PayPal's Electronic Profiling

Jon Gosier —  September 7, 2009 — 29 Comments

I don’t know whether it’s laziness, callousness, indifference or all three but PayPal, intentional or not, are sending a very strong message to the rest of the world about Africa. Before I go any further, let me clarify that this is a rant. It’s about PayPal and how they seem to be ‘profiling’ users based on IP. It’s the new millennium equivalent of ‘driving while (insert minority group here)’. If rants irk you…good, that’s what they were invented to do. ;)

A Personal Example

For the past year I’ve been living in Uganda. Prior to coming here I’ve been a Pay Pal user for around four years. I estimate that in my years using the service, I’ve used it transfer well over $100,000 if you add up transactions both ways over the past four years. This was because I used to sell and buy lots of things on ebay but these days it’s because I use paypal to pay for a lot of goods and services internationally. Most recently I began using to send and receive payments to and from clients or employees.

I don’t know whether high levels of financial transactions via Paypal makes me a valued customer or a suspect in their eyes but their actions seem to indicate the later.

Apparently getting paid via paypal, or paying people via paypal is a crime if you’re accessing the site from outside of certain ‘trusted’ countries. This is absurd because the whole idea behind sites like PayPal is to mobilize financial transactions. We live in a global world these days. In 2006 I used Pay Pal from 20+ countries throughout Eastern and Western Europe, In 2007 I used it several times from Mexico, in 2008 I used it as I traveled across ten states in the US and now I’m using it from Uganda. However, if I had to give my mailing address it would be in either Colorado or Georgia depending on how soon I needed whatever the mailed item was.

Some might call me a ‘jet-setter’ others might simply say, “I traveled more than that THIS YEAR!?!”. It depends on who you’re talking to and it’s a trend that’s only going to increase as families and businesses spread out across cities, countries and continents. Obviously there are a lot of financial and phishing scams that originate from the continent. Pay Pal is absolutely right to attempt to curb them. Pay Pal is absolutely wrong to red flag a continent of a billion people as being criminals, and that’s essentially what they’re doing. How so?

The Customer’s Always Self-Righteous

Apparently PayPal’s way of ‘policing’ their service is to simply flag various IP addresses as being ‘suspect’ . hrmm. I have a few Iranian and Indian friends who could tell you a bit about what it’s like to get profiled based on where you appear to be from. (And if they won’t suffice as anecdotal evidence, I’ve got a few million mexican and black american friends who’d double down on the sentiment.) Still, I get the fact that Pay Pal may need to increase security in certain areas because of the liabilities of operating across various borders. Some countries actually aren’t friendly to international law, they defy it to spite other governments. Fair enough, protect the customers investments.

So Africa remains a high-risk zone as the sheer number of comments like these from paypal users indicates:

I am in the process of trying to sell a laptop. i have posted ads on comtrader and ebay. So far the item has been bought off ebay by a mother who wants its for a present for her daughter in AFRICA. Two people have expressed interest through comtrader, one wishes to buy it for a business associate in AFRICA, and the other wants it for himself, and guess where he lives….. AFRICA. Sorry for all the capitals, but am i missing something here. I’ve replied to the ebay purchaser who is going to pay through Paypal, which i know is covered by ebay so i feel safest. Just wondering if this obsession with me posting it to AFRICA is anything i should be sketchy about.

Or this person’s thoughtful reply:

Anything from africa is a scam so stay well clear. Re-list the item if you have too.

Wow. Anything from Africa is a scam. I better take back this computer I just bought from GAME!

The unintentional effect here is that by blanketing the whole region as suspect, it reduces the number of viable alternatives for legitimate businesses and professionals who want to use services like PayPal for trade. I use PayPal for some of my payroll now (for people who don’t live near me). However, whenever I do, PayPal flags my account and shuts it down temporarily ‘because I accessed it from a suspicious location’. To unlock it I have to call them, from Uganda and do a bunch of other stuff that’s inconvenient. I suppose this is the price of admission for using the service in country it wasn’t intended to be used in. So no complaint here either.

But what it does mean, is that from every angle legitimate African businesses are smacked in the face by measures put in place to police the one’s that are indeed abusing the system. But this affects even expatriates and NGOs that might want to use the service. If it’s accessed from a certain IP there’s a red flag, especially if that IP is not where you registered to use the service.

