Archive for April, 2011

Is It Adios To PayPal From India?

Friday, April 29th, 2011
From the time they restarted in India last year after being shut down for export payments for a couple of months, it appears that PayPal needs to follow tighter KYC norms before approving an account. However, they don’t tell you any of this at the time of enrolment and supply of HTML code for publishing their button on your website.
You’re thrilled with the speed at which you’re able to accept credit card payments on your website. Money flows in, you initiate transfer from PayPal to your bank account. Then, suddenly, PayPal puts a freeze on your account with retrospective effect, reverses the bank transfer, levies charges both ways, which turns your account balance negative. They claim that the buyer canceled the transaction, which forced this action by PayPal. You find out that the buyer never canceled the transaction.
Then PayPal tells you that you need to submit some documents for verification. You do that. They don’t bother to unfreeze your account nor reply to your emails. Then, when you call them to follow up, they tell you, all is fine, you just need to turn your account balance positive. You arrange for additional fund transfer, which PayPal gladly accepts into the account.
Then, all of a sudden, they send you an email saying your claim is denied and that they are canceling your PayPal account. Which is fine, but they don’t refund the charges they’ve levied for reversals nor return your balance.
This is the most flagrant example of cheating I’ve come across by any company. Good riddance to bad rubbish. Bye bye PayPal from India. I won’t cry for you. Instead, I’ll hope that you get banned in every other country whose laws you choose to trample upon so callously and then cheat your customers to get out of your tight spots.
http://techcrunch.com/2011/01/28/reserve-bank-of-india-restricts-paypal-payments-to-merchants-to-under-500/
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Is this the beginning of the end of PayPal in India?

PayPal came under regulatory scrutiny in India a year ago when it appeared as though its exports payments feature was not quite compliant with the laws of the land.

According to a recent announcement, PayPal’s wings have been further clipped with India’s central bank (Reserve Bank of India) imposing a maximum limit of US$ 500 per transaction on export-related payments for products and services.

Stepping back a few months, PayPal had virtually suspended its export payments feature for a couple of months pending a closer look by the regulator. When the service resumed, I imagine that PayPal was required to follow tighter KYC (Know Your Customer) norms before opening and activating a merchant account. However, they never tell you this when you enroll your company for a business account and collect the HTML code for publishing the PayPal button on your website.

You’re naturally thrilled at the speed at which you’re able to to accept credit card payments on your company’s website. No other competing service lets you do it so fast – in hindsight, it appears that they must be following the laws that PayPal has been flouting. Money starts flowing in and, after a few days, you initiate withdrawal of funds from your PayPal account to your bank account. Then, suddenly, PayPal puts a hold on your account, reverses the bank transfer, and levies reversal charges both ways, which turns your account balance negative. At first, PayPal claims that their action was prompted by a request from the buyer to cancel the transaction. You go back to check and find that the buyer didn’t do any such thing.

When you go back to PayPal with this information, they suddenly change the tune and tell you that your account is on hold status since it needs to be verified according to KYC norms. They ask you to submit documents to prove your company’s incorporation status and business address. You wonder how they let you open an account and let funds enter it without KYC. Deciding to let this doubt pass, you upload all the requested documents on their website. A few more days pass. PayPal doesn’t release the hold on the account despite acknowledging receipt of documents.

When you call them to follow up, they tell you that all the documents are fine, but they can’t take any action on your account because it shows negative balance, so can you please just add some funds so that your account balance turns positive and they’ll restore your account to full functionality. You ask them why you should be blamed for the account balance going negative – after all, you never tried to withdraw more money than your account held, it was their unjustified reversal charges that was responsible for this situation. They promise to credit back the reversal charges as soon as the account turns positive. All this happens over the telephone, they won’t send any confirmation email, when you point out that their website shows some other status, they blame it on some technical fault and tell you ignore it. Faced with no other choice, you arrange for additional fund transfer, which PayPal gladly accepts into the account and reflects a positive account balance.

