PayPal’s Buyer Protection And Important Takeaways For Card Issuers

PayPal is one of the largest payment platforms founded in 1998. PayPal has more than 400 million active users, with more than 19 billion transactions (more than 1250 billion USD) processed in 2021.

What is PayPal’s buyer protection program? 

Despite the growth of eCommerce transactions, many consumers remain sceptical about the security of online transactions. Knowing this, PayPal started with the “Buyer Protection Program” to reassure that users could get their money back if there was a problem with the transaction. 

What does PayPal’s buyer protection program cover?

The program is designed to protect users when their order is not delivered or if what is delivered is significantly different from what the merchant describes. The program covers the total purchase price and shipping charges in such cases.

What are the advantages of PayPal’s buyer protection?

Typically, the PayPal dispute process is faster and less complex than disputes of card transactions. PayPal makes it much easier to report an issue, and the consumer gets feedback and an outcome much quicker.

Using buyer protection to attract users to the platform has been so successful that a recent consumer survey showed that 67% of users use PayPal because of the buyer protection program (Link to the study).

How is PayPal’s buyer protection different from consumer protection on card payments?

Payment schemes like Mastercard and Visa offer extensive cardholder protections on their cards. In fact, the coverage of protection scenarios is superior to PayPal. 

While PayPal did a great job increasing awareness about its buyer protection program, the program itself is not as compelling as the protection offered by payment networks (Mastercard & Visa) on card payments. 

PayPal’s buyer protection mainly covers two cases: 1) purchase not received and 2) purchase significantly not as described. These two cases are only a fraction of cardholders’ protection offered on card payments (to name a few: services not received/not as described, digital goods, recurring transactions, not completed transactions, etc.). Unfortunately, the majority of cardholders are not even aware of it. Card issuers and Card Schemes have so far not raised awareness and do rarely advertise this as an advantage of card payments. One possible reason for this is the bank's effort to process the dispute. 

Why does consumer protection matter, and what card issuers can do about it?

PayPal’s buyer protection strategy shows that this can be a strong value proposition to attract consumers to prefer a payment method over others. When it comes to card payments, this means choosing a card over another one for making a transaction (gaining top of wallet position for the card).

To make the most out of cardholder’s protection on cards and gain the top of wallet position, we recommend card issuers to:

1. Invest in digitalising the dispute process to reduce manual work and increase automation throughout the process
2. Invest in improving the communication channel to make the interaction between the cardholder and the dispute team easier (e.g., cardholder self-servicing)
3. Consider promoting cardholder protection more actively and as one of the core USPs of their cards. 

How does Rivero help card issuers in this domain? 🏦

With our product, #amiko, we help card issuers to digitise the fraud and dispute process, resulting in an excellent experience for cardholders and efficient process handling for the issuers.

➡️ To find out more about #amiko, visit our website

➡️ To learn about other issuers' experiences with #amiko, check this customer success story