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The New York Times reports that eBay is considering making PayPal the only form of payment allowed on eBay auctions. The company is test marketing this concept in Australia starting next month, and loyal eBay buyers and sellers there are furious.
eBay's stranglehold on internet auction enthusiasts is already clear. It is the most popular auction site, and if you're a seller, you have few other choices that get you as much exposure. But that's not enough for eBay. In addition to all the fees generated from auction listings and sales, they apparently want to ensure that they'll get extra fees from the payments if they require everyone to pay with PayPal.
Company officials say this move is an effort to cut down on fraud. They say that by requiring the use of PayPal, they are able to see buyers and sellers through the payment process, rather than them risking fraud through the use of outside payment services.
Do they really think that we're gullible enough to believe that it's all about cutting down on fraud? I don't believe it one bit. This article suggests that PayPal cuts down on fraud by quoting eBay's reduced fraud costs shown in their financial statements. What readers may not realize, however, is that these figures only take into account the losses that eBay is on the hook for. What about all the losses that are eaten by the buyers and sellers who were cheated? And there are plenty of horror stories from users of eBay!
PayPal is an expensive form of payment. In the U.S., it costs sellers 2.9% of the selling price plus 30 cents for any eBay sale under $3,000. Those fees add up quickly, especially if you're selling low-priced, high-volume items. It's even worse in Australia, where PayPal takes 4.4% plus 30 cents.
eBay sellers in Australia are speaking out against this policy because they say it will further eBay's monopoly and cost them too much money. I agree. And if eBay does try to bring a policy like this to the U.S., I expect a huge backlash from sellers.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Reader Comments (Page 1 of 1)
1. Outrageous move on eBay's part and they are lying and simply have found 'not plausible deniability', but only vague-ebay-ability or vEBAYability.
Maybe I will write about this newly coined term. Seems like it happens all too often.
Posted at 11:49AM on May 11th 2008 by Sheldon L
2. Sheldon it's not worth the effort. Talk is cheap and I find it difficult to believe that the Aussie's don't have anti-trust laws. Put anything like this into effect in the U.S. or the U.K. and you will quickly find yourself in court. Go ask Bill Gates who is an expert at finding holes in the laws and a regular in the court system. His batting avg. is not good. Ebay's proposal is so blatantly stupid that Bill is probably having a good chuckle. They are about 100 years too late as monopoly went out with laissez faire.
Posted at 12:23PM on May 11th 2008 by william lindblad
3. Can't understand why eBay wants to limit their business to small items, when it has the potential to be the world's B2B and B2C vendor. But by ignoring commercial international banking services, things like Documentary Letters of Credit are unavailable to users.
PayPal has a $10,000 limit per transaction. How can someone in Peru buy something big -- like a piece of equipment worth $35,000 -- from someone in Ohio if PayPal only covers the downpayment???
To my mind, this puts the kybosh on eBay's claim to want to fight fraud. The Banks have been successfully handling escrow accounts for hundreds of years.
Posted at 10:42AM on May 12th 2008 by SallyJ
4. To see how much eBay and it’s subsidiary actually takes out of your wallet (out of your total profit), see this new online eBay + PayPal calculator.
http://pheebay.com/1/?eBayALTERNATIVESPheeCalculator
The calculator works for all English speaking countries AU, US, UK, CA, NZ.
It could also help show why eBay is mandating Australians to use it’s 100% owned subsidiary PayPal. If you like it please spread the word about it. :)
Cheers
Posted at 4:43AM on May 13th 2008 by Neo
5. They are already implementing in US. When I am trying to sell I am being forced to accept paypal payment. Its its a must then offer it as a free service
Posted at 7:08AM on May 15th 2008 by Max