Boston, Massachusetts — On June 13, 2007, PayPal announced yet another innovation into its ongoing battle with fraud.
Paypal Inc., still struggling with a software system and customer service system which arbitrarily freezes users accounts and transactions for no apparent reason, unveiled their “Advanced Risk Predictors” program on the last day of eBay’s Boston Developers Conference.
Paypal Chief Technical Officer, Scott Thompson, said “Fraud has slowed the growth of ecommerce.” He failed to mention that perhaps a factor in the slowed growth of ecommerce was the millions of Paypal user accounts his company has limited — along with the tens of millions of dollars associated with those accounts that cannot be used to propel ecommerce forward. Continuing, Thompson said Paypal will use the 9 years worth of unique information it has on its customers — past and present –to help merchants make more informed decisions about which transactions they should accept and which not to accept. Personal information of all eBay customers — past and present — will be used as well. Mr. Thompson calls this “deep historical information.” In other words, PayPal is going to take your personal information and use it to determine if other people with similar traits pose a probable risk or not.
While Paypal has said it will begin testing the service in October 2007, it has failed to address the numerous negative impacts this system will have overall. Such concerns include the fact that PayPal’s current fraud detection system arbitrarily and liberally freezes and limits user accounts for no apparent reason. The new “Advanced Risk Predictors” software, to fully rollout in 2008, promises more of the same.
Not only will PayPal have the ability to freeze or limit account based on calculated probability a transaction is risky or fraud is apparent, sellers will have the ability to accept payments or not based on PayPal’s recommendations. And those recommendations are only based on what a computer says.
What this amounts to — along with PayPal’s current tactics — is employing sanctions on well meaning customers and sellers before any crime has even occurred. The logical process of completing a transaction first and then dealing with issues once a complaint is lodged will no longer be the norm. Being verified by PayPal will mean nothing. Buyers and sellers will have to scratch their heads and hope transactions go through on a case-by-case basis.
