After The Regretsy and Diaspora Account Freezes, We’ve Lost Confidence In PayPal

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Hey PayPal, do you realize people no longer trust you? By heartlessly freezing the accounts of legitimate causes, you’ve shaken our confidence. By releasing the funds only in response to public pressure, you’ve shown that your policy enforcement is erratic and our money can disappear on a whim. The account freezes have become such fiascoes that they transcend the facts. Even if you’re boxed in by the law, even if these companies accidentally misused your product, it doesn’t matter. The public’s perception is that there’s a risk in keeping money with PayPal. If something doesn’t change, startups, causes, and merchants will start processing donations and payments elsewhere.

Today’s blunder where you froze the account of Regretsy as it tried to buy toys for poor kids is going to stick in people’s minds for a long time. It follows you freezing accounts of open source social network Diaspora, Minecraft creator Markus Persson, and social network for models Zivity. I won’t even get into your controversial stance on Wikileaks.

Sure, we don’t hear about the countless people you save from spammers, fraudsters, and thieves. But again, this is a public relations issue, and you need to be winning the hearts and minds. You’re essentially a bank, and banks are built on trust. That trust erodes with every errant account freeze. If I was an organization depending you, I’d be worried, and would consider withdrawing all my money. Unfortunately, that very action could lead my account to be frozen.

So get smart, and change how you deal with these issues. Here’s how:

1. Appoint a rapid response team to either pre-approve or immediately review any high-profile or contested account freezes.

2. Change your system to prevent people from using the Donation button if they aren’t a non-profit, or accidentally misusing any other feature.

3. Clearly explain to users that rapidly withdrawing large sums of money may trigger an account review, and suggest they regularly withdraw smaller sums instead.

This isn’t a comprehensive list, but it would probably help you avoid of large volume of erroneous account freezes. If some of these measures are already in place, they’re not working properly. Also, be less of a grinch. You’re a giant company, you could afford to give those Regretsy kids some extra toys or provide some token of good faith to those you’ve screwed.

PayPal, you’re the incumbent, and people are slow to switch to an unproven smaller payment service. But considering WePay dumped a 600 lb chunk of frozen money in front of your conference, startups are gunning for you. That first-mover advantage won’t hold up forever. As more commerce moves online, you’re going to have to uphold the trust of mainstream users that are highly influenced by bad press. And right now, you’re on thin ice.