How PayPal prevents merchants from accessing funds based on often mysterious fraud policies has long been a topic of PayPal user message boards. This problem now is more in the spotlight has merchants have more options outside of PayPal to accept payments.
PayPal says such account holds affect a small percentage of users and are needed to protect the company from big losses. But complaints have increased this year and some users are considering other ways to accept payments.
A plethora of rival payments start-ups, including Square, Stripe, Braintree and WePay, provide more options for PayPal users now, putting pressure on the company to change.
The issue has been bubbling up to the surface with a great deal more frequency as of late and the company is well-advised to put a friendlier face on their product with new servicers offering free acceptance services as the competition is growing fierce in the traditional PayPal merchant segment of SME and micro-busineses.
But the changes should improve customer service and increase revenue growth by encouraging more merchants to use PayPal, he added.
“Even if there’s a little higher loss rate, the incremental revenue from this will fall to the bottom line pretty quickly,” Luria said. A typical loss rate for online transactions is 1 percent or more, he noted.
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