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Old 01-28-2004, 09:03 PM   #1
Sashman
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Default Any Paypal pitfalls for use with an affiliate program?

We're starting up an affiliate program and I wondered if some wise soul might be able to enlighten us on problems with using paypal as a payment engine. Automating paypal payments seem pretty easy, and since we are using paypal as the purchasing engine, funds should almost be instantly available for a transfer.

My main concerns/questions are :

1. How badly will using only paypal hurt an affiliate program?
2. How long should payment be delayed before paying? I'm worried about individuals abusing the system in some unforeseen way that a thirty day delay in payment might have uncovered.
3. Has anyone seen a TAF model built on paypal -- where someone who has purchased a license has the ability to send a friend a link, which would in turn credit the original purchaser's paypal account if his friend buys the product?

Thanks in advance!
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Old 01-28-2004, 10:37 PM   #2
lookfindgo
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Sashman, I can not claim to be a "wise soul" I can share my experiences and knowledge.

I run my affiliate programs and pay by check, Paypal and wire (less wire expenses). I don't think, ( this with a grain of salt) you can not have the check and wire options available. Not every webmaster has a Paypal account.

Delay period, good question, I have 2 week pay periods and get all payments out within 3 days of the end of each pay period, but I do have a very good fraud mechanism in place, so I don't need a delay factor before paying. I strongly suggest you figure out how to control your affiliate program and get payments out very fast after the end of each pay period. My success has been centered around a short pay period and a quick payment after each pay period.

Webmasters (like myself) want cash in their hands. That builds confidence, support and referrals.

Dave

Last edited by lookfindgo; 01-28-2004 at 10:39 PM.
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Old 01-29-2004, 05:02 AM   #3
maddeningcrowds
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Also I assume you are aware of the current legal issues regarding paypal's status as a bank or not a bank.

I know one large corporation that will not use paypal for affiliate paments. They are a large company and send out many thousands of dollars each month. If something goes wrong with the system, there's going to be a huge problem: paypal are not properly insured or regulated as a bank.
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Old 01-29-2004, 11:32 AM   #4
Sashman
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Thanks for the responses.

I was under the impression that only Paypal's money market fund was not FDIC insured.

http://www.auctionbytes.com/cab/abn/y02/m03/i13/s03

I suppose if there is a problem one could always wire money into the paypal account on a need only basis.

As for something going wrong with PayPal, I agree, it could be a huge problem. But luckily a problem that could be covered in the program's TOS.
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Old 01-29-2004, 11:52 AM   #5
jokearound
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I was also under the impression that the main service paypal provides was FDIC insured..

hmm...
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Old 01-29-2004, 04:03 PM   #6
Sashman
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Default FYI

Paypal FDIC Pass-Through Insurance

You do not need to keep funds with PayPal in order to use our service. If you do hold a balance, you can do so in two ways: (1) PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage; or (2) you can elect to earn a return on your funds by enrolling to invest all funds that you receive into the PayPal Money Market Fund. The PayPal Money Market Fund is not FDIC insured, not guaranteed by any bank and may lose value. PayPal keeps a record of the amount of your balances, which you can check by logging in to your account through the PayPal Web site at any time. Balances held in currencies other than U.S. Dollars are not FDIC-insured.

If you do not enroll in the Money Market Fund, then in the unlikely event that an FDIC-insured bank in which we place your money fails, your balance placed at the bank would be subject to FDIC pass-through deposit insurance coverage, along with any other deposits you hold at that bank, up to a total of $100,000. Pass-through deposit coverage is contingent upon PayPal maintaining accurate records and on determinations of the FDIC as receiver at the time of a future receivership of any bank at which we place your funds. FDIC pass-through deposit insurance protects you only against the failure of the bank at which PayPal places your funds, and does NOT protect you against PayPal's insolvency. Through the terms of our User Agreement, we believe that your funds will also be protected from any claims of PayPal's creditors and will be returned to you even in the unlikely event of a PayPal insolvency.
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Old 01-29-2004, 09:52 PM   #7
Vrindavan
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consider MoneyBookers.com too
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Old 01-30-2004, 03:46 AM   #8
trabaho
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Default Frozen accounts

We pay our clients through paypal but when they travel and access their accounts in Asia or another country it gets frozen. I think Ive had 5 already upset about having to wait a week or two to get their money.
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Old 01-30-2004, 04:52 AM   #9
Jack
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Going back to your original post, you noted:

Quote:
1. How badly will using only paypal hurt an affiliate program?
I do not like to receive payments for affiliate work through Paypal because I have a premiere account and am charged 2.9% on all funds received through it. Paypal is also now requiring all accounts that receive more than $1,000 per month in funds to become premiere (and thus be subject to the fees for receiving funds). If your program worked great for me, I doubt this would be a deal breaker but you may want to consider offering your super affiliates alternate forms of payment due to this.

