There were always alternatives to Ebay for online auctions, but Ebay did it best or simply had the most traction with sellers (Yahoo Auctions was awfully barren when you wanted to find something, for instance).
PayPal was always the easiest and most secure way to transfer money online. Remember that originally PayPal competed with Ebay's own in-house payment system and won. That prompted Ebay to purchase PayPal in around 2002. Ebay had been beaten and so bought out the system people actually used in order to lock in their monopoly.
I was okay with this for years; as long as Ebay was the best way to buy obscure or one-off items online and as long as PayPal was the easiest way to pay for those items, I didn't mind. But Ebay has continued to make their selling site more and more difficult and frustrating to post simple auctions. Now PayPal seems to have outgrown its britches, too. Let me explain what happened to me personally in May 2008.
I have been an Ebay user since 2001. I have been a PayPal user since I guess 2002 or 2003. My Ebay feedback rating is 100% (don't believe me? check it out here). My record is spotless. However I only sell maybe 4-8 items a year on Ebay and purchase about the same. I listed an item for sale at Ebay in May 2008 and accepted payment by PayPal. The buyer paid for the item and I received a notice from PayPal telling me the money would be held for up to 21 days but that I should ship the merchandise immediately. This sounded like a really bad spam message -- the kind that ask you for personal bank account information or your site login credentials in order to verify your account status and avoid being shut off (these types of email scams are, in my experience, quite commonly targeted to Ebay and PayPal users). Why would I ship merchandise to a buyer when I could not verify that I had received payment? It had to be a scam.
It wasn't a scam -- well, not in the third-party-criminal-trying-to-get-my-login-credentials kind of way.
Perplexed, I logged into my PayPal account and did a search for "hold". Within the search results I found a change to the PayPal policies in March 2008 stipulating that, at PayPal's discretion, "a small percentage" of payments may be held for up to 21 days if PayPal determines there is a high risk involved. High risk? My feedback rating is 100%. You can't get any higher than that! Every Ebay seller from whom I have bought items and every Ebay buyer to whom I have sold items has indicated that I fulfilled my part of the deal. Since when is this high risk?
An email to PayPal posted through their support web form was responded to within 2 days and basically indicated that I should try to improve my seller rating to avoid funds being held. Excuse me? Let me repeat: 100% positive feedback with Ebay. How can I possibly increase my seller rating when I am already at the upper limit? Ebay owns PayPal, therefore PayPal knows my feedback score. They can also see that in April 2008 I received 4 positive feedbacks, so it isn't like my account is not current.
The only explanation I can find is that, because I am selling 4-8 items a year rather than 300 items a day, I am not paying enough PayPal fees to be considered low-risk. PayPal are not getting rich enough off me, so I am being punished for being a casual seller rather than a business (casual sellers were Ebay's target audience -- businesses can sell online with their own websites or through Amazon Shops, Yahoo Stores, etc., I cannot). In my own experience (as an Ebay buyer) the sellers doing 300 items a day have the worst feedback scores, yet they are paying PayPal more money per day and so they would presumably not be considered high risk even though their buyers say otherwise.
I am not alone in this. PayPal's "small percentage" of sellers with imposed payment holds are numerous on various discussion forums around the internet. Here's a link to a live Google search results page for more details.
©1996, 2008 by Don K. Eitner