Can I pay with PayPal? Do you accept PayPal? These are questions that today’s merchants must be prepared to answer yes to. Many customers now prefer to use PayPal to manage their online purchases. There is an inherent security for customers when using PayPal versus paying with a credit card. With PayPal transactions, of course, come PayPal chargebacks.
Yes, just like credit card and debit card purchases, merchants are still at risk for chargebacks when customers pay for goods and services with PayPal. While the process is generally the same (we’ll explain it below), there are some key points that are important for merchants to be aware of when deciding to accept PayPal.
PayPal and Merchants
For June 2016, PayPal has announced that they will be updating two important sections of their user agreement: Section 11 – Protection for Sellers; and Section 13 – Protection for Buyers.
It’s important that you review and understand the PayPal User Agreement Selling and Accepting Payments and how the policies impact chargebacks and your protection under the PayPal Seller’s Protection Program.
You need to clearly know what is and isn’t protected under the PayPal Seller’s Protection program. For example, the following sales are not eligible for protection under the program:
- It involves intangible, non-physical, items, including digital goods, and services. Digital goods are delivered and used in an electronic format, like a song delivered online or through a mobile application.
- The buyer claims (either with us or their card issuer) that the item you sent isn’t what was ordered (referred to as a “Significantly Not as Described” claim).
- It involves items equivalent to cash including gift cards.
Note: this is not the complete list of sales not covered under the PayPal Seller’s Protection program, so you’ll want to review the full list on the PayPal website.
Another sales domain that is not covered concerns PayPal chargebacks that are connected to crowd-funding campaigns. This is an important detail that many merchants overlook when looking for ways to fund and innovate a new project. While crowd-funding sites such as Kickstarter are very popular, there is risk for everyone involved. Review the PayPal Seller’s Program before starting a crowd-funding campaign, and make sure you know how this extends to disputes and PayPal chargeback protection.
The PayPal Dispute and Chargeback Process
With PayPal, buyers have two options: file a dispute with PayPal, or file a chargeback with their credit card company. Many of our merchants are not familiar with the PayPal dispute process:
- A buyer opens a dispute with PayPal.
- When a PayPal dispute is filed, you are notified by PayPal and you have 20 days to respond to the dispute. Fortunately, PayPal requires buyers to provide details on why they are filing the dispute. It’s important to note that until the disputed transaction is resolved, the associated funds are on hold. PayPal recommends that you respond quickly and proactively to the dispute.
- The next steps for you involve using the PayPal Resolution Center to resolve the dispute process with PayPal and the buyer.
Of course, some buyers may not be familiar with the dispute process, or they may simply decide to contact their credit card company and file a PayPal chargeback instead. PayPal clearly states on their website: We don’t initiate or handle chargebacks – the buyer’s credit card issuer does. So that process follows the issuer’s policies. We also don’t judge the validity of a chargeback; that’s the responsibility of the card issuer.
This means that if you’re using PayPal to handle your payment process, you still need to know and understand the chargeback process. The onus is on you, the merchant, to be aware of how the chargeback process works and be ready to respond.
Too many merchants falsely believe that when they use PayPal to manage their payments, they don’t need to be as concerned with the chargeback process. But as it’s clearly stated above, it’s up to you to handle this process. This is when you need to ask yourself how you and your team will respond to chargebacks (or disputes) if they do occur. Both PayPal disputes and chargebacks take time, energy, and resources to resolve.
We hope you will thoroughly read the resources that PayPal makes available to you, and we want you to read the chargeback articles in our Knowledge Base so you know what to do and what not to do. To help you out, here are some useful PayPal links:
- Resolving disputes, claims, and chargebacks
- PayPal User Agreement
- What is a chargeback, and why did I get one?
As always, our team of experts is available to help you out with any questions you have about PayPal chargebacks and the chargeback process in general. Contact us with your questions and we’ll help you get on the right track and take the confusion and stress out of the chargeback process.