The Dark Continent…of People Just Like You

Once again, the message perpetuated here is to be cautious when dealing with Africans, Africa or anything you suspect of being related to the aformentioned. This is nothing new. Most people here have been dealing with such mentality their whole lives, why would it stop now that the medium has changed? To be fair, there’s truth to this stereotype. There is indeed a huge problem of scams here. There is some truth to most stereotypes, the word itself simply implies that those truths are applied where they don’t necessarily belong. If you’re a Nigerian Cyber scammer you’d have to be truly special to be offended by people complaining about Nigerian Cyber scams. If you aren’t and all you want to do is buy a laptop from someone in North Carolina off eBay, but you live in Botswana….well you’re about to be grossly offended by your transaction experience.

Unfortunately, there are a lot of people here who are just like consumers everywhere else in the world. They want to buy things, they want the conveniences of online shopping, they want to do business…and they want their neighbors to stop scamming you so they can have those things.

I realize that the problem can’t be solved entirely by Paypal alone but I would appreciate at least an option to flag my account in advance for what might be mistaken for ‘suspicious activity’. I’d be happy to leave this to PayPal’s discretion but my problem is they aren’t using any. African transaction? Banned! Banks will allow customers to indicate that they will be abroad for a certain period so that they don’t shutdown accounts by mistake. Why doesn’t PayPal? You’d be surprised at how damaging these blanket policies can be to an organization like mine that simply just wants to pay employees and be paid by clients.

I suppose the complaint is that PayPal doesn’t give me an option to avoid my account getting bricked. It costs me money everytime they do it. they give me no alternative to prevent it from happening and when I talk to them, somehow it’s my fault for existing ‘in that country where The Last King of Scotland took place‘.

A Note of Thanks

Thank-you PayPal, for your charming international policies and your wonderful customer service. Thanks for flagging my account every time I try to pay someone, and thanks for forgetting every single time that I tell you I live outside of the U.S. because clearly people don’t travel anymore. Thanks for making it always necessary to prove my identity when you decide it’s convenient for me to do so, and thanks for giving me…a customer….no method for complaint when something like this happens.

Also, thanks for reversing payments to people on my behalf, even though I didn’t ask or even want you to. It really hurts my startup in ways you can’t imagine. Thanks for pissing off clients who didn’t think I was scamming them before, but who do now because of PayPals actions of reversing payments without warning. Isn’t that ironic.

Update 9.9.09: Theresa has posted an awesome follow-up “Alternatives to Paypal for African Entrepreneurs

Update 10.9.09: Another great follow-up on “eBillme, Another PayPal Alternative

Update 10.9.09: To be fair, fixing a PayPal once it’s been bricked is relatively painless. I called them, verified my account and I was back in business in twenty minutes (most of that spent on hold). They really work hard to fix things after the fact, but I still feel that it’s better business to mitigate risks on your customers behalf prior to a problem. This is why milk cartons have expiration dates, you don’t wait for your customer to buy up the rotten milk to discover which of your products needs to be replaced. =)

Jon Gosier

Posts

Founder of Apps4Africa, Appfrica, and D8A

29 responses to PayPal's Electronic Profiling

  1. 

    I totally and whole-heartedly agree with this article. As a South African I’ve been constantly disappointed at the attitude taken by PayPal towards transactions involving African parties.

    Great article, thanks for writing it.

  2. 

    I feel your pain. Just a couple months ago I was in Ghana trying to transfer some funds into my PayPal account. They picked up on the IP address and locked my account. I was forced to re-verify my bank accounts, my address and a couple other things. It took almost a week to unlock my account. It’s a good thing I wasn’t trying to do something that was time-critical, otherwise I would have been out of luck.

  3. 

    awww HELL. Paypal is so huge that it has no need to have any sort of customer service. It’s just irresponsible not to allow any mechanism for legitimate responsible businesses like yours to use their services without hassle and penalty. Is Google Money any better?

  4. 

    Thank you for raising this once again. I’m totally behind you 100%!

    One of the co-founders of Paypal, Elon Musk, was born & raised in South Africa (Wikipedia). Has anyone spoken to him about helping us out?

