, countermeasures and future challenges. Regensburg 2007. ISBN 978-3-937195-15-5, 209 pages, over 90 illustrations, details on the study and management summary as PDF
  • Markus Breitschaft, Thomas Krabichler, Ernst Stahl, Georg Wittmann: Secure payment methods for e-government . In: Federal Office for Information Security (Hrsg.): E-Government-Handbuch. Bundesanzeiger Verlag, 2004. Updated version May 2005. ISBN 3-89817-180-9, 144 pages, 43 figures, 32 tables, study as a PDF download from the BSI

Web links

Official websites

Critical articles and contributions

Article of the Munich IT law firm Keller-Stoltenhoff, Keller, Münch, Petzold

Contributions from c’t magazin.tv of the Hessischer Rundfunk

Article at Spiegel Online

Critical websites

  • Trap Internet - Article that shows the fundamental shortcomings of the PayPal system and shows how PayPal even represents a significant increase in risk, especially for sellers.
  • PayPal as an alternative payment method - Article that deals critically with the advantages for buyers and the problems and dangers of PayPal.

Individual evidence

  1. ↑ As of April 2009. [1]
  2. ↑ according to the official German website of PayPal at https://www.paypal-deutschland.de/presse/unternehmen.html
  3. ↑ PayPal Help Center: Withdraw credit from PayPal account to bank account.
  4. ↑ PayPalHilfeCenter: I have made a direct debit, but the money has not yet been added to my bank account.
  5. Article about X.com in "Valleywag" (February 2007). Retrieved January 26, 2011.
  6. ↑ Kane, Margaret: eBay picks up PayPal for $ 1.5 billion. In: CNET News.com, CNET Networks, July 8, 2002. Retrieved November 13, 2007.
  7. ↑ http: //www.heise.de/newsticker/eBay-will-in-den-USA-keine-Ueberweisung-mehr-zulassen--/meldung/116444
  8. ↑ http: //www.billsafe.de/templates/billsafe/content/onetoone_billsafe_rechnungskauf.pdf
  9. ↑ https: //cms.paypal.com/de/cgi-bin/marketingweb? Cmd = _render-content & content_ID = ua / ServiceDescription_full & locale.x = de_DE
  10. ab PayPal Germany: https://www.paypal-deutschland.de/haendler/paypal-fuer-haendler/vorteile/kostendienstleistungen.html
  11. ↑ The current PayPal fee overview for receiving payments can be seen on [2].
  12. ↑ PayPal data protection principles
  13. ↑ PayPal identity verification
  14. Caution customer! Background: Pay "safely" with PayPal - and 2200 euros are gone. c't TV (November 15, 2008). Retrieved January 26, 2011.
  15. ↑ Do we need PayPal? About the sense and nonsense of the online payment system: Customer data at PayPal is compared with lists of terrorist or drug trafficking suspects maintained by the US Homeland Security Service. it-recht-kanzlei.de, November 18, 2010. Accessed December 9, 2010.
  16. ↑ PayPal: The presumptuous paymasters: Anyone who trades frequently on the Internet auction platform Ebay gives a lot to the simple and fast Paypal payment system - until the account is blocked and one is suspected of money laundering. observer.ch, October 1, 2008. Accessed December 9, 2010.
  17. ↑ PayPal statement regarding WikiLeaks: PayPal has permanently restricted the account used by WikiLeaks due to a violation of the PayPal Acceptable Use Policy, which states that our payment service cannot be used for any activities that encourage, promote, facilitate or instruct others to engage in illegal activity. We’ve notified the account holder of this action. thepaypalblog.com, December 3, 2010. Retrieved December 8, 2010.
  18. ↑ Blocking of Wikileaks: US government puts PayPal under pressure: Paypal has blocked Wikileaks under pressure from the US government. A leading employee admitted that. Golem.de, December 8, 2010.
  19. ↑ PayPal announces it will no longer handle WikiLeaks donations, readwriteweb.com, December 4, 2010. Retrieved December 9, 2010
  20. ↑ "Beware of the customer!", C’t magazine, Heise online, on November 6, 2010. Accessed on November 10, 2010.
  21. ab “Unauthorized”, Georg Schnurer on September 3, 2007 in: c't Magazin für Computertechnik, Issue 19 (2007), pages 76ff., ISSN 0724-8679
  22. ↑ Dr. Martina Krügel, lawyer at the University of Hanover, quoted in: "Eigenmächtig", Georg Schnurer on September 3, 2007 in: c't Magazin für Computertechnik, Issue 19 (2007), page 77, ISSN 0724-8679
  23. ↑ PayPal Terms and Conditions: Subscriptions and Recurring Payment Guide
  24. ↑ Report of the Süddeutsche Zeitung of July 26th, 2011 "PayPal outrags online retailers - Why German companies are suffering from the US embargo against Cuba"
  25. ↑ Golem.de report from July 26, 2011 "Ultimatum - PayPal wants to push through the Cuba embargo in Germany"
  26. ↑ "The bank wins"
  27. Rossmann throws PayPal out after threats. golem.de, accessed September 9, 2011