Losing Customers Because of PayPal

Do you have a significant amount of uncompleted e-commerce sales or the online shopping cart abandonments? Are you wondering why so many customers leave your website and never finish their purchase transactions? Apart from checkout errors, technical glitches and personal reasons, there may be another big problem: PayPal.

According to the latest researches, 23% of shoppers will drop a checkout process if they are requested to register with the website, additional 12% will leave when they are asked for too much personal information.

In other words, your customers want a quick, simple, non-intrusive checkout process that will not demand more personal information than it is really needed for processing the order. And while PayPal’s “guest” checkout may sound like a good option for those customers who don’t want to register or sign up; when it comes to respecting people’s privacy, PayPal may be the worst possible solution. Especially since their “no PayPal account option” is not what it seems.

PayPal is infamous for their identity verification requirements that both violate the privacy and compromise the security of their customers. Those who have a PayPal account are familiar with emails demanding to submit a copy of their photo ID, driver’s license, passport, utility bill or Social Security card to prove their name, address, date of birth, National Tax ID or Social Security number. Many also have a first-hand experience with their accounts being suspended, money being locked away, or some account functions disabled. As sad as all the aforementioned is, it should not come to a surprise if the person could afford to spend a few days reading through PayPal’s terms, conditions and privacy policy before opening an account.

However, PayPal’s paranoid and greedy tentacles are stretching far beyond their signed-up victims. Privacy infringements and security risks imposed by PayPal are also concerning the individuals who have never had nor intend to have anything to do with PayPal.

This article was written after I noticed it’s been the third time on one month I had to abandon my intention to purchase products from online sellers, leave their websites and look for the same goods elsewhere. All because there was no other payment option besides PayPal.

Many businesses use PayPal services to accept payments via their websites. PayPal claims to be a “a faster, safer way to pay and get paid online”, and while it may be convenient for people who already have a PayPal account and don’ mind their privacy violated, PayPal can be of a great inconvenience to others and result in a loss of new customers.

It often feels that PayPal is imposed on people: it is widely used and some businesses offer PayPal payment processing as the only way to pay for their goods and services. PayPal proudly states on its website:

“Founded in December 1998, PayPal is the leading global online payment company. PayPal has 117 million active registered accounts and is available in 190 markets.”

117 million active registered accounts is an impressive number, and, at first glance, it justifies the ubiquitous obtrusion: it seems reasonable for a seller to presume that the customer either already has a PayPal account or is eager to create one. However, let’s take a closer look at which came first — the chicken or the egg. Is PayPal imposed on people because it is so big, or is it so big because it is imposed?

Is PayPal really as big and safe as it claims?

Let’ investigate.

When we found the product or service we need and made the decision the seller has been striving for — to purchase the product — we press the “Buy now” button and proceed to the checkout page. If PayPal is involved, the checkout page seems to be giving us two options:

  • Have a PayPal account? Log in to your account to pay.
  • Don’t have a PayPal account? Pay with your credit or debit card.

So far so good. If the buyer already has a PayPal account, the purchase proceeds in the usual for PayPal manner.

The trouble starts when the person doesn’t have a PayPal account nor has any desire to get one.

PayPal demands too much personal information

Let’s say, we don’t want to get involved with PayPal in any way, but we could tolerate them processing this one-off transaction because we do want to buy the product. We would expect PayPal to offer a normal credit card checkout form and process the payment. So we choose the “Don’t have a PayPal account? Pay with your credit or debit card” option, and face the long and extremely intrusive form:

Intimidating and intrusive PayPal checkout form asks for too much private information
The long, intimidating and intrusive PayPal checkout form that demands too much personal information.

Some differences between a normal payment processor and the paranoid PayPal are obvious straight away:

1. Normal online payment processing services do not need to know your full legal name. PayPal demands “Please enter your full legal name... First name, Middle name(s), Last name”. Decent payment processors only require the form of your name that matches the one printed on your bank card, and most normal banks allow their customers to choose a preferred or convenient form of their name for the cards.

2. Normal payment processing services don’t insist on residential addresses and don’t reject PO boxes. When dealing with decent payment services, the person is free to use the address that is convenient for them. After all, what’s the point in owning a PO box if you are not allowed to use it? PayPal demands the residential address: “Please note we do not accept PO Boxes. If we are unable to match your address against Australia Post records, we may ask you to verify it by providing documentation.” PayPal demands this even though many credit card customers use their PO boxes as their postal and billing address with their credit card providers. PayPal forces people to disclose their private residential addresses.

3. Normal services do not demand the phone number. A person has every right not to have a phone number: it was not issued for free to every person, nor did PayPal pay for anyone’s phone to demand they must have one. Strictly speaking, a residential address is not a mandatory attribute of a free individual either. PayPal prefers to pretend that they are not aware of this fact, or they simply don’t believe in freedom, all “for our own protection” of course.

Seeing the demands and restrictions in this checkout form was the point when I decided I will not trust my personal information to a paranoid money monster, but the curiosity and the attitude of a privacy advocate enticed me to interview a few people, do some online research and investigate the evil matter further.