    I ranted about this a year ago on this posterous post. Nothing has changed in a year.

    One of the longest comment threads on http://www.imod.co.za deals deals with this issue.

    Paypal, your silence is deafening.

  5. 

    In some ways you should feel lucky that your account only gets bricked by PayPal. I’ve had my account closed on me when I tried a transaction while in Nigeria for business. And I wasn’t even transacting with Nigerians. No protest possible – just a closed account email notice followed by funds refunded to my account and transactions canceled.

  6. 

    I’m not a fan of how every two months I am subject to a ‘random’ security check which forces a change in password, which I always forget and results in me being locked out, then followed by the need to re-verify my paypal account. This requires a third party receiving a phone call in the UK, giving me the numbers through gtalk, and then me punching the numbers into the box using an IP address in Kenya.

  7. 

    Chai I tire.
    This is a real big problem for some of us software entrepreneurs in Africa. Makes me operate with something I can call an RPC paypal account owned by a trusted person in USA. allowing me to use it and answering calls whenever they doubt my transactions
    sucks

  8. 

    You could sit here and rant about this problem, or you could just fix it and be on your merry way.

    Fix it how? Find yourself a proxy in the good USofA, preferably in the home state you have on file with PP. Since everything going to/from your Paypal account is HTTPS SSL encoded, you’re no more exposed with a proxy than all of the other nodes your transaction otherwise goes through. PP sees a USofA IP address and your troubles with PP are now much less. Never gone entirely, but much less.

    Or keep complaining…the choice is yours.

    • 

      DB, you’ve got a point. There are methods of ‘fooling’ the system. That helps me. I’m also speaking on behalf of people who don’t know how to do such things. It’d be nice to think only about how this affects me, though.

      Secondly, jumping through all these hoops also raises suspicions when something goes wrong and you have to explain to PayPal why you’re using a proxy server to access your account. Hardly a scalable solution but again, it’s easier to solve a solution for yourself than for everyone else which is what we’re talking about here.

  9. 

    Anyone tried using a proxy with PayPal? Had any success with it?

  10. 

    As the world gets smaller and smaller and Africa increasing in it buying power this targeting will have to stop. Or a rival Paypal will start and take the African business.

    Apart from China and India Africa isone of the fastest growing economy in the world. The tables are turn all but slowly but be assured they are turning,

    Business changes is subject to timing!

  11. 

    This is a prime example of how the internet has not at all managed to create a level playing field – any kind of ecommerce from Africa is near impossible. I worked online from Uganda for 10 years, and saw the PayPal functionality decrease over time. I did eventually resort to using a US-based proxy account that belonged to a trusted collaborator with our community based organization. I was put on the account as an employee so that I could access the account history and manage my organization’s transactions… after a few months, the proxy’s account was flagged and temporarily shut down!

    I even tried for a while to make a connection with someone from PayPal to explore options and suggest ideas for making it work in Africa, but was told by a former PP exec friend of mine that they simply had no bandwidth (read: personnel time) available to deal with Africa at all. Very sad.

    • 

      Yeah, the ‘proxy’ as a solution thing is a solution but hardly a sustainable or scalable one as I mentioned in reference to DB’s comment. There’s three billion people living in various parts of the world where PayPal has flagged IPs (Africa, South America, parts of Asia). No one is saying that it’s PayPal’s responsibility to fix it for all of them (they very well might not have the manpower to do so). However, I do think it’s smart business to provide solutions for verified individuals and businesses like yourself who are simply looking to use the service like everyone else.

      After all, from a purely financial perspective it only adds to their bottom-line. After all, I’m only asking for a way to preemptively authorize my PP account so that I don’t have to worry about it getting shut down, like what’s possible at a banks. It seems like it’s in the interest of PP to expand their international clients. But maybe it is too much hassle, or maybe they just don’t care to do business with the rest of the world.

  12. 

    So what is it we can do ? Shouldn’t UBA,Ecobank?Standard Chartered and any over Pan-African financial entities come up with their own Paypal version for us customers to use and enjoy ?

    • 

      @Frederic Currently there are no great alternatives. PayPal doesn’t seem to be interested in solving it. Google is similarly noncommittal with their service. MPesa is working towards a web strategy and looks to be our only real hope for a pan-African/international solution. There are some great regional solutions in South Africa but they are primarily focused on SA users.

