This is why I am always on the lookout for a PayPal alternative

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 It has to be withdrawn immediately.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 When money is withdrawn from PayPal, PayPal first converts it to your local currency and then it sends it to your bank.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!

43 thoughts on “This is why I am always on the lookout for a PayPal alternative”

  1. Use instamojo.com, they have a good product. This is not an ad or spam. You’ll love it. :)

  2. Hello! I suppose you’re following the evolution of bitcoin? Hopefully it will grow to be stable enough and recognized enough to be a viable alternative to PayPal!

  3. Offer Bitcoin as a payment option. Irreversible and no Paypal fees. You can anchor the price in USD. Only a small fraction will use it, but at least you’ll get every cent of it. Offer a discount to account for the lack of fees and the absence of chargebacks.

  4. True that man!

    Paypal sucks completely, worst thing is that if you login from abroad they will block your account and the transfer your were doing. After that it takes them 3 weeks to unblock your account and continue the transfer. (this is when you are receiving money, not even when buying something).

    Paypal must be the worst example of customer service imaginable. You might want to check out this page from payoneer: http://www.payoneer.com/USPService.aspx

    I’m not exactly sure how it works but supposedly you can receive paypal payments directly on a credit card.

    Michael

  5. Have you checked out Fastspring.com for software sales? I use them and they are awesome.

  6. I think Stripe payments are the solution.
    They don’t have the chargeback policy !

    Stripe is limited to US only :(

  7. Stripe, Dwolla, Braintree are all for countries that have evolved. If you are living under a rock in a country like India your options are pretty much limited to PayPal or barter system to collect small ticket payment from world over. Indian payment gateways are a joke because our central bank believes if they make any easier for people to receive money from abroad we will all start laundering money for terrorist activities.

    Bitcoin you say? I will start accepting them when I can pay my bills, rent and salaries in Bitcoins. Till then I will have to rely on old fashioned currency.

  8. Bitcoin can be converted to a real currency which you can then use to pay your rent, bills and other expenses.

  9. Using PayPal but not happy with it.
    Write a post when you get started with bitcoins, About how to start accepting bitcoins.

    Thanks

  10. Yash,

    If you don’t want to worry about having to exchange Bitcoins for your local currency, you could look into implementing Bitpay – they’ll handle the currency exchange for you, though they take a 2% fee. https://bitpay.com/faq

  11. “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.”

    Oh yeah? I bought an app once that turned out to be vaporware (it was literally NOTHING but a collection of empty files and UI images) and PayPal refused to refund my money or let me do a chargeback even after I showed them proof of the vaporware AND I could not get a reply or refund from the vendor. Any excuse to keep the money. Fuck PayPal!

  12. Wow! I thought buyers were safe with PayPal. It seems they screw both the seller and the buyer in a dispute.

  13. Have you thought about offering to accept payment in Bitcoins? They directly compete with PayPal’s service function. There’s no risk of chargeback, and very, very tiny fees, so you practically get every cent you charge.

  14. man .. after reading I was like WTF, I tell you.. paypal and ebay are both biggest scamsters on the web. PayPal is a FRAUD banking system that should be SHUT DOWN as it is NOT a bank, and has NO standards to be held to, even though they HOLD your MONEY, they are NOT members of FDIC, or NY legal banking organization, the SEC probably has nothing on PayPal either!

  15. Hi there – fellow vendor who also only receives money via Paypal, and full disclosure – although I have no love for Paypal, in my previous life I worked in the banking industry, including a stint in Chargebacks. I can tell you that this issue is not confined to Paypal, and would occur if you were accepting money from international credit cards, regardless of which bank your merchant facility was with, in the event of a chargeback. Additionally, a similar result occurs if you go into a bank, buy FX, and immediately turn around and sell it back to them a minute later because you don’t need it anymore – you will always be screwed by the rate at which they buy the currency back from you. Unfortunately FX risk is a cost of doing business, and yes, rate differentials may be unfair (as are chargeback rules being skewed to the consumer), but they won’t go away.

  16. Another chime-in for Bitcoin. I just started offering it on my software product in addition to PP. It’s missing some of the feature of PP, like automated refunds. But like others said, there are no chargebacks, it’s moderately international, and only 1% fees. I’m using BitPay. The only disadvantage is that currently only a tiny portion of customers use it.

    People who would chargeback you on PP probably wouldn’t pay with Bitcoin anyway (otherwise how could they rip you off?), but it’s still nice to support a PP alternative.

  17. Re: “Bitcoin you say? I will start accepting them when I can pay my bills, rent and salaries in Bitcoins. Till then I will have to rely on old fashioned currency.”

