PayPal should partner with UPS and other shippers


You've seen me write before of a proposal I call addresscrow to promote privacy when items are shipped to you. Today I'll propose something more modest, with non-privacy applications.

I would like PayPal, and other payment systems (Visa/MC/Google Checkout) to partner with the shipping companies such as UPS that ship the products bought with these payment systems.

They would produce a very primative escrow, so that payment to the seller was transferred upon delivery confirmation by the shipper. If there is no delivery, the money is not transferred, and is eventually refunded. When you sign for the package (or if you have delivery without signature, when it's dropped off) that's when the money would be paid to the vendor. You, on the other hand, would pay the money immediately, and the seller would be notified you had paid and the money was waiting pending receipt. The payment company would get to hold the money for a few days, and make some money on the float, if desired, to pay for this service.

Of course, sellers could ship you a lump of coal and you would still pay for it by signing for it. However, this is a somewhat more overt fraud that, like all fraud, must be dealt with in other ways. This system would instead help eliminate delays in shipping, since vendors would be highly motivated to get things shipped and delivered, and it would eliminate any communications problems standing in the way of getting the order processed. There is nothing much in it for the vendor, of course, other than a means to make customers feel more comfortable about paying up front. But making customers feel more comfortable is no small thing.

Extended, the data from this could go into reptuation systems like eBay's feedback, so that it could report for buyers how promptly they paid, and for sellers how promptly they shipped or delivered. (The database would know both when an item was shipped and when it was received.) eBay has resisted the very obvious idea of having feedback show successful PayPal payment, so I doubt they will rush to do this either.


I had occasion last week to call Amazon and bitch... I purchased an item from an online store and a few days later got an email from them saying they didn't have the item and didn't know when they'd get the item, but they'd keep my order open.

Yeh, thanks. Thanks a lot.

In my real world business experience, the seller isn't supposed to actually process the final transaction on your money until shipment.

The big issue is this: Don't charge the cards until the products are
shipped or delivered to the customers. "Huh?" you say. "But I can charge
the cards after they give me their numbers, right?" Wrong. Unless you've
been in the mail-order business before, you're probably not familiar
with this rule. Technically, you are not allowed to move money
immediately into your account unless the product is delivered or shipped
on the same day. In brick-and- mortar, real-world retail stores,
delivery and payment happen simultaneously. Merchants charge customers'
cards and then the customers walk out of the stores with bags full of
goodies. But when you're selling products remotely, as you will across
the Internet (unless you're delivering software or online content
instantly), you can't debit the credit cards until you've completed the
"pick, pack, and ship" fulfillment processes. So here's how most credit
card transactions work over the Internet:

1. Authentication. It's a good idea to make sure the cards you are
accepting have valid numbers, have actually been issued, and are not
reported stolen.
2. Authorization. This process checks whether funds are available
for purchases. If they are, you can put reservations on those funds. But
hold on — you don't get the money yet.
3. Settlement. Once you've shipped the products or delivered them to
the customers, then you let the banks know. The banks will release the
funds that were previously reserved, and the money will make its way
through numerous banks and intermediaries into your account.

Which begs the question with Amazon's (and, as you've noted, paypal's) payment model. It's completely opposite of standard accounting practice. But I doubt that anything will change anytime soon.

I've experienced more and more sellers using online shipping to lie about ship dates. Complicated by the fact that the PO ONLY scans on destination. Leaves a gray area where if you're not insured, how do you prove it was never sent?

Your escrow idea is exactly the std practice, and as a buyer I would feel MUCH better about my online transactions.

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