2010 Nov 10
student Neda in BCS555 at Seneca made an informative video about how PayPal
works and some of the issues
|Security||Pros and Cons|
|a system which allows subscribers
to affect payment by transferring to the vendor, amounts from a bank account,
or a debit from a credit card.
EBay acquired PayPal in Oct
|Types in email address, chequing account number, or credit card info, and they become a Visa merchant.||Vendors are not really stores, but rather individuals selling/auctioning items. In the case where goods are to be sent from the vendor, items are sent once PayPal confirms payment made to them.||No involvement.||Your account is automatically insured for up to $100,000 at no cost to user. Insurance is provided through Travelers Property Casualty Insurance.||In the beginning only available to US customers, since EBay took over, it is more popular. Used to take approximately 2 weeks to receive payment if using chequing account.|
|The screen capture to the
left shows that although PayPal has become more popular through the exposure
it has received at EBay, it is suffering from some negative publicity as
a result of a scam in March 2003.
"Recipients are asked to
provide their PayPal account information, credit card number, and bank
account number using a form in the body of the e-mail message. A button
is provided to "log in" to PayPal's site and update the information.
The message is designed to look like it was generated by PayPal, using
graphics from the PayPal Web site as well as fonts and colors similar to
legitimate PayPal correspondence."
explains the story of a person who almost got caught
""It was formatted really nicely. It had the right colors for the PayPal site and there weren't any obvious grammar mistakes," said Karawynn Long, a writer and Web designer in Seattle who received one of the apparent scam e-mail messages. Long was almost fooled by the message into entering her account information. "The subject of the e-mail was odd. But it was early in the morning. Pre-coffee," Long said. Searching for the Source Suspicious of being asked for her confidential account information, however, Long used her e-mail program to view the message's HTML source code. Her search revealed that information submitted using the form would go to a host server with a domain name ending in.ru, the domain suffix for Russia, according to Long. "When I viewed the source I could see [the scam], but how many people view the source on their e-mail?" Long said.
The screen capture to the left shows a Reuters story carried by Yahoo April 1st, 2003 about PayPal being in trouble with U.S. government regulations
|PayPal is owned
by eBay. "Silicon Valley-based eBay said it received a letter on Friday
[March 28th, 2003] in which the U.S. Attorney for the Eastern
District of Missouri accused PayPal of violating a provision of the USA
Patriot Act. The provision prohibits the transmission of funds that are
known to have been derived from a criminal offense, or are intended to
be used to promote or support unlawful activity. The prosecutor
also said the company could be forced to forfeit the money it received
in connection with the alleged illegal activity and that it could
also be criminally liable."
"Congress passed the Patriot
Act one month after the Sept. 11, 2001 attacks on New York City and the
Pentagon. The legislation broadened law enforcement powers, especially
to combat money laundering that is believed to help finance terror
"I use Paypal for almost all my internet transactions of watches. Buying and Selling. I prefer to be paid by paypal as the money is there instantly and I can ship the product. When buying the money is transferred to the seller and he can ship to me. Never had one single problem.. Tell your students though, the rule of thumb regardless of method used for transferring money is "know the buyer",..."Know the Seller". Many deals have gone bad (even though money was transferred) because the product was not represented properly."
"Ignoring all the ways you can lose your money by accepting paypal (buyer chargebacks etc.), bottom line is that paypal is a very expensive, but convenient way to exchange money. Fees are about 3%. For low $$ transactions, say <$100 I might live with a $3 fee to get the cash, avoid "check's in the mail" BS etc or know the seller got my money.
For larger $$ transactions
I prefer money orders. It costs about $1 per $1000 to buy a USPS money
order (usually regarded as safest for both buyer and seller) and
$14 to Express Mail it. $16 total for next day delivery, plus a drive to
the USPO [United States Post Office]. So breakeven between Express Mailing
a USPS MO and paypal is about $500. For a $1500 watch's $45 paypal
fee, you could send the MO and pay for FedEx shipping of the watch!
Now I have bought a $1400 watch with paypal (seller paid fees) and sold
a $1000 watch with paypal (buyer paid fees). But I won't do it again.
not all opinions are positive
"They started out a nice little company a few years ago. However everything has been downhill ever since. Fees are constantly on the rise. Customer service is crap. It is very seller-unfriendly. Here is why I dislike Paypal:
1--Someone used my account without my persmission. I reported it to Paypal and what did they do? Nothing. They told me to report it to my credit card. So I report it to my credit card and what does Paypal do? Suspend my account until they review it. So for over a month now I have not had access to my account. I call them but they seem pretty clueless as to how long the review process will take. In the meantime, I have a balance of almost $1400 that I can't touch. So how is that supposed to be user friendly?
2--Paypal makes its money at the cost of the sellers (whom should be their #1 priority to begin with). Sellers hate to use it because they get charged about 3% commission but if they don't use it, they lose buyers. Some sellers accept it at "buyer's charge" but that only works on sale boards (such as TZ & Watchnet). Try stating "Paypal accepted w/ fees" on eBay and they will close your auction right away (cause eBay now owns Paypal as well).
When I do sell watches, I
do offer my buyers the option of using Paypal (even now I can use my friends
account). However I will throw in some kind of bonus if they send
a check/money order (free shipping or extra strap ...)"
"I don't use Paypal and have no intention of starting. The lack of using Paypal hasn't seemed to slow down my buying, selling and/or trading watches. In your quest for the truth of Paypal, you might direct your students to
www.Paypalsucks.com. There they will find many interesting stories of how people have been victimized by that system in real life. I know that one noted watchseller, a doctor by profession, won't use Paypal since he was scammed out of a watch. If using Paypal is a requirement for me to purchase your watch, then I will respectfully decline. On the other hand if I must use Paypal to buy your watch, then you will need to find another buyer. Checks, money orders, and wire transfers are quite sufficient for most hobbyists, or at least it seems so to me."
Alternatives to PayPal
" sold an item to a buyer in Japan at 10:00 pm edt. He immediately e-mailed me and asked if he could wire the funds to my bank account, since it was daytime in Tokyo. Half an hour later the wire was done, and when the money hit my account the next afternoon, I shipped. Fast payment, fast shipment, lower fees than Paypal would have charged (since my bank does not charge for receiving wires)."
"M-commerce as you mentioned in class is the latest technological development and Paypal is making sure its jumping on the bandwagon early. The service is to be launched in the United States, Canada and Britain in a couple of weeks [April 2006]. Hopefully this will help pushstart M-commerce in Canada as it has been slow in development in Canada.
new feature allows users to transfer money and pay either through the use
of SMS where they send a SMS and a PayPal computer calls back the customer
for them to enter their PIN number, or the customer can simply call and
then enter their PIN number. Through this new service what Paypal
is in essence doing is making cell phones into digital wallets. A
financial consulting analyst named Dan Schatt commented that this move
is excellent because it will create interest that a mobile phone is for
much more than talking. However I think the industry has been proving
that cell phones are diverse from the beginning by adding text messaging
and then cameras, Internet access and so on.
article talking about the launch of this new service can be found at:"
for Tara - "represent"
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