Why I sold my PayPal shares
The Sav incident is another example of how poorly PayPal treats its customers.
I rarely buy individual company stocks, preferring to invest in index and target date funds that don’t require constant attention. But during the market drawdown earlier this year, I picked up a handful of beaten-down stocks. One of those was PayPal (NASDAQ: PYPL).
I didn’t hold onto it long, though. The next time I logged into PayPal after buying shares, I asked myself, “Why again did you buy stock in this company?”
Let’s face it. PayPal has horrible customer service and treats its customers like a statistic. The only thing it has going for it is the network effect: everyone has a PayPal account.
Here’s an example: last year, PayPal decided to remove the account view that shows your latest transactions with the current balance after each transaction. This was helpful for reconciling your account with your accounting software.
Not only did PayPal remove the balance column, but for some reason, it still calls this view Activity (including balance & fees), even though it clearly doesn’t include the balance. This view is on the main dashboard when you log in. Having a big error on the dashboard for so long is worrying.
About a week after I bought PayPal shares, my podcast editor emailed me saying he was switching payment processing from PayPal to another company. I don’t blame him. PayPal is horrible for recurring payment businesses because accounts can’t be transferred if you sell a business. I’ve also had problems when payments didn’t go through, and finding and managing active subscriptions can also be troublesome.
Want support? Good luck getting a timely response that answers your question. Compare this to Stripe, which I use for one of my businesses. I can start chatting with a Stripe representative within a few minutes, and they are always able to answer my question.
Most of the emails I get from PayPal these days offer me loans or tell me it’s increasing its fees. And don’t get me started on the many postal mailings I get each month pitching me on PayPal loans. It seems like desperation.
But the nail in the coffin is how PayPal treats merchants. If there’s a whiff of something sketchy going on with an account, the first thing the company does is turn the account off. Consider what happened to NameBio two years ago. (The situation with Epik was also concerning, although it’s not clear what exactly happened in that case, and Epik’s response didn’t help it.)
Last week came news that PayPal did the same thing to Sav. Here’s what Sav wrote about the issue:
Last night we received an email from PayPal stating that we can no longer do business with PayPal. The email didn’t state any more information except that there was a trademark or copyright violation regarding the sale of an item. We were never provided any additional information about the alleged violation. Additionally, we were never given any prior notice, nor any chance to explain any transaction before being banned.
Today, Sav announced that PayPal was restored. Sav.com wrote:
We learned this morning that our account was disabled last week due only to a domain name that had no association with Sav.
This sounds similar to what happened with NameBio.
PayPal has systems to catch potentially harmful behavior. This is good. But its first inclination when something gets flagged is to cut off the account completely. Sav.com had to scramble to identify the issue and get PayPal’s attention through a social media campaign. Its customers were at risk if their renewal payments didn’t go through.
A company that wants to work with its merchants would reach out first to resolve the issue.
Why does any merchant work with a payment service that cuts them off when something is flagged? Well, they feel like there’s little choice because of the network effect of PayPal.
If that’s all PayPal has going for it, that’s not a good long-term recipe for success.
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