  13. 

    If it makes you feel any better (and, really, it shouldn’t), they do this in Asia, too. About every third time I try to purchase something using my PayPal account (I live in China, have for six years, but still use a US PayPal account), it gets locked and I have to Skype for half an hour getting it unlocked.

    I know there are a lot of scams coming out of East Asia, too, but every credit card company deals with it just fine.

    • 

      @JB Yes, I’m aware. I have friends who live in China and it’s an equal headache there. None of this was intended to be exclusive to Africa. I reference this a few of my replies to comments, and I feel it only makes the argument stronger that PayPal needs to address the problem for legitimate businesses in countries all over the globe. =)

  14. 

    Can you use this post to mobilise a number of entrepreneurs you’re incubating/investing in? As has been highlighted, you’re not the only one facing this issue. What can be done to solve it?

    If it’s a blanket ban in certain geo-located IP addresses, with enough users from those countries, could we not display the benefits (socially and financially) to organisations that would need to be involved?

    Just a thought

  15. 

    I recently used Paypal while I was in Kenya to make payments and I did not encounter any problems.

    Ebay/Skype/Paypal have a thing about closing accounts before asking any questions. That is why I do not recommend anyone using Paypal as their sole merchant services provider because they can terminate their services without notice.

  16. 

    Ive been trying to find a payment provider for a startup in Kla Uganda.
    Most of them(included google checkout) require that you have a verified US address; pay-pal does not but like this post alludes, their charge backs and reversals can take you out of business.
    I have found some guys called wallie who do prepaid payments (very friendly) …. all in all getting paid for a service out of Africa is a pain.

  17. 

    Thank you for this post and for highlighting this problem.

    The global monetory system is designed to make the rich richer and the poor poorer. This is something that sharEpay the firm I established in South Africa aims to change. Put the power into the hands of the people, with the worlds first person to person mobile cash transfer system.

    Why should it be so hard, expensive and time consuming to send $50 to my sister in Uganda, or R50 to my uncle in South Africa. Global person to person payment, will soon be possible. Well thats at least the idea, I am working to achieve with sharEpay.

    .

  18. 

    This is indeed shocking. My small business has to use paypal to make payments to our hosting providers.I never realised that we had indeed been blanketed as a scam continent. I suppose I could easily blame it on the nigerians but it's simply smells like a bit of racism or segregation. I'm honestly disappointed that a highly successful and innovative company like paypal can be so shallow at the same time. Thanks for the article. I will tread carefully.

  19. 

    Folks have been complaining about this for years, from Pakistan to Pretoria. Smells like a market vacuum to me. Know any developers with ties to folks like Grameen and Google :-)

  20. 

    Jona, I understand the frustrations. Been facing the same for a while in trying to use PayPal from Uganda. I setup a paypal account in the US over six years ago. I always have to supply a credit card number as a way to verify my identity. Then I have to review a bunch of previous transactions and confirm that they were authorized by me, before I am allowed to do anything. I now avoid using PayPal, unless I really really really have to. Pray someone out there will come to our rescue in Africa!

  21. 

    Apparently over 15 comments on this thread have vanished. I have no idea how or why but it's got something to do with Intense Debate. Sorry for any inconvenience.

  22. 

    I share the same frustration. We had our account flagged so many times despite telling PayPal that access for the next couple of months would be from Kenya as our partner who is based in the US was working from the Nairobi office. Numerous emails later and after tonnes of frustration and "frozen" cash, we wound up that account. We may reopen it later but the stress was not called for. How many times will be email or fax identification docs? But later i figured using US based proxies while accessing the service would have worked.Never got to try it though.

  23. 

    Am a software dev from Uganda. Just made a bad decision and used Paypal in my startup. When i submitted my app for approval , not only was my account shut down but I was kicked out of the developer portal. Reason: "Unfortunately from your country you cannot receive payments" ..but why block me from the developer portal?

    Am not complaining though. Like someone in the thread mentioned this is a market gap that a smart entrepreneur should fill…(someone like me :)). Africa now has a thriving mobile payments eco system , we need to figure out how to connect it to the rest of the world … without Paypal

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s