PayPal Alternatives: The World Needs a Good One

PayPal is a valuable service, but there are parts of it that just suck. Here at The Conversations Network, we use PayPal (a) to receive membership dues and donations, and (b) to distribute payments to TeamITC. It’s been very difficult to balance the account because of the way PayPal holds onto funds (to their advantage) and only deposits the difference between receipts and disbursements back to our BofA account. So a week ago I decided to open a second PayPal account, tied to a new BofA account. It was easy enough to setup, link the BofA account and make a round of payments to our team.

A few days later, we got an email message that they needed more documentation: copy of a voided check, IRS non-profit determination letter, etc. No problem. We uploaded it to them the same day.

But yesterday I discovered we’ve fallen into a Catch 22. First, Paypal canceled all the payments we made to TeamITC earlier this month. (They’d never gone through, it turns out.) Second, they’ve essentially frozen the account. Third, the funds that should have gone to our team are stuck in the PayPal account. They refuse to return it to the BofA account. So we can’t make payments and we can’t get back a few thousand dollars that PayPal so happily withdrew from our bank. The reason? They say they can’t accept a “starter” check as verification of the account. (Silly, given that they don’t seem to have any trouble withdrawing funds from that account.) Since we don’t plan to use this account for anything other than PayPal, there’s no reason to print checks. As an alternative, they’ll accept a bank statement, but we won’t get our first one for more than two weeks. PayPal refuses to accept anything else such as a letter from BofA.

I’ve spent about 1.5 hours on the phone with PayPal people, none of whom had the authority to solve our problem. The last person said I’d have to email the Compliance department. We’ll see how that works and how long it takes to hear from them.

What we need is a reasonable competitor to PayPal. Neither Amazon nor Google are there yet. Amazon won’t allow us to pay people outside of the U.S. and Google doesn’t (AFAIK) support outbound payments at all.

Update: With a little help from the PayPal executive offices — it helps to have influential readers of your blog — we seemed to have resolved this quickly. It appears we fell under the compliance obligations imposed by the (U.S.) Patriot Act and financial regulators for KYC (“Know Your Customer”) and AML (“Anti-Money Laundering”). It looks as though all non-profits are now, by default, considered terrorist organizations until proven otherwise, and opening a bank account without printing checks is a red-flag warning of intentions to launder money. It’s going to take a while to sort out which payments went through and which didn’t. Some are clearly marked as “Canceled” while others are simply “Uncleared,” but we should be able to get payments to our international team of “terrorist” writers and audio editors in the next few days. (I can only imagine what a field day the NSA’s text scanners will have with this paragraph.) Not that I wouldn’t still like to see some good honest competition for the PayPal near-monopoly.

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