(Photo credit: Wikipedia)
PayPal, the on-line payment service long associated with its owner, e-Bay, made the headlines in the Business Section of the New York Times, and like many companies these days, not in a good way. It’s actually not the first article about the company’s questionable fraud security practices, but it is certainly the biggest so far.
Similar to most credit card companies, PayPal uses a system of complex mathematical algorithms looking at millions of transactions, attempting to detect a pattern that might indicate fraud. In one example cited, if you had a series of transactions of $30, and a transaction of $3,000 appeared, the algorithm would kick it out, and PayPal would automatically freeze the account. The cash would still flow into the owner’s account, but the rub is that PayPal will then refuse to release the money, often for months’ at a time.
Victims noted in the articles range from a $1 million account who services bike and foot races, to other small business owners and individuals, start-up companies, even charities.
Katherine Hutchinson, senior director of risk management at PayPal, said “situations where people had to wait to reach their funds were rare, affecting about 2 percent of accounts.” PayPal claims 113 million accounts, world-wide.
Four points come immediately to mind:
1) PayPal sees nothing wrong with having 4 million dissatisfied customers?
2) According to the piece, some customers have even notified PayPal of expected sudden spikes in planned activities. Their calls went unheeded, their accounts frozen anyway.
3) PayPal claims it has hundreds of mathematic scholars with Ph.D’s working on software to prevent fraud. Perhaps the money would be better spent on humans who could make these fraud prevention decisions? Its long been proven that machines do not make better abstract decisions than humans.
4) Many feel PayPal is guilty of the more sinister motive of keeping the money in their hands for longer periods to earn additional returns, at customers expense
PayPal is Not Alone:
Customer services (Photo credit: gordon2208)
We all have our own horror stories with large corporations, from dealing with automated phone systems that put the caller into such a maze, the only way out is to hang up, to cable companies incessant rate increases and blackouts, telephone installers who never show up, even after the phone company insists on a 4 hour window for a 10 minute job.
What companies lose sight of in their insular worlds, is overpriced companies providing customer-abusing service always, without exception, attract new companies, new competitors.
A Few Examples:
Cable companies like Comcast have lost market share to satellite companies for some time. But now, Time Warner Cable, Direct TV and Dish, who routinely lead “The worst companies for customer service” list, are all losing in the total subscriber metric over this last quarter. These infamous customer abusers are losing out to the internet, where streaming network content is not only free, but usually devoid of commercials.
Image via CrunchBase
And internet providers are not immune to putting their foot in their mouth, and chewing vigorously. Netflix infamously raised its rates 60% a year ago, and handled it as badly as any company possibly could. over 800,000 subscribers promptly left the service. Its explanation, attempts to split the business into two parts, even the proposed web site were PR disasters. Ultimately, Netflix published a mea culpa and price rollback. Meanwhile, companies such as RedBox and Amazon quickly stepped into the turmoil, offering better services at cheaper rates. Netflix may recover, but their stock will never again sell for $300 a share.
Customers of large credit card companies like Citi, Bank America and Chase, for example, are voting with their feet, leaving the overpriced, fee-laden companies for member owned Credit Unions and smaller, lower cost banks. The groundswell against outlandish fees rose to such a fever pitch last year that Bank America was forced to roll back a $5 debit card fee.
Perhaps its the huge influx of MBA’s with no practical experience flooding the corporations with their “this is the way the world should operate” mentality; perhaps it’s company executives protected in corporate wombs and impervious to conditions consumers face today. Whatever it is, corporations seem more inclined these days to step on their tongues, and customers more inclined to run, not walk, to greener pastures where their business is appreciated.
Is a new wave of consumerism being formed? A recent article in Bloomberg BusinessWeek says no. I disagree. Time will tell.
But that’s just me…
Related articles
- PayPal Antifraud Measures Are Extreme, Some Users Say (nytimes.com)
Good post. Why does customer service appear to be the one thing lost as companies concentrate on getting new customers while bailing on existing folks. It’s seems counterintuitive yet true – all too many companies treat customers like they are a bother. I’ve been doing my own market reaction and sending my findings directly to the sales and marketing departments of companies providing poor service. I now send written letters and email with a running total of all the people I have specificakky encouraged to STOP patronizing their business.
I have sent my letter to 4 companies and received direct comment from all 4. The sales and marketing folks seem much more engaged than the customer service departments.
I enjoyed your post.
Excellent idea.have you noticed how many companies no longer supply their address or phone numbers on their websites? It’s like they really don’t want customer interaction-just another bother.
