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
I had a Paypal account that was ripped off. I made the account and never used it once. Then a ~$500 debit came up on my account. It took forever to get through to Paypal and when I finally did they told me someone had hacked their database and stolen my number and used it to distribute money into another account. Paypal refused to correct the situation and they told me to goto my bank since it was a fradulent charge made by someone else. Only after hounding them for about two months would they fix the situation. No one at Paypal seemed to know what was going on. I dealt with many different people who apparently didn't keep track of what was going on through a computer since i had to explain my situation almost everytime I called them.
Now everyone should now why so many internet companies went under. A lot of them are just in it for a quick buck and don't have a good foundation. If you've had problems with them, let the SEC know. There is a big review phase before they can go IPO.
Well at least there is still the money order option, When that goes to hell we will all be sitting around for weeks waiting for personnal checks to clear. Thanks everyone for pointing out the pitfalls of pay-pal. (Say that three times fast). Funny thing I'm in the middle of a pay-pal deal right now at e-bay, I'll keep my fingers crossed on that one. Guess how much UPS wants to mail a 10 pound package to Indonesia?
I have used PayPal tons of times but ONLY with people that I am quite sure of. It is convienent way of exchanging money but ONLY after I have done my homework and I am willing to do business with someone.

We own that - not PayPal. If we think that we just send money to anyone and PayPal will cover our rear ends, we are not using it correctly.

This has been covered in endless threads before - know who you are doing business with BEFORE you send the money. If you can't get a good read, then bail on the deal. Pay attention to your feelings- your intuitions.
Angela, you have a BIG advantage in one specific area over most of us. You have WOMENS intuition whereas the rest of us are "thick headed" males ..... : ) Sean
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