Ok so this topic is not my usual stuff, but it’s something I looked into recently as part of an issue I wanted to solve and found a lot of interesting points which I thought I could share with you since I’m sure you can relate.
After all, you’ve probably entered into many online purchases and chances are that you’ve used the PayPal payment option in most of them. Have you ever asked yourself … Is PayPal safe? Or maybe, like me, you just follow the crowd and used it without much thought; after all it is one of the most popular online payment processors in the world.
As of mid-2016 there where over 188 Million people using this system for payment processing. (For those of you who are into statistics you can see the full report here).
Statistics of PayPal usage from 2010 to mid 2016
Being a chronic online shopper myself, I have been using this online payment system for ages; however I never really took the time to understand what lies behind it and what makes PayPal so safe for online shoppers.
So I set out to do just that and went about doing some research (including a thorough review of the PayPal user agreement and policies) in order to validate the common perception that PayPal really is a secure payment method, and answer the question.. Is PayPal safe for buyers?
What is PayPal? – Really!
PayPal is an E-Wallet system that allows online shoppers to pay for their orders using the funds held in their personal bank account, credit card or debit card. When used for online purchases, PayPal is free. There are no payment charges, no annual fees and no processing fees.
This quick clip by PayPal explains the basics.
So when you decide to process an online payment through PayPal you are essentially authorising them to make a payment to the merchant on your behalf by taking the necessary funds from one of your personal funding sources.
From the other end, the online store you are purchasing from must also have an account with PayPal in order to receive the funds. Most online merchants, including big names like Amazon and Ali Express will accept PayPal as a method of payment nowadays.
You can also link your PayPal account to various different sources of funds, including all your credit card, debit cards and bank accounts, so if there aren’t enough funds in the default account, the system will automatically go to the next linked account and withdraw the required funds from there.
PayPal vs Credit Card
When you register your credit card as a Funding Source with PayPal you are essentially giving them the authority to automatically charge that credit card in order to obtain the funds required for your online transactions.
Having said this, PayPal will only initiate a payment from your Account with your specific authorisation. In other words, only when you click the “Pay” or “Continue” button in the PayPal website or the ‘Pay by PayPal’ button on the merchant site.
So the obvious question arises; Why not use my Credit Card directly to pay for my online purchases?
Here’s the deal.
While certain protections offered by Credit Cards and PayPal are very similar, the latter has the added advantage of not disclosing your personal credit card details to every merchant with which you make a transaction, which means that you are decreasing you exposure to hacking risks.
It gets better!
PayPal’s security practices are so sophisticated that many believe they are even safer than Credit Cards.
There’s more to it actually. Let’s take a look at other important benefits offered by PayPal to online shoppers like you and me.
Is PayPal Safe for online shopping?
Finally, the Juicy part!
Yes, we do consider PayPal to be quite safe, and we will show you why. The following are the main reasons which, in our opinion, make it one of the safest payment methods for your online purchasing needs.
1 Refunds for Unauthorised Transactions
One of the main risks with online payment processing mediums, be it online banking or e-wallets is the possibility of our private accounts being hacked by cyber criminals.
While consumers should shoulder their responsibilities and be extra careful when using these online systems, it is good to know that most corporations do have a buyer protection program in place for these scenarios and PayPal is no exception.
The company’s policies state that if you notice your account was accessed by unauthorised third parties then PayPal will reimburse you in full for any transactions which may have been performed without your knowledge.
So PayPal will refund you for any unauthorised movements in your account, however it’s important to note that the timely reporting from your part of any suspicious transactions is essential in this situation.
The T&C allow for a time-frame of 13 months from the first unauthorised transaction for you to log an official report with them. This gives you plenty of time, as long as you make it a habit to review your transactions on a regular basis.
It’s fair to say that PayPal strives to make this process extremely simple for you by sending each user a monthly email, with a direct link, to remind you to check your transactions.
