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PayPal not as safe as everyone thinks?

PayPal Discloses High Rate Of Chargebacks
The Banking Channel

Oct 03 2001 : PayPal's move to file for an IPO at
this time, has mystified analysts, but may be
related to its USD 8.9 million in chargebacks from
unauthorized credit card use in 2000, which led to
a fine from MasterCard. In its filing, PayPal states
that its liability for chargebacks from fraudulent
transactions could cost it the right to accept
credit card payments, which comprised 50.5 per
cent of its business in the quarter to June 30.
Since the firm has enough funds to remain in
business for two years without new funding,
Avivah Litan, of Gartner, notes, "they have cash,
so this doesn't compute. This is the worst
possible time for an IPO".

Apart from the risk of online fraud, PayPal faces
competition from Citigroup, which is co-marketing
its C2it service with AOL Time Warner and
Microsoft, and can quickly gain substantial
market share. IDC analyst, Ian Rubin, expects
further competition to emerge, as "eventually
some of the incumbents like American Express,
Visa and MasterCard will either create their own
products, or evolve their credit cards to do
something that will compete head-to-head with
PayPal". Rubin also notes, "P2P online payments
are kind of in vogue right now, but I don't see them
necessarily having a long shelf life".

PayPal's filing also indicates that its undefined
status under state, federal and global financial
regulations, especially in light of US, and
international, regulation of Internet transactions,
could lead to penalties. For this reason, Litan
questions PayPal's filing for an IPO, since "they're
not likely to raise very much money, and now they
subject themselves to public reporting and the
whole overhead of being a public company".
PayPal itself refused to comment on the filing,
due to being in an official "quiet period" with the
SEC, but is known to have had USD 134.6 million
of cash and short-term securities, at June 30,
2001.

FYI

Tim
tkmetz
sugarbrie
3,854 posts
 
Not surprised. I am technically a "Verified Premier Member" or whatever it is called. The bank account I used to get this status was closed two years ago, and since then that bank has been bought out and no longer exists. That account is still shown in my PayPal account as my verified account. I have never given them another one.


I also moved over a year ago. They have my new address (unverified), but my old address is still in their system as my verified address, which gives me the Premier status.

The credit card number I gave them back then is also gone. It is still shown in my account as a card I can use for purchases.

sean
6,231 posts
 
Sugar, thanks for the warning. Sounds like you've been planning this out quite well and are just waiting for the right unsuspecting victim to trounce on.... : ) Sean
>
sugarbrie
3,854 posts
 
Thanks for the vote of confidence Sean !#$%*!! I do not have any balance in there anymore. I took it out before they go bust and I lose it. Is PayPal legally a bank (ie, FDIC insurance)??
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