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
eBay has there own system, Billpoint. Seems to work well and eBay monitors their members pretty good. I have read that some big banks like Citibank are looking at getting into this business. That should be more secure (I hope).
hey, Sean - you guys KNOW when a deal feels wierd - we all do, but sometimes our hurry to sell or greed or whatever... clouds that.
and hey, Sugar Britches - I like to say that ;~}
Personally, I don't think that "security" will be improved just because bigger banks get in the game. The fine print will be smaller and more legal hoops to jump through. I see the bureaucracy of bigger banks being more of a pain in da keester than now. Just my opinion - who really knows?
Buyer beware still seems to be the words to heed.
cheers, AJ
Amazing. I went back to PayPal and they finally recognize that my old bank account is closed. It was not my main bank account at the time anyway. Would never post that on any website. It only had $100 in it at the time. I first told them I closed it about one year ago. Guess I could maybe verify my new address and use it for credit card purchases only. We should get VISA's fraud protection even if PayPal fails. If you notify VISA or Mastercard of a bad charge on your bill within 60 days, they will revove it usually.
I bought an inexpensive interconnect, and paid with paypal. Never received the cable, and all paypal did was send an email saying the seller was at fault. My money was gone and there was no way for them to get it back.Thanks for using paypal.
Itsalldark, I had the EXACT same experience. Some jerk in New Jersey just plain ripped me off, lost $100. He was advertising on AudioWeb and AudioShopper.