The fine-print in PayPal style: some of the information below was obtained from other people and was not tested in the author’s personal experience. Please contact the author if you notice any discrepancies, and the corrections will be made.

PayPal makes misleading claims

Let’s suppose we are still okay to give up the convenience and security of having the purchase delivered to our PO box, we entered our full legal name and residential address, which we have never disclosed online to anyone else before, we entered a phone number, we supplied our credit card details, email address, and... on the following page PayPal demands our date of birth. No other payment processor asks for that! PayPal falsely states “Australian Government requires us to collect your date of birth”. This is false! Date of birth is not legally required for making online payments and never has been. Moreover, the date of birth is often used by Australian Government agencies as an identity verification point, and, contrary to PayPal’s statements, the Office of the Australian Information Commissioner (ex Office of the Privacy Commissioner) strongly recommends not to disclose it to anyone online.

Same happens in other countries: PayPal claims that it is the government requirement to demand personal information like date of birth, residential address, photo IDs and other documentary proofs, yet no other online payment services in those country requires such level of information, nor can payPal supply the name or number of the statute of the law that allegedly requires them to violate the privacy of people in such a way.

PayPal tricks people into signing up and creating an account they don’t want

Now, if we try to be vigilant and read through the extremely long fine-print in Combined Financial Services Guide and Product Disclosure Statement, User Agreement and Privacy Policy (those tiny links at the bottom of the scary PayPal payment form page). After all, the User Agreement “is an important document (along with our Combined Financial Services Guide and Product Disclosure Statement) which you must consider carefully when using PayPal’s Services” — quoted from the PayPal User Agreement. Part 2, paragraph 4 of the Combined Financial Services Guide and Product Disclosure Statement says: “When you register to use the PayPal Service, we will open a PayPal account in your name”.

Which registration? Which account?? We are confused: It must be some kind if misinterpretation... I just want to pay this one time and get my purchase, I don’t want to spend five hours reading the endless fine-print or sign up for anything!

Very soon we notice that PayPal keeps on talking about registering for PayPal services, signing up and some accounts.

If we continue through the PayPal privacy violation process, eventually we can make the payment. However, at the end it becomes clear that PayPal has retained all the transaction details including the full credit card details. After that, PayPal sends a series of manipulative emails to coerce the purchaser to provide a password and, if they do, they end up with a PayPal account pre-filled with their personal info PayPal collected during the one-off purchase. PayPal keeps the data in its database for a long time, even if the customer resists and does not create a PayPal account. The data is kept ready for a future account creation, “just in case”.

So, if PayPal is involved, the true payment options are:

  • To log in and pay with a PayPal account.
  • To pay and end up with a PayPal account.

PayPal extorts more personal data from those who signed up

If the customers gives in and allows the PayPal account to be created, after some time of account inactivity, PayPal unfolds a targeted campaign to push the customer into getting “verified” — something totally unnecessary to make simple credit card purchases. PayPal will abuse the email address and personal data it extorted form the customer and send emails like the following to extract more private information from the victim:

PayPal is constantly working to ensure security by regularly screening the accounts in our system. We recently reviewed your account, and we need more information to help us provide you with a secure service. Until we can collect this information, your access to sensitive account features will be limited. We would like to restore your access as soon as possible, and we apologise for the inconvenience.

Why is my account access limited?

Your account access has been limited for the following reason(s):

[Date] We noticed some unusual activity on a credit card linked to your PayPal account.

As a security precaution to protect your account until we have more details from you, we've place a limitation on your account.

In this email, PayPal claims that they have access to the customer’s credit card account and can see “some unusual activity” there. This must be either a lie, or PayPal has allowed unauthorised access to the account. The fact that the customer permitted PayPal to take a certain amount of money from the credit card during one purchase doesn’t mean that customer granted PayPal any other access to that account. However, PayPal claims to have the access. Via such misinformation, PayPal is attempting to scare and manipulate the customer into a deeper relationship with them. PayPal will not give up: the emails may continue for years. After all, PayPal has to reach their next target — 118 million registered accounts.

With PayPal, what should be a one minute purchase process, becomes an hours-long ordeal of reading the fine-print, and a nasty years-long struggle with the PayPal’s approach to the personal data retention.

PayPal puts the customers at risk of identity theft

PayPal tries to disguise this behaviour under a standard bunch of excuses, such as it is necessary to “protect privacy and security” of the customers, to offer businesses a convenient tool for accepting payments, and to represent a “faster, safer way to pay and get paid online”. Protect privacy? That’s what the PO boxes are for, which PayPal doesn’t allow people to use. No, it is definitely not about privacy.

PayPal insists that their “service allows people to send money without sharing financial information, with the flexibility”, but in reality there is no flexibility and, while the financial information may be not passed to the seller, PayPal will email out your personal information like residential addresses and legal names to the sellers with no guarantees on how this information will be kept and used, which may jeopardise personal safety more than any disclosure of financial information.

