How PayPal Transformed And Then Ruined eBay

eBay’s purchase of PayPal was, in the first instance at least, a truly INSPIRED purchase. It really was. Here’s why:

Consider this: In effect, eBay is simply a means for people to list items for sale and “agree a price” – the latter being the auctioning process.  The point is, once a price is agreed, the company is no different to any other which enables people to list items, for example, Craigslist.

Now, on Craigslist, you cannot actually BUY. They take no responsibility for that, and indeed, there are pages and pages of warnings to potential Buyers to take precautions and not get scammed while transacting.  This is because Craigslist understand that the single most important and complex risk in the Buying and Selling process is “payment risk” and they just don’t want anything to do with this.

But imagine the transformative effect that a listings website would have if somehow “Payment Risk” could be solved. Solve this issue, and instead of having a listings website you’ve got a “transaction platform” – it’s a HUGE change, a huge step up.

Well, this is what eBay’s purchase of PayPal was able to do for eBay – to transform it from a listing site to a transaction platform and it’s why eBay paid around $1.5bn for a company that was losing money (and according to Elon Musk, one of PayPal’s founders, losing millions of dollars per week at that!).

The problem for eBay now is that they have (for some time) forced users to use PayPal.  Why is that bad?  Because PayPal didn’t really solve the Payment Risk problem –  Sellers really dislike PayPal.  The internet is full of entire communities of PayPal haters – why? Well it’s simple: through a combination of:

-          Chargebacks.

-          Limited/frozen accounts.

-          Falsely disputed transactions  with PayPal always siding with the buyer.

-          Ridiculous Fees.

-          Withdrawal limits (which cause all sorts of cash-flow problems).

-          Rather “obtuse” customer Service.

Sellers now hate selling things via eBay.

You see, the “Payment Risk” problem hasn’t been solved at all.  PayPal has adopted a simple approach – “to hell with the seller – always side with the Buyer.”  Those problems are symptomatic of that approach and it means an eBay seller can do everything right and because PayPal is the enforced “payment risk solution” an honest eBay seller can lose both his/her money and the items they’ve sent out.

It’s not fair.

And it also means, that as a Seller, you’d be out of your mind to take a PayPal payment for ANY amount more than a few bucks. Only list what you can afford to kiss goodbye-to for free, because if the  Buyer lies and denies delivery or pulls some other scam: you lose the lot as PayPal won’t pay you!  What that necessarily means is that you’d be mad to actually list anything of value on eBay too…

Think about this next time you list something on eBay.  You’re gambling…