Thanks for sharing your comments.
I was just talking to a friend about that. Human contact is frowned on because they represent cost. Lost on these companies is the fact humans also represent customer service. I have simply made the decision to avoid those that seem to want to avoid me.
I’m watching the Re-Pub Convention to see if I can find someone willing to work together for the good of the entire country.
I make every possible effort to buy local, even if a few cents more, I know the seller and they know me.
As for the RepubliCANTS, good luck on that. Even McCain, noted for working across the aisle, came out like a tiger tonight attacking Obama.
Nice article. Engaging in fraud in the name of preventing it…
Might I add: With millions and millions of account holders, Paypal does its part to encourage population growth for its own sake! Of course, the context of this statement must be understood before I am labeled a madman:
http://toddgarlington.wordpress.com/2012/08/13/paypal-culture-commentary-2/
I don’t think you’re a madman, although in fairness, the evidence either way is slim.
I actually see advertising directed at wherever the current generation’s interests lie, and today I believe it is self. What we think makes us happy, what we think we need to have status. Today, its the all about “me” message, and the necklace buys a lovely woman by our side, which makes “me” look good. But you have a very interesting premise.
Thanks for writing.
I have not taken the time to figure out what Pay Pal is.
An easy way to understand PayPal is a clearing house. It takes the payments from your buyers, if you are the seller, and puts them into an “escrow” type account, and once the buyer and seller are happy, then deposits the funds directly into your checking account. If you are the buyer, it takes the money from your credit card, and deposits it to the seller, as above. The problem occurs if you are new to PayPal, or a regular business, who suddenly gets what it considers a questionable transaction. It will freeze your Entire Account, even beyond the questioned transactions sometimes for months at a time. You as the seller are left with no funds to access. And it does it without warning or without contacting you.
Barney
I suspect that the double-edged sword is a small human staff making decisions and a large computer algorithm decision making element. On the one hand, without people’s brains making decisions, it is difficult to over-ride the algorithm in situations that do not fit the norm. But, adding human over-rides leaves room for corruption and exploitation (i.e. favoritism to fixing the market to embezzlement…)
Absolutely correct. But as it currently stands, calling/contacting with evidence as to the integrity of the transactions in question make no difference. It isn’t until the computer says it is ok, that funds can be released. There has to be some kind of medium, a balance between the two.
I have often thought it would be great to give a company CEO a phone, and ask him to call his office, using only the info available to the general public. Perhaps then some of the phone menu hell would go away.
Thanks for writing
I am an LONG TIME Time Warner Customer who is now FURIOUS………Had scheduled appt with technician to come out today, took time out of MY DAY on a Saturday morning when I could have gotten paid to work time and 1/2 at my job and when the tech called at about 8:30am, he was rude, condescending and laughed when I said my internet was “intermittent”. Then he stated “what do you want me to do about it then?”. I told him he has an appointment to be here, he stated “are you home now?”, I told him he was calling me on my home line so yes, he then said “lady, I don’t know where you are right now”. At that point, I hung up. I then spent the last hour on the phone with various offices in Time Warner (to include dispatch twice) and offered nothing other then “we can send the exact same person who treated you rudely out today” or make me take more time out of my schedule to wait on another weekend to another rude, incompetent technician to come out? My son has spent over 6 hours in the last 4 days on the phone with incompentent “advanced technical support” team for IT (who were all cursing, laughing and talking rudely about other callers in the background) and the last one told him to have him “mommy call in” My son is 16 years old and can follow basic computer setting troubleshooting steps that they could have easily walked him thru but they refused to because they are too lazy.
So……….Time Warner is unresponsive to customer, they never call anyone back who has a complaint and they don’t care that they are losing customers left and right because they have the next “sucker” waiting just around the corner. I will pay for someone to come out and troubleshoot this issue myself, send Time Warner the bill and trust me, they will pay it or I will see them in court.
And if you have a Time Warner employee scheduled to come out into your home, watch out and watch their every move. Based on the level of professionalism I have received in the last week, after being a LONG TIME Time Warner customer……….Time Warner doesn’t care and now I continue to have spotty internet and being treated like dirt by Time Warner emplyees. And now, as a single parent, I cannot get my son’s schedules online, school grades, etc unless I pay someone $50 hour to come out to look at this because Time Warner hires irresponsible field techs who I would not trust around a dog at this point. And how am I suppose to afford this? This is GROSS NEGLIGENCE and CORPORATE IRRESPONSIBILITY on behalf of Time Warner. And I can guarantee you no one will try to contact me about this complaint.
