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Being the 800 pound gorilla of online payments isn't easy. Despite PayPal's ubiquity and the fact that it remains at the forefront of digital payments, including in the rapidly-evolving mobile payments space, the company's reputation is mixed.

Serving millions upon millions of customers isn't a walk in the park, and when something goes wrong with somebody's money, the world is bound to hear about it one way or another.

While PayPal is the target of a variety of complaints, some of the most common have to do with frozen funds. That isn't surprising. When PayPal's efforts to detect and fight fraud, or cover its behind for chargebacks, result in somebody's access to their money being restricted, things can get ugly, fast.

PayPal's David Marcus, learned that quickly when he became president of the company last year when a PayPal customer named Andy McMillan turned to Twitter to vent about £40,000 in funds that he was being kept from in his PayPal account. McMillan's plight caught the attention of the Twittersphere, and that forced Marcus to reach out personally in an effort to make things right.

"Aggressive changes" are on the way

At the time, Marcus gave McMillan his personal contact information and invited McMillan to help him improve PayPal. Now, it looks like some of the changes Marcus promised are about to be rolled out.

And they couldn't come soon enough. As detailed by CNN Money's Julianne Pepitone, Andy McMillan hasn't been the only visitor to "Paypal hell." Plenty of others have found themselves in a seemingly helpless situation with no way to access large sums of money and no ability to navigate PayPal's customer service department to find a resolution.

That, obviously, is problematic, and according to PayPal's senior director of communications, Anuj Nayar, it's forcing "a fundamental shift in our business operations" that is coming soon.

Providing more information is key. "We want to be clear about how people can get out of the situation," Nayar explained. Other details are scant, but Nayar says the changes "are not minor."

Too little, too late?

The big question is whether PayPal's changes are coming too late. Although PayPal is still a dominant force in online payments, the company should be concerned with the success of upstarts that are targeting some of its bread-and-butter customers. Those upstarts include companies like Stripe, which has gained traction by building a payments platform geared toward developers.

The good news for PayPal is that its younger competitors will almost certainly face issues as they grow. Payment processing is difficult, and companies must do certain things to fight fraud. The bad news for PayPal is that the upstarts have probably learned from its mistakes, and will focus doubly hard on avoiding them. That means one thing: in the battle to win over the customers it has already lost, PayPal has its work cut out for it.

Patricio Robles

Published 22 January, 2013 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2476 more posts from this author

Comments (6)

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Michael Batey

Interesting stuff. PayPal's unwillingness to provide details of the planned changes suggests they are having problems making the cultural shift needed to become more transparent and helpful.

over 4 years ago


Mark M

Aggressive changes (as vague as they are) are too little too late for a lot of users. PayPal has spent years favouring buyers and offering little to no protection to sellers.

Freezing funds without definitive proof, not providing any sort of investigation info/documentation to support their decision etc. PayPal are essentially a racketeering organisation; albeit a popular one, imho.

over 4 years ago


Scott McKirahan

As it stands now, because of their shoddy treatment, I not only will not buy anything from a website that only takes PayPal, I will not buy from a website that has a PayPal logo - even if they take other forms of payment and and have a real credit card processing company. Obviously, this means eBay will never get any of my business either, now that they are PayPal only.

I also advise others not to use them on several prominent Ecommerce forums. The risk is not even close to worth the reward of being able to accept money from questionable people who are non-credit worthy (how scary is a person who can't even get a debit card?).

A formal personal apology, a sincere promise to put sellers first (we ARE the ones who actually pay the bills and keep them in business) as well as a substantial "incentive" MIGHT bring me back but I'd have to be very convinced that they had cleaned up their act and gotten rid of people who have less for brains than I flush every morning.

over 4 years ago


Francisco Meza

Paypal is scum. A few years ago they held about $18000 usd from me. If i remember correctly,they automatically held 6% of the gross in something called a 'rolling reserve'. They would hold this money for 3 months, then release it gradually. That 6% was the.same amount as my profit.

over 4 years ago


Jeff Petermann

As I understand it, ebay and paypal are still on and the same...until that changes, I will NEVER be back...twice now I have followed all necessary "rules" put in place by the ebay/paypal monopoly, and have become victim to their legalized extortion...they are both WAY more concerned with the buyer and both still have a "seller can go to hell" mentality that has cost me money, product and time. I think there should be an investigation into the ebay/paypal merger/acquisition (whichever it was) as their customer service makes it impossible to fight back and, as one of the "little guys" I think it is preposterous to think that just because a company is big enough to push people around, doesn't mean they should.

over 4 years ago


William Vancura

I am 66 years old and semi retired. I was a barber for 45 years and decided to sell beauty products online using PayPal to protect buyers and myself. My account was frozen and although I spent hours sending them documentation I still have not had my funds released. They said they were making changes that is bull crap.
How can they do this to someone?

about 4 years ago

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