Information on Merchant Accounts,
Ecommerce and Credit Card Processing

February 29th, 2008 by Jamie Estep

Paypal buyers no longer need a Paypal account

Filed in: 3rd Party Processors, Industry News | 4 comments

Paypal issued a news release today stating that buyers no longer need to sign up for a paypal account in order to purchase from a Paypal accepting seller.

From a usability perspective this makes perfect sense, and has been one of the biggest hurdles for Paypal to overcome as a 3rd part processor.

However, I can foresee some major customer issues in regards to seller protection.

Right now, Paypal effectively removes traditional buyer and seller protection for credit card transactions by resolving disputes within the Paypalsystem instead of through the credit card chargeback system. This works explicitly because both the buyer and the seller are registered users of Paypal. Paypal has control over the entire transaction process, and has absolute power over both user’s accounts. Sellers currently have some piece of mind that their buyers have gone through a registration and verification process, albeit very limited. When the buyer is no longer required to maintain a Paypal account, a huge avenue for fraud opens up. The seller remains bound to Paypal’s dispute process, but the buyer is not. In this case the card issuing bank would take full control over the dispute, and unlike a traditional merchant account, the seller does not have a relationship with Visa or MasterCard. Paypal will become a liaison between the card issuing bank and the seller in the event of a chargeback, wherein the problem lies. Anyone who has tried to work with Paypal during an account hold or a dispute knows that yelling at a wall is more effective than trying to communicate with Paypal. Judging by Paypal’s already horrible customer service reputation, they are potentially adding an enormous workload on their plate in the form of chargeback handling. This could very well be a disaster in the making.

This is obviously an attempt to compete with more traditional Payment Gateways that have seamless API integration with websites (, Paypal’s Verisign, etc.). While this has the potential to improve Paypal conversions, I would be hesitant in enabling this feature in a Paypal account until more is disclosed about how non-account holder chargebacks will be handled.

4 Responses to “Paypal buyers no longer need a Paypal account”

  1. Funny Man March 1, 2008 at 9:28 am

    I do agree with your posts. I have been using paypal but I think if paypal is going to remove the paypal buyer protection then how about the seller. Most have been rip off because of this paypal policy and many have lost money because of no policy for both buyer and seller

  2. Noelle G. March 3, 2008 at 1:08 pm

    This is optional though, right? If I as a seller choose not to accept non-PayPal transactions there’s a way to turn it off?

  3. jestep March 4, 2008 at 11:42 am

    There’s supposedly a setting in payment receiving preferences that allows you to require paypal customers to have a paypal account.

  4. Motivator March 7, 2008 at 2:53 am

    Yes it is optional you can do it or not its really your choice. I think that paypal tends to give customers new preferences to improved its services but I do wish they can implement protections for buyers and sellers as well.