PayPal claims to protect customers’ financial information, such as credit card number, yet they readily disclose lots of personal information with every single transaction: while the credit card number stays hidden, your name, residential address, phone number and e-mail address are transmitted to the sellers. payPal doesn’t want people to realise that a bank card number is very easy to chance if you suspect it might have fallen in the wrong hands, but you can’t chance your name and home address every time a dishonest company like PayPal misuses it.

Nobody in sound mind would give their full legal name, home address, phone number and e-mail every single time they pay in a supermarket, petrol station or a restaurant. So, though PayPal may offer some minimal protection of the financial information, they give away enough of your private information needed for a full blown identity theft.

PayPal looks “big” by deception

Any careful customer can see through the smoke-screen and sense an enormous money-making machine that intrudes people’s privacy, deceives, lies, forces the customers to disclose unnecessary personal data and tricks people into creating unneeded accounts. Any careful merchant realises that PayPal uses them as a free recruiter by forcing their prospective customers to sign up for PayPal.

Now you see how PayPal managed to get their 117 million accounts, now you know that deception, manipulation, paranoia and greed came first, before the egg and the chicken.

Always offer your customers an alternative payment option

It is now clear that there can be many customers lost by an online businesses to the PayPal’s way of operating. And it is obvious that a reasonable business should always provide the customers with a non-PayPal alternative for making payments.

In my case, I nearly had to give up my intention to make a purchase and leave the seller’s website for the fourth time this month, but luckily the company were in Australia, so I was able to call them (poor guys were shocked to learn that having PayPal as a single option was harming their business) and happily arrange a direct bank deposit, completely avoiding PayPal.

From “You don’t need to have a PayPal account to make a payment” to “We need your driver’s license or passport”

To many of those who, willingly or not, ended up with a PayPal account this email looks painfully familiar:

Dear <name>,

We need your help resolving an issue with your PayPal account.

What's the problem?

Before we can offer you certain products and services, federal regulations require that we collect specific information to verify your identity. This information includes your name, address, date of birth, and National Tax ID or Social Security number. We haven't been able to verify your identity using the information you provided, so we need some additional documentation from you.

Until this issue is resolved, you'll be able to log in to your PayPal account but you might not be able to add money to it or use some of your account features.

How can you help?

It's usually pretty easy to take care of things like this. Most of the time, we just need a little more information about your account or latest transactions.

Please log in to your account and go to the Resolution Center to find out what you need to do.

1. Photo ID

To help confirm your identity, please send us a copy of your photo ID that shows your name and address. Waiting for your response link: "resolve"

At the 'Resolve' link PayPal says this:

PayPal requires a copy of certain documents for verification purposes to return your account to regular standing. Please submit each of the following documents:

Valid photo ID:

  • Driver's License
  • Passport
  • Military Identification Card

Please make sure that the documentation you provide is up-to-date and legible. The name and address on your documentation must correspond with the information registered on your PayPal account. Your documentation cannot be older than 6 months. Send only documents received by mail (online statements cannot be accepted). Send all the information and documents required as soon as possible to complete the review process.

2. Proof of Address

To confirm your address, please send us a copy of a bill that shows your name and address. Helpful documents include a utility bill, a cell phone bill, an insurance bill, or a tuition bill.

At the 'Resolve' link:

Please submit each of the following documents:

Proof of address:

  • Utility Bill

Please make sure that the documentation you provide is up-to-date and legible. The name and address on your documentation must correspond with the information registered on your PayPal account. Your documentation cannot be older than 6 months. Send only documents received by mail (online statements cannot be accepted). Send all the information and documents required as soon as possible to complete the review process.

3. Provide Proof Of SSN

Provide documentation that shows your Social Security number. Helpful documents include a copy of your Social Security card, a pay stub, or a government-issued document.

At the 'Resolve' link:

Please provide the documents requested below. We'll review your account status after we receive the information we've requested.

Provide proof of Social Security number:

  • 1. Your documents need to be valid and legible.
  • 2. The submitted information on the documents must correspond with the information on your PayPal account.
  • 3. Documents can't be older than 6 months.
  • 4. We will handle your information in accordance with our privacy policy.

A bit too much for something that started as a payment to a merchant whose website promised: “PayPal does not require you to have a PayPal account to make a payment, this is an optional step”, isn’t it?

If your privacy, security and low levels of stress are important to you, it may be a very good idea to think twice before dealing with a website that says “currently accepts payment through PayPal only”.

PayPal sends emails like this even to the customers who have been using their PayPal account for more than a decade. The person who forwarded me the text has been using PayPal since 1999 and said:

“I called Paypal and was told that it was not Paypal requiring these documents, but it was the federal (US) government. When I asked why no other online retailers required this level of information, I received no answer. When I asked what statute of US law required this, they put me on hold for about 5 minutes and then told me they could not find it.”

More information

Related articles: Protect your Privacy: Everyday Tips for Everyone

The Australian Privacy Foundation – an association dedicated to protecting the privacy rights of Australians, it aims to focus public attention on emerging issues which pose a threat to the freedom and privacy and defend the right of individuals to control their personal information and to be free of excessive intrusions.

Australian Privacy Commissioner – Australian government website dedicated to privacy issues with a special focus on information technology and the Internet.

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