You wait for PayPal to release the hold on your account, but that day never arrives.

What does arrive, after a few days, is an email from PayPal saying your appeal is denied and that your PayPal account is being terminated. However, despite the passage of several months, they don’t refund the reversal charges, nor return the balance in your account. Emails to them go unanswered. Their website is not updated to reflect the status they communicate via telephone. Two months after they terminate the account, you suddenly receive a totally contradictory email in which they urge you to respond to them ASAP so that they can help you enjoy all features of your account! You wonder if they’ve really lost it.

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PayPal must be joking!

If not for the huge amount of time and money wasted, you’ll find this experience surreal and hilarious. You might also wonder if there’s a more blatant example of cheating by a company as well-known as PayPal. Thank God RBI has it on its radar.

Many industry observers predict that RBI’s recent restrictions spell doom for PayPal in India. Am I delighted to hear that! Good riddance to bad rubbish!!

Consequent to new laws passed in the US in the wake of the recent financial crisis, PayPal suddenly faces regulatory scrutiny in its parent American market where it has been unregulated so far. So, the day when PayPal faces an India-like situation in other countries is probably not too far away.

How Many More PFMs Do We Need?

Saturday, April 23rd, 2011

pfm01To paraphrase a Bob Dylan classic, “How many WeSabes and Kublaxes must shut down before PFMs call it a day?”

Looks like I’m not the only one who is intrigued by this question. Writing from the sidelines of FinovateEurope2011, a financial services technology innovation conference that was held in London recently, Erik Bogaerts cheekily offers the following headline for news stories covering the event:

“By 2014 there will be more PFM solutions on the market than banks”

“By 2014 there will be more PFM solutions on the market than banks”!

Bogaerts feels that the lack of a standard format for B2C banking information exchange is responsible for taking the steam out of the frenetic growth of personal finance management applications in their heydays. Click here and here to read my views on PFMs from that era, including why I’d termed them P2FM, or Personalized Personal Finance Management.

Fact is, there are standard formats like OFX and QIF for retail banking statements. But what is lacking is a way by which the user can allow the P2FM application to download her transaction statements – and nothing else – from her Internet Banking account.

Under the circumstance, the user is left with the following options:

  1. Share her Internet Banking credentials with the P2FM trusting that the immediate ecosystem comprising the P2FM and its partner(s) and any potential hackers won’t abuse the carte blanche they receive to do virtually whatever they want once they’re inside her Internet Banking account for the stated purpose of downloading her account statements
  2. Avoid sharing her credentials with the P2FM, and instead log on to her Internet Banking account by herself, download her account statements in one of the standard formats (ex: OFX), and upload them to the P2FM’s website.

Although the first option is convenient and is supported by virtually all P2FMs, it faces the major challenge of having to allay the aforementioned security concerns of users. Click here to know more about my reaction when I reached this option during my registration on Mint.

A few P2FMs do offer Option 2 but it’s very cumbersome to use. As I’d explained in this post, it therefore undermines the value of P2FMs for almost all but the most financially hard-pressed users.

This unresolved dilemma presents the biggest barrier for large scale adoption of P2FM applications although that hasn’t stemmed the steady flow of new entrants into the industry nor stopped reminding me of the Dylan song.

Shift From Credit To Debit & Prepaid Cards

Friday, April 15th, 2011

pic01The past year has been awash with news and analyst reports about how American consumers are forsaking credit cards and increasingly using debit and prepaid cards. Given that credit cards are a “pay after” instrument as against debit and prepaid cards that are “pay now” and “pay before” instruments respectively, pundits have concluded that the shift marks a major change in consumer behavior. According to them, the average American has chosen to be thrifty and has realized the need to live within their means so that they’re able to avoid debt in the aftermath of the recent crisis.

When I did a quick straw poll with a few of my friends living in the US, I found the ground reality to be quite different, which made me wonder if the pundits are jumping to conclusion.