    It seems like you accept USD, while living in India. Can you pay your bills, rent and salaries in USD?
    I guess if I offered you GBP you wouldn’t take it either.

  18. Your best option is setting up a company abroad and using it to sell your software. You can then employ yourself in the company and receive a salary, or you can receive the money as a dividend from the company. Either way, you can choose other payment options and only transfer the money to yourself when you need it.

  19. True, true, true.. I totally agree with you. I tried to make business with Paypal time ago and they closed my acc (stupid policies) with 500USD inside, and I CANT get my money back.

  20. Sorry to hear you’re having those issues, Yash. I’m Dan Engel, Co-Founder @FastSpring. You may want to give us a shot. We accept user payments via PayPal in addition to Visa®, Mastercard®, American Express®, Discover®, JCB®, bank transfer, check, money order, and purchase order. We work with 2,200+ software developers all over the world; in fact the slight majority of our clients are not based in the US, nor are their users. Our clients are paid typically twice per month. We don’t charge clients for chargebacks unless there’s an excessive chargeback problem such as in the event of fraud. We help you manage chargebacks/refund requests using our support resources, working with you to solve those types of issues as opposed to making the decisions for you without your involvement. Our order pages support 20+ languages and user payments in 12 currencies. We’re known for providing the industry’s most responsive and highest quality customer service experience. But you don’t need to take my (biased) word for it, take a look here: http://bit.ly/9MmuYG
    Or do some searching online. I think you’ll be happy with what you find out there about what it’s like to work with us, and you’ll be more than happy with your own experience if you give us a try. There’s a reason clients switch from our competitors over to FastSpring every day, yet never leave us for a competitor. Feel free to reach out directly to me via email or phone. We’re here to help, Yash.

  21. Use Bitcoins….

    Take some hours to look into it. You can offer your customers Bitcoin payment and receive it as Dollars. You just have to use a service like BitPay. WordPress and Reddit are already using it: https://bitpay.com

  22. We used PayPay for our product http://justmigrate.com

    It is a night mare if someone asks for refund after auto withdrawal and never change PAN details unless you are okay with 7 days downtime.

    You missed another important point, we also got few users from India and thanks to RBI regulations using paypal we cannot accept payments from another Indian. Well just offered them free migration.

    Also if you are targeting consumers in US they are little more confident paying with PayPal vs asking for credit card details. This is an important point, always keep PayPal as an alternate when accepting payments from US market.

    Cheers,
    Siddharth

  23. Same thing happened with me as well. I agree their conversion rates are pathetic. Chargeback hurts software sales and there is nothing we can do about it.

  24. Suggestion 1: Set up another PayPal account. Base it in a foreign country such as the United States, where there are no restrictions against maintaining a balance in PayPal. Transfer to your Indian PayPal account when you’re ready to withdraw funds to cash/INR, or transfer it directly to a USD-denominated bank account if you can find a way to get a better exchange rate.

    Suggestion 2: Petition your elected representatives to pressure RBI to revise its rules.

  25. Wtf comments… The guy’s looking for an alternative to Paypal, which is a SaaS payment platform, and all you have to say is “Bitcoin”, a currency used by a handful of people. Just stfu already.

  26. Totally agree with you that for digital items, there is no protection in paypal system. Also they charge 3.9%+$0.3 fee for international currency transaction. Their exchange rate is lower(if actual 1$=Rs. 59, paypal offer1$=Rs.57 – for withdrawal). Bitcoin is new thing and not popular in india & fact is that, cant find buyers in India who can offer actual rates for bitcoins…

    I think as of now, there is no option for paypal for small international amt transaction. I hope something will come in near future….

  27. PayPal belongs to the banking elite of New York. They are untouchable on this planet earth like the Wall Street thugs. They won’t allow any competition whatsoever and will shut it down in the name of money laundering and customer frauds like they did to Liberty Reserve, egold and brought down bitcoin by crashing it etc….as soon as alternative payment system reaches a threshold they will shut it down. Its guaranteed, that’s why for over 10 years in the so called free internet there has no real alternative to paypal only few marginal solutions which does not completely resolve all the problems faced by Indians.

    There fees are more than wire transfer if exchange rates are taken into account and it takes more than a week to get the money deposited. They have created a system by if you want to do any sort of business you have to go with PayPal but for individual transactions their are 100s of options like Xoom etc. Sorry you have to go through this….but I don’t see any alternative like paypal in near future unless the whole system of banking fraud collapses.