Once you notify PayPal of any unauthorised movements in your account, they perform an internal investigation (also to ensure that there was no fraudulent intent or deliberate negligence by yourself as the account holder), however the company promises a maximum turnaround time of only 20 days to solve the matter and reimburse you in full.
2 Refunds for unsatisfactory transactions
This is definitely the best part!
The PayPal buyer protection programme covers you in case something goes wrong with your online purchase. This, ladies and gentlemen, will give you the peace of mind you need when making purchases online.
PayPal can offer this since it is the middleman between the consumer and the merchant and therefore it has a lot of power when dealing with sellers. In fact, the Terms and Conditions clearly state that the outcome from any Buyer Protection claim is a decision over which PayPal has final say.
As a buyer, if you prove that you did not get what you paid for, then PayPal will reimburse you for your expenses, including any shipping costs you incurred.
The PayPal protection covers most goods and services, including travel tickets, digital contents and physical items, and there is no minimum transaction value required in order to apply for this cover.
The PayPal T&C identify two categories of unsatisfactory transactions;
1. The first is where you simply did not receive your purchase, (be it physical goods and/or services),
2. The other instance is where you received your purchase, however the items/service received were materially different than what was described by the seller. (PayPal refers to this as ‘Significantly Not as Described’ or SNAD for short)
At this point you might be wondering what would you consider ‘Significantly not as described’.
Basically these are items which are deemed to be materially different to what you have ordered and PayPal’s T&C go as far as to give us some examples to understand the concept, such as;
• Goods received which do not match the description given by the seller in his online store or sales pitch. Example, if you order a book and instead you receive a DVD, or items ordered in certain colours which arrive in a different shade.
• When you buy items which the seller stated as being completely new and you realise that the goods received are actually used items.
• Damaged goods received from online merchants. Sometimes this would not necessarily be the seller’s fault as the goods might have been damaged during delivery, however PayPal will still refund your costs in cases were the goods received were damaged.
• Receiving an incomplete order. This could range from missing parts of an item to simply not receiving the full quantity of items ordered.
• Receiving fake items. If you ordered from an online store which promised original stock and you notice that the goods received are in fact replicas, then you are allowed to claim for a refund.
Here’s what it boils down to.
In the above scenarios, the focal point is that the purchase received is not in line with the description provided by the seller.
On the other hand, any situation in which the seller had clearly indicated and described the state of the products at the point of your purchase transaction, would not fall under the definition of ‘‘Significantly Not as Described’.
So; if your purchase was disappointing because it did not meet your expectations, yet the item was exactly as described in the seller’s profile then you will not be granted a refund. In other words, only genuine claims will be allowed.
Your can always try and request the refunds directly from the seller if you are not satisfied with the items received however it will then be up to the seller to satisfy your request.
This is why, as a consumer, you should pay extra attention both to the description of the product and also the quality of the merchant from whom you are buying.
For a detailed step by step guide on how to request a refund under PayPal’s buyer protection program we suggest you read this article. There are some important aspects you should be aware off to ensure your refund is processed without hitches.
3 Your Data is in safe hands
Well, according to PayPal, that is.
The company proclaims that it has the most sophisticated encryption programs available and confirms that information held about its clients is absolutely safe.
PayPal states that your personal data is stored in secure locations and on servers that are not connected directly to the Internet.
Furthermore, you only have to enter your credit card or bank account details one time, on sign up. Thereafter you will only have to re-enter your details if you decide to change the credit card of bank account linked to your PayPal.
Therefore, once registered on their highly secure and encypted database you will not need to disclose your bank details again and every time you make an online purchase using PayPal, all you need is your password.
You can appreciate that this is much safer and more convenient than trying to remember the never ending sequence of numbers that make up your credit card account, not to mention expiry dates, addresses etc.
History seems to validate the fact that PayPal has a very strong defense against cyber criminals. Over the past years we’ve heard of various credit card breaches however PayPal has never suffered any major security violations to its database.
It gets better.
