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UK-based online retailers and eCommerce businesses that use PayPal could be in for a nasty shock when it comes to cashflow, after the latest announcement from the payment processing giant. The company has introduced its ‘Pay after Delivery’ program to the UK, with a cool reception from sellers.

Immediate cash flow shouldn’t be disrupted, because PayPal will pay the seller straight away.

However, the buyer won’t be charged until 14 days after the transaction. PayPal’s marketing team is promoting this as being better for the buyer, with the purchase ‘covered by PayPal Buyer Protection’. If the purchased item doesn’t arrive or isn’t as expected, the buyer will be able to claim a refund from PayPal.

The danger to the seller

Though PayPal is telling the market this type of arrangement will lead to buyers spending more, because they don’t have to pay immediately, many sellers have highlighted the disadvantages to them and the extra power this arrangement gives PayPal.

For a start, the 14-day payment grace period may promote a try before you buy mentality. The danger here is that purchases through PayPal may be more likely to be returned, causing a higher chargeback rate. This, in turn, could lead to higher costs as chargeback insurance premiums rise.

Second, PayPal will have complete control over the process. PayPal iterates that the present system gives protection to sellers, and a method for buyers to file disputes and chargebacks through their credit card companies. Under PayPal’s new process, it will become the sole arbiter in all disputes. It’s been reported that some sellers (who have expressed an opinion) believe this could put further upward pressure on chargeback rates.

North Payments’ response

At this time, North Payments will continue with its current policy and process. We are committed to being an enabler of eCommerce, and also to helping sellers maintain low chargeback rates and reduce them even further.

If you’d like to find out how we can help your business to reduce processing costs and chargebacks, then please contact us today.

Posted in Payment Processing.

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