I’m sorry for what you are having to go through. Time Warner, Comcast, et al came in to replace the Phone Company because of its terrible service, and now they are doing the same thing. Satelite companies are beginning to replace cable, and they are falling down on the job, also. Ironically, we left the big city along with ATT and Comcast behind when we moved to the mountains. We are now served with a local phone company, that gives great service at competitive rates. We had internet problems for a few months, but every time I called, someone came when they said they would, often the same day, and they kept working on the problem until one tech discovered the box coming into the house was defective, and on his own initiative, replaced several of the components, even though they weren’t called for on the work order. Since that time, the internet has been at least twice as fast, and has not gone down once in three months, whereas it was crashing sometimes several times a day. I guess my point is that the little guys are great at service, the big guys only after the buck.
If your state has a Public Utilities Commission, or something like that, a detailed letter to them, with a copy to the president of Time Warner, might help. I had an issue several years ago with the local Bell company (in the same big city) and a letter to the PUC got more response than countless letters and calls to the company. Might be worth a shot.
Thanks for sharing your issues and for writing. I appreciate it
Good luck
Great post. I count myself among the 4 million PayPal users that have been screwed by their questionable “fraud prevention” practices. My business partner and I switched to a new payment provider after we lost hundreds of dollars to PayPal’s stupidity on multiple occasions.
Same here, though I had two fraud attacks which PP was really indifferent to.
Thanks for writing/ following
I don’t have a paypal account. However, someone opened one in my name, along with a bunch of other accounts. HomeDepot caught the fraud and contacted me so that I was able to cancel everything and not be harmed. PayPal was very good about canceling the account and saying I owed nothing, and that was for close to $4000 worth of stuff. They were prompt and congenial in all my dealings with them.
Congratulations, you did very well with them. That certainly was not my experience with them, nor 4 million others, according to the newspaper article.
Thanks for sharing
Good post. Voting with your feet is the most democratic of all solutions. We have a dearth of customer service in the world, so we consumers have a heavy hand in navigating our own customer service. It requires a tenacious form of diplomacy to gain the appropriate solution to a problem. I do not personally mind banks questioning transactions, as I have had three separate ID theft attempts. The banks discovered the attempts and let me know about them. And, they absorbed the credit card expenses when someone used my card. (Note to others – use a credit card for distant transactions rather than a debit – it is your money on the latter if there is fraud). Yes, they can be over-zealous and it is important to notify them when traveling abroad or doing something unusual. Yet, please remember the wolves are at the door.
I have a great association with a company in San Antonio, called USAA for military people. Been with them 42 years, and they have every possible piece of my financial business that they deal in. In the last 5 weeks, I’ve had two fraudulent claims on my card with them, in both cases they called me, I verified they weren’t my charges, they reversed the charges and cancelled the card numbers immediately. Over the phone, no hassles.
PayPal operates differently. They decide there is a suspect transaction, and freeze the account, often for months on end. As the owner, no matter what you try to do to verify the account, PayPal keeps it frozen. Thats the big difference. Even if you notified them in advance of unusual activity, they still freeze the account, with all your money in it, not just the suspect amount. PayPal receives money into your account from your business, which is not what a credit card does, so it is in a different business.
No doubt about the wolves, I origionally cancelled my accounts with PayPal several years ago when I was doing business on eBay, because I got hit twice with bad transactions, and PayPal was totally indifferent to the problem.
The reference article from NYT notes 3-4 new companies coming into the field because of the issues with PayPal. Thats my point, when companies become too arrogant or thoroughly begin to believe their own PR, then competitors flock into the field.
Thanks for writing
Thanks for taking the time for the further clarification. I have never used PayPal, so I don’t have the same experience level. Arrogance is not consistent with good customer service. Isn’t this the same company whose founder is now running one of our new space age companies? Best regards.
Makes you just want to ‘cash and carry’ all your transactions. And, down at the local hardware store, I always get great customer service.
We’ve been voting with our feet for quite some time, now. I figure I’m only a miniscule fish in a huge ocean, but at least I know I’m doing the best thing possible.
It’s the very wisest feet that vote.
I completed a transaction using Paypal just this afternoon, and I remember feeling the same way that I always do before I press “finish transaction” – slightly uneasy!
I dropped PayPal a few years ago; I got hit twice with unauthorized charges, and they were “less than cooperative” in working it out. I am still uneasy with their whole model of having to have access to a credit card and a checking account. The NYT article I reference notes several new competitors coming on scene that aren’t so stringent.
Thanks for the comment, always great to hear from you