Even in those cases where merchants databases where breached as was the case with ebay a few years ago, the information stored at PayPal was not effected in any way.
4 Lower exposure of information means higher protection against Fraud
The way this payment process works means that your personal financial information is confined within PayPal’s system only. Yep, that’s right Paypal does not disclose your personal financial information to the online merchants.
This protects you in two ways.
First of all, when paying through PayPal you do not have to disclose your bank details to various different online merchants who would definitely not have the same level of database protection enjoyed by PayPal.
Secondly, the less often you have to give out your credit card details the more protected you are from cyber thieves trying to intercept your card details through unsecured internet connections.
With PayPal, the seller from who you are making your online purchase will not need to see your bank details in order for the transactions to go through. Therefore PayPal acts as an intermediary between you and the merchant; a sort of filtering device intende d to help process the payment but blocks any other confidential data from getting through to the seller.
In order for the process to work the merchant must obviously also be registered with PayPal and have an account with them. Your payment will then be sent to the merchant’s Business account within PayPal without them needing to see your credit card number or security code.
You must appreciate how this is a big advantage for many online shoppers. You probably feel very cautious about handing your credit card details to small, less renowned merchants, and we agree with you. Why take the risk, when you can use PayPal without having to reveal your personal bank details to every seller you buy from?
5 Paypal Bounty Programme
Paypal have a bounty programme in place which is intended to reward persons who report weaknesses in their systems.
You might think this is crazy!
Here’s the deal.
The company is so concerned about it customers protection that it created a programme to encourage people, who spot flaws in their system, to report it to them and get something back for their efforts.
So they really go all out to anticipate any possible security issues, and why wouldn’t they when their success is dependent on this aspect.
6 Alert to Risky Transactions
PayPal will actually gauge the transactions you enter into and alert you if they consider them to be risky.
In fact, for certain transactions that you authorise, PayPal may restrict the funding source available. This is done in order to manage risk.
This does not mean that the transactions will not go through; however, before processing a transaction which PayPal may deem risky, it will alert you that there is a higher than normal risk associated with this particular payment.
From your end you may choose to go ahead with the transaction anyway and PayPal will honour your request by transferring the necessary funds. If you decide to proceed with the transaction, however, you should be aware that you might not be able to avail from the buyer protection programme to the full extent in the situation where something does actually go wrong with the transaction.
7 The PayPal App
PayPal also has its own mobile application which makes it easier to use PayPal for your everyday needs like online shopping, transferring money, or checking your account transactions.
In line with its company policies, PayPal has made sure that its mobile application is as secure as the rest of its operations.
The mobile app can be accessed via a pin number, so, if your mobile gets stolen, there’s no way the thieves can use your PayPal account, unless they get their hands on your pin number!
Now you know PayPal can be Trusted
So there you go. We’ve given you seven reasons why we consider PayPal to be one of the best payment providers out there. To summarise, these are:
1. Refunds for unauthorised transactions.
2. Refunds for unsatisfactory transactions.
3. Sophisticated Data Encryption and Storage methods.
4. Lower exposure of information means higher protection against Fraud.
5. The Bounty Programme keeps PayPal on its toes.
6. Alerts you to risky transactions.
7. The Mobile App is secure and provides convenience on the go.
I’m assuming that you are now much more satisfied that PayPal is safe. So, if you have to use one particular payment service for all your online purchases might as well go for PayPal.
What’s the bottom line?
I really think that the level of security and efficiency offered by PayPal is parallel to no other. This does not mean that every once in a while things might not go wrong with your account or with a particular transaction, however you can rest assured in the knowledge that you are covered and your risk is minimised.
If you want to find out more about PayPal buyer protection scheme and policies, they have a dedicated website to answer any queries you might have. Here’s the link.
Now that you know why using PayPal is both practical and secure, you can go ahead and enjoy your online purchasing experience with more peace of mind. Remember to share this post with your family and friends and let them know of the benefits offered by PayPal for their online shopping.