  28. Gumroad seems to pay Indians only by Payp-al. Bank transfer is only for US residents.
    Anyhow what is the fate of one who doesnt have a paypa-l account?

  29. Thanks Yash for bringing things into perspective here.

    I have recently visited my dear friend in India and really saw the plight of Indian ecommerce entrepreneurs first hand. Seeing the actual situation first hand, I am really very angry with Stripe, Dwolla, WePay, Square, Paymill and all those brands that does everything to project Paypal as bad while showing no commitment and no respect for Indians and the idea of creating a level playing field for resident Indians who are either founders of online startups or have so much potential to built one tomorrow.

    For the uninitiated, India is the fastest growing ecommerce market in the world. The amount of money people have who matters is simply phenomenal. The potential the market actually has for all kinds of ecommerce in astounding. What is really disappointing is that India is right now in some sort of digital apartheid.

    No matter how we all feel about Paypal, we should note that only Paypal is truly available in India. It makes me angry that Stripe, Dwolla, Paymill, WePay, Square – none of these so called fantastic payment systems are available for Indian ecommerce merchants who just want to sell to Indians residing in India and who could buy things or services using INR (rupees). On some pretext or the other, everyone is staying out. Even Paypal does not allow domestic online transactions in rupees.

    India is the world’s largest democracy and it has got a phenomenal Central Bank called Reserve Bank of India (RBI) which didn’t let financial crisis of 2001 & 2008 impact India. RBI has rules which these American companies do not want to obey. Why can’t they do what RBI told them to do?

    I simply cannot understand the logic of these so-called companies like Stripe & Dwolla in particular. Why exclude 1.35 billion people to be a part of ecommerce?

    Ever since Barack Obama became President of the United States, it has become the fashion to bash global trade and any chances of global trade of services happening. How can you have provisions for 29 million Australians and 59 million Brits while you exclude 1350 million Indians???

    Stripe and Dwolla – no matter how bloody fantastic you are, deep down you have an agenda that serves your public relations right and keeps you in good books of the democrats. Your brands and your people are ready to do CSR & greenwash and all that rubbish feel good bullshit while you keep the information asymmetry intact in the favour of the coterie: US, Canada, UK, Ireland, Australia & NZ. Everything is available to merchants in these six countries. But when it comes to India, there is just Paypal. No matter how bad Paypal is, the point is that at least they operate in India. At least Paypal empowers Indians to do more trade.

    It is a shame that stripe, Dwolla, WePay, square & paymill have no real urgency to bring their products to India. They want to teach RBI a lesson and they want Indian merchants with some of most brilliant ideas to have difficulties in engaging in online trade.

    I really could see the suffering of my Indian friend. I really think that the new RBI governor Raghuram Rajan would do so etching about these companies like Stripe & Dwolla. And most importantly, I want to scream at top of my voice to all those brilliant Indians studying at IITs, Stanford, MIT to do something about this and bring out a solution and end the notoriety of Stripe, Dwolla, WePay, Square & Paymill to keep Indians out of the loop. This is time that something is done to end this.

    And I want to request Paypal to accept the RBI compliance guidelines and allow Indian ecommerce merchants to accept donestic rupee payments from Indian buyers resident in India. No need to export products & services and get paid in Dollars or Pound when the huge untapped Indian buyers are there.

    This is my wish. I wish the Prime Minister of India read my call for action. I wish Indian techies are reading this. It’s time to look for real solution that could change lives, create jobs and make India the centre stage of all things ecommerce.

    Thanks.
    Jessica

  30. Yash !

    Is there any change in the state of affairs? I just received some software consulting fee from a client in US via PayPal. They charged 4.4 % as fee and converted rest at $1 = 58.1685 INR while the listed rate is $1 = 60.74 INR. This cost of money transfer appears too brutal to me . Client does not want to visit the local branch in US and wire me the money.

    Is PayPal still the only way we Indians are doomed to stick with?

    thanks

  31. Hi – I am planning to set up an etsy shop for my products and i just signed up for Pay Pal. This string of discussion has sort of got me worried. While i have understood the sad conversion rate – i want to know what would be the RBI guidelines for a small format “wanna be entrepreneur” who wants some global presence through a platform like etsy. I am sorry if this question has already been answered on the forum – but couldn’t wrap my mind around so much information !

    Thanks in advance

  32. Yash,
    You can sell through Clickbank. They pay directly into Indian Bank account. I have first hand experience with them and the money comes promptly into the bank account directly. You can also check 2Checkout. Have not tried them yet but they look promising, They too transfer the money directly into Indian bank account.

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