Last edited by Jack; 01-30-2004 at 04:52 AM.
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Old 01-30-2004, 06:42 AM   #10
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Quote:
Paypal is also now requiring all accounts that receive more than $1,000 per month in funds to become premiere (and thus be subject to the fees for receiving funds).
i am not aware of this.

If so, it is too much!
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Old 01-30-2004, 08:09 AM   #11
Jack
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It seems the statement I made before was a bit inaccurate. This US $1,000 limit applies to payments received from eBay sales, web store payments, or other ecommerce activity. Just transferring money from one person to another should not be affected by this.

News about this can be read here:

http://www.auctionbytes.com/cab/abn/y04/m01/i13/s02

Of course, if the receiver does have a Premiere account, this 2.9% fee still does apply no matter what type of payment is sent.

Last edited by Jack; 01-30-2004 at 08:10 AM.
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Old 01-30-2004, 08:58 AM   #12
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can you have two paypal accounts
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Old 01-30-2004, 11:44 AM   #13
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To expand on what Vrindavan said ...

PayPal allows you to have two accounts - one premier and one not. You can direct your affiliate payment to the non-premier one and take eCommerce sales on the premium one. I use the to get my FastClick commissions without a fee and still take credit card payments from people who want to do small ad buys on the site.

You will need two different bank accounts though to set this up. If you have an account in a personal name and an account in a business name that would probably work just fine.
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Old 01-30-2004, 12:06 PM   #14
maddeningcrowds
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My understanding is that Paypal places your money in account for which paypal is insured. Your dealings with Paypal are not protected by FDIC, which is impotant, because regardless of the terms, if paypal experiences a bad hacking or fraud and goes bankrupt, your money is lost.
Quote:
As for something going wrong with PayPal, I agree, it could be a huge problem. But luckily a problem that could be covered in the program's TOS.
I don't want to seem like a paypal basher but I have to forcefully point out that when you agree to Paypal's TOS [sic] you give them permission to semi-permenantly retain all funds in your account for any reason which they need not disclose to you.
Quote:
If PayPal (or Wells Fargo, in connection with processing credit card transactions) has reason to believe that you may be engaging in or have engaged in fraudulent, unlawful, or improper activity, including without limitation any violation of any terms and conditions of this Agreement, your access to the Service may be suspended or terminated.
Quote:
PayPal, at its sole discretion, also reserves the right to limit access to sending money or making withdrawals from an account for any one of the events listed below.
the reasons in the list include:
Quote:
Reports of unauthorized or unusual credit card use
So translation: if there is a report of unusual credit card use Paypal can prevent you from making withdrawals at its own discretion whilst it carries out an investigation of unspecified length with which you agree that you must wholly cooperate (this typically involves sending in multiple copies of driving licesnse, utitlity bills, bank statement, credit card statement).

Note that for this to happen there doesn't have to be fraud, or a report of fraud, or unusual credit card activity. There only need be a report of unusual credit card activity.

Summary: Be very careful with paypal.
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Old 01-30-2004, 02:44 PM   #15
shareasale
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I have to add my own caution. If you use paypal for large amounts of funds, be careful and my suggestion is to not keep those funds in there any longer than necessary.

When all is working smoothly, paypal is a great option...however not all works smoothly all of the time.

There is a great and real problem with fraud, not all Paypals fault, but I don't think they do everything they can to stop it either. You are, afterall, sending money to an email address... If you go forward, make sure your email addresses are correct, and can't be easily meddled with within your system. I.e., a strong and secure method for affiliates to change their email address on record with you...

Be alert when a partner has an Unverified, or Unverified International account (paypal) as opposed to a Verified Business Account or Verified Personal Account.

Most banks have a wire (ACH) option which is better for everyone in my opinion - much more secure as the banks records have to match with all the contact info that you have in order for a payment to be made...
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