states threaten micromerchants with paypal attacks

PayPal Booted Out of State, Under Legal Siege. " ... the state of Louisiana ordered PayPal to stop doing business with its residents without a license.

"Although the company faces the threat of regulation from several other states, Louisiana was the first state to order the company to stop transferring money to and from residents until it obtains a money transmission license.

"If PayPal fails to abide by that order, it could be fined US$1,000 per day by the state.

"PayPal said it will 'comply promptly and suspend the ability of Louisiana residents to make payments through our service,' although it reserves the right to contest the order."

The article in eCommerce Times continues, stating PayPal is facing legal challenges in other states, including New York.

Let's see, PayPal has been around how many years now? And states are only NOW looking at it? Is subject to these same complaints, or any other net-based money-transfer services?

I don't know the legal ins and outs of the way PayPal is supposed to conduct business. I do know that this should've been resolved long ago - before thousands and thousands of small online businesses came to depend on PayPal for ecommerce functions. Including the thousands on eBay alone.

PayPal isn't a cheap service for a micromerchant to use, but it sure is cheaper than most bank merchant accounts and it is absolutely easier to set up than every single other shopping cart program out there. It may not be the best service out there for the microbusiness, but as far as I've seen, it's the only one out there that makes sense. It's flawed, but works well enough to have generated $40 million in revenue in 2001 and more than 2 million business acounts.

What I want to know is what micromerchants are supposed to do if PayPal sinks under the weight of regulatory cinderblocks in 50 states. Are banks going to step in an offer comparable services that are comparably easy to use? I doubt it.

If PayPal falls, it will be the death knell for thousands of micromerchants who cannot afford the expense of merchant accounts or hiring programmers to set up expensive shopping cart programs for their sites. Even sites proclaiming to be easy-to-use and cheap are not - witness Yahoo.

So what's going to happen? I don't know. Is eBay going to step in to the fray? If they want their success to continue, they'll have to.
Posted by .(JavaScript must be enabled to view this email address) on 02/12/02 at 12:08 PM
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