PayPal To Change Their Policies On Digital Sales?
The experience I had with selling digital products with PayPal as the payment provider had me absolutely gobsmacked in regards to their policies on the sales of digital products and money holds that makes absolutely zero sense.
After I sold some digital products for the amount of $314.40 PayPal issued a money hold for 21 days and they are stating as you can see above that if I update my order status my money will be available within 7 days after verification, instead of available after 21 days.
So I went right ahead and marked within my PayPal account that the digital items has been sent to the client. After I marked in my account that the digital products has been sent to the client I saw the below message pop up in my PayPal account.
According to the message above my understanding was that I will receive my money within 7 days. After the 7 days nothing happened, so I contacted PayPal support to ask why my money has not been released as it states in my PayPal account that my money would be released within 7 days.
When speaking to PayPal support they told me I have not updated my shipping information (which is bogus as look at what the message states above) and will only receive my money within 21 days from the transaction. I told them that of course I have updated my shipping information and marked in my PayPal account that the digital products was sent to the buyer on the day of purchase.
PayPal told me that they cannot see what I am seeing on their side and that I need to make sure that I have updated my shipping information. I then took a screenshot of the message showing in my PayPal account that states I will receive my money within 7 days.
On receiving the screenshot I send them they then laid emphasis on VERIFICATION. I will receive my money within 7 days of VERIFICATION and continued to tell me to update my shipping information. So here is what happened.
So first of all I have already updated my shipping previously in my account as you can see above and not possible to do this again. You can see the error notification pop up and this is nothing new. I went through the exact same thing with PayPal not too long ago.
When I brought up the screenshot of the message I received in my PayPal account that states that I will receive my money within 7 days after verification again, then PayPal support started putting emphasis on the word VERIFICATION.
Now of course with digital products there is no shipping of products involved, so there is no shipping tracking number that you can upload to PayPal for the purpose of VERIFICATION, which prompted me to send PayPal support the following message.
Now just for some clarification, when the client that bought digital products from you decides to acknowledge inside of his/her PayPal account the receipt of their digital products, then your money gets released instantly. This however is not an easy task as many don't know about this or know how to do it or care to do it, even if you email them and ask them to please do so.
The point I am trying to make is that there is no middle way. You either wait 21 days for your money to be released or you get your money instantly should the customer acknowledge receipt of their digital products inside of their PayPal account.
This 7 day business PayPal states in relation to the selling of digital products is therefore complete bogus. And there is no shipping involved, so there is no shipping tracking number, so there is no way that PayPal can verify that the digital products has been received by the customer, unless they mark in their Paypal account that they have received the goods at which stage you would then receive your funds instantly.
I am giving you the short version here. You will not believe me what difficulty I had with PayPal support not understanding this basic principle that the 7 day rule in regards to the selling of digital products does not exist, it is absolute bogus as there is no way that PayPal can VERIFY anything as there is no shipping tracking number as there is no shipping involved.
Finally after around 30 messages (I kid you not) and talking to around 8 PayPal support representatives the penny finally dropped and I got the following response:
Not long after I received this message my money suddenly became available lol :)
Was there any verificaiton involved? No. Did the client suddenly decided to mark inside of their account that they have received their digital products after for days not doing so? I very much doubt it.
My conclusion is that PayPal after a long conversation with me suddenly seemed to realise what utter bogus this 7 day rule after "VERIFICATION" that is clearly not possible really is and decided to release my money instantly.
I am absolutely gobsmacked, as how does a massive company get it this wrong and for this long? This is certainly not rocket science to understand why this policy is utter bogus and illogical to say the very least.
So now the big question?
Will PayPal update this policy in regards to the selling of digital goods and money holds? I guess the answer will become clear when generating my next sale of digital goods.
One other major problem
So think about the concept of drop-shipping. The digital sales I am generating works on the same principle. I am the middle man that orders the digital products on behalf of the client from the dealer at a discounted price of 20%, but I still need to buy the products on behalf of the client. Just for clarity, the digital product registration codes are delivered via email. My example of the drop-shipping principle here is just in relation to me acting as the middle man.
So the money that the client use to pay for the digital products is the money I am supposed to use to buy the products on behalf of the client, but now due to PayPal issuing money holds I need to pay for the client products out of my own pocket.
I have raised this with PayPal letting them know that I am certainly no millionaire that can afford to pay for all customer orders out of my own pocket until PayPal decides to release my money eventually. I mean a sale here and there is ok but what if I have a month where I need to pay £3000 for example out of my own pocket until PayPal releases my funds after 21 days. Who can do business like this?
