PayPal Sets Up Safety Net

In a move designed to make online auction buyers more comfortable dealing with sellers they do not know, PayPal this week launched a fraud protection program.

Dubbed “PayPal Buyer Protection”, the initiative gives buyers up to $500 of coverage for qualified transactions on eBay. The program is free to all PayPal users for qualified transactions, and was scheduled to begin immediately.

News of the program comes just days after PayPal announced a deal with payment provider CyberSource, giving online shoppers an alternative payment option to credit cards and electronic checks.

“PayPal’s … trust and safety capabilities enable us to offer additional fraud protection for buyers,” said Alex Kazim, vice president of marketing and business development for the Mountain View, Calif.-based company. “With this new program PayPal is able to help increase the community’s confidence shopping on eBay.”

The PayPal Buyer Protection program covers eBay buyers for up to $500 on non-delivery of items, or on products that are substantially not as described. With those transactions that do not qualify for PayPal Buyer Protection, eBay will continue to provide its standard purchase protection feature of $200 coverage with a $25 processing fee.

Sellers qualify for the PayPal Buyer Protection program by maintaining a 98 percent positive feedback rating on eBay and having at least 50 feedback points. Sellers also must select PayPal on the site’s “Sell Your Item” form, have a verified PayPal account, and be based in the U.S. or Canada. Buyers who would like to ensure an item is covered by the program can simply look for a new Buyer Protection logo, which will be visible in the Seller Information Box for every qualified listing.

This isn’t the first time that PayPal has offered protection for buyers on low-risk purchases. In 2000 and 2001, well before eBay acquired the online payment service, the company boasted similar incentives to attract customers. According to Avivah Litan, vice president of financial services for Gartner Research, these kinds of incentives just make sense.

“When you think about it, ‘buyer protection’ is really clever marketing,” Litan said. “It’s almost like when you get zero liability on a credit card purchase over the Internet — no sweat off the company’s back, but a good value to attract those customers who might otherwise shy away.”

PayPal’s buyer protection program will work along side the company’s existing Seller Protection Program, which protects sellers for 100 percent of their transactions, up to a total of $5,000 per year.

Adapted from

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