I use PayPal to sell my software online. It’s good enough but at times there are incidents which make you say WTF!
As per RBI’s rules Indian users of PayPal can not keep the balance in PayPal. It has to be withdrawn immediately. So PayPal initiates an automatic withdrawal every day to your bank account. Yesterday a withdrawal for $199.04 was initiated. When money is withdrawn from PayPal, PayPal first converts it to your local currency and then it sends it to your bank. So the $199.04 was converted to Rs. 10,363.01. PayPal’s exchange rate is pathetic. My bank would give me a better rate if PayPal sent me USD. But PayPal wants to make the most money whatever way it can so it sends me INR and takes a small cut in currency conversion. Besides they also need to give a cut to the partner bank because eventually its a bank (Citibank) that transfers the money to my bank. But that is something I have come to accept as a necessary cost of doing business Internationally.
This withdrawal was cancelled because an asshole who had purchased uMark last month decided to chargeback. Chargeback is the ultimate weapon for a buyer and for a seller selling intangible goods like a software license key, there is absolutely no protection. So PayPal cancelled the withdrawal and credited my account back with $186.38. $12.66 less. Why? This was not because of the chargeback. Chargeback was for $34 and that would be taken from the balance later on. That was because PayPal converted INR 10,363.01 to USD and which according to their pathetic conversion rate came to $186.38.
The buying and selling rates of currencies are always different. In this instance PayPal behaved as if I sold Dollars to them for Rupees and then sold the Rupees for Dollars. This has not happened for the first time. This happened numerous times in the past and after a few emails, and some phone calls
they will credit the difference back but it will take days and a lot of wasted time. But if you don’t call them the money is gone. There was actually no currency conversion because the withdrawal was initiated and cancelled almost immediately. It was only some automated conversion entries in the database, something PayPal can easily correct if they want to. But they won’t.
The moment I find an alternative for PayPal which is cheap, easy to integrate and allows me to charge customers in USD, I am off.
Update on 7 May 2013:
Just had another case of a cancelled withdrawal. Again $12.33 went missing and when I called the customer support, I was told the money won’t be credited back! It’s a loss! Forget it!
Yes PayPal will keep my money just like that!