I do understand why PayPal does this though in case there are refund requests etc. but at the same time PayPal needs to understand that no one has unlimited funds and can do business like this.
PayPal assured me though that once sales picks up and you build up that trust history with them then there will be no more money holds.
Lets watch this space.
Ps. Note that the money holds does not happen for me on small sales generated. Once we start moving over the $200 mark per sale is where it seems the money holds starts kicking in for me at the moment. This threshold may differ from account to account.
I don't actually know what the threshold is on my account, but I just know anything below $200 does not seem to be placed on a money hold.
Recent Comments
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Interesting post and thank you for putting it down on paper. I am quite certain it was immensely frustrating while you were going through it.
I assume they are well aware of what they are doing and by keeping other people's money for as long as they can they generate thousands and thousands of dollars in interest for themselves.
Great to know they can be convinced to change.
Alex
I think you hit the nail on the head that interest is surely one of the reasons. You are not the only one that mentioned this here.
Yes, it is too easy to assume that is what they are after. I am sure they have other reasons as well.....
Thanks for the heads up as my Local SEO business is an almost all digital delivery program and using Pay-Pal could hindre my ability to scale up and hire people to perform vital services within the first 3 weeks of a project.
I need to be proactive and clarify if this policy applies to services as well as or digital delivery items.
Andy
Keep us posted Andy as that info will be helpful to me too keeping future projects in mind.
Another thing I was wondering about. Say you had a business where you do ship items to customers, what tracking info does PayPal need for verification purposes?
What I mean is that only packages that you probably send by special registered post will have a tracking number, correct? So that means unless you make use of super expensive postage you won't have any tracking information to provide PayPal with anyways which makes this useless.
Have I misunderstood? However just like in the case of selling high ticket priced digital items, this will probably also only apply when shipping high ticket priced items sold to prevent money holds for long durations.
Here in the US all carriers have to give a package tracking ID, you only get a receipt of receiving from registered mails. It's like double insurance the customer did in fact get the item delivered.
Andy
I see, many thanks. Maybe it is the same elsewhere, not sure. Will look into it. Many thanks!
Let me get this straight. Are you "drop-shipping" digital products? How does that work? Most big ticket digital products are sold using affiliate marketing not drop-shipping. Is there a money-back guarantee?
It is very simple. I have a dealers code that allows me to order products on behalf of the client at a 20% discount from the vendors website. The registration codes for the digital products are delivered via email.
I was maybe not clear in my description. I meant to say that the drop-shipping principle apply as in me being the middle man that needs to pay for the products clients ordered.
Well on the money back guarantee it is a difficult one. No is the actual answer as the policy states once the registration codes has been used to register the product/s in their name then no refund can be issued.
However as PayPal is used as the payment provider, the policies of PayPal states that there should be a refund policy.
But then again there is a trial version available and why would you want to ask your money back if you already tried out the software and decided to buy the registration keys and registered the software in your name? There should also be seller protection built in I guess and what is fair to the seller also.
So luckily I never experience any issues in this regard. However I do get customers sometimes buying the wrong plugins and in a case like that I do refund them. And the vendor/creator I bought from then refunds me too. We are working closely together.
Thank you for taking the time to explain this to me. Have you asked the vendor/creator to extend you credit because of PayPal's 21 day policy?
No, there is nothing like credit with the vendor of any sorts haha. The vendor is just happy to provide me with a 20% commission so to speak from the deals I am doing on his behalf, but finance wise and how I go about doing it is all down to me.
And you are most welcome! Have a great evening!
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They do this with digital products because of the absurd amount of scammy items out there for digital items. I think it's to ensure when the customer files a refund, they have an easier time doing it. PayPal allows you to file to receive your money back if you don't receive the product or its not advertised correctly, you received the wrong one, etc. in their Resolution center.
Unfortunately, the good guys get punished along with the bad guys when they try to ensure less money is lost as scammers tend to 'disappear' after awhile, including their bank accounts.
I'm sorry you had this issue!
Yes, unfortunately this is always the case. The good guys getting punished for others' bad behaviour. I hope they will start coming to the right conclusions though in regards to the track record of my account and stop the money holds on my account.
They definitely need to stop holds on accounts in good standing, I agree! Just have them for new accounts for a year or two.
For sure! Let's watch this space :)