During the latter half of the credit crunch, we’ve been hearing of a lot of rejections of credit card applications. Even someone of the stature of Michael Arrington, the founder of the famous TechCrunch blog, recently complained that his application for an American Express credit card was rejected. Even if the cold and objective bankers at Amex were not impressed by the fact that he was named as one of the world’d Top 100 influential persons by TIME magazine, Arrington’s credit score of 748 – which is considered “excellent” and falls in the 78th percentile – should’ve ensured that he got the credit card. But, fact is, he didn’t. I was initially wondering if “decisioning” systems – the software used by credit card companies to decide which applications to accept and which to reject – have undergone a drastic change during and after the Great Recession. My wonder changed to conviction when I read in a recent NYT article that “More than 15 million Americans lost their cards because of strict credit-card regulations that were passed last year…”.

Furthermore, many people – including Arrington – have suddenly seen their credit limits slashed by their credit card issuers – Chase, in Arrington’s case – for no obvious reason in the last few months.

As a result, it appears that American consumers are no longer able to charge their expenses to their credit cards to the extent they could in the past. So, the shift to debit and prepaid cards reflects lack of choice more than any new-found need to lower debt and boost savings.

What If Google Only Displayed Ads?

Sunday, April 10th, 2011
Readers might have noticed a spate of recent articles (click here and here) complaining about the deteriorating quality of Google search results. According to a recent expose in the New York Times, JC Penney, the leading American retailer, seemed to have gamed Google’s search algorithms to such a great extent that its website appeared near the top of organic search results for a variety of keywords including “dresses”, “area rugs”, “skinny jeans”, “home decor,” “comforter sets”, “furniture”, and so on. Oddly enough, JCPenney.com even beat Samsonite.com when people searched for “Samsonite”.
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Ads v. Organic Search

On the other hand, people haven’t seen any cause for concern in Google’s financial performance. Given that Google generates revenues from its ads – and not organic search results – its robust revenue growth can only mean that there are there are enough people who find its ads relevant and click through them, even if they might not be too thrilled with the quality of the organic results they see. For the moment, I’m ignoring “click fraud” which, at less than 15% of clicks, doesn’t alter the inference by too much.

Just to be clear, a search page comprises of Comparison Ad and Ads (“paid search” or “inorganic search”) on the one side and Organic Search Results on the other. While Search Engine Marketing (SEM) determines the position of inorganic results, Search Engine Optimization (SEO) plays a critical role in organic search rankings. For more on SEO and SEM, click here.

It just suddenly struck me, what if Google were to up the ante against its critics and completely stop displaying organic results? Such a move would surely go against the charter of a company that is known for its search engine and make it resemble an online yellow page website.

However, a recent experience made me wonder if Google has already started going down this path.

I recently learned that my company “GTM360 Marketing Solutions” ranked very high on Google Search results. Not having done any SEO on the website, I was curious to find out how we got there.

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There's only one organic result above the fold!

When I checked, I discovered that my company’s high ranking owes itself to its enrolment in Google Places, a Google service. As the above screenshot shows, all results ‘above the fold’ – including gtm360.com – except for one are Google Ads or Google Places websites, that is, websites that have some affiliation with Google. While not all of them are ads, they’re certainly not organic. This surely seems to suggest that Google has cut down exposure for organic search results.

Sacrilegious as it sounds, can we expect Google to only show ads one day in its search results?

Why Does Memory Loss Begin At Different Ages?

Friday, April 1st, 2011

As people enter middle age, they begin to experience memory loss. However, memory loss can happen much earlier. Some people – including me (sigh!) – began facing it as early as 28. Someone else I know has started experiencing it at 74 years. And I’ve come across a person who never suffered this problem until she died at 85.

There’s no rocket science behind this phenomenon. However, it is a bit counter-intuitive, which explains why it enters every day conversation quite frequently.

Let me try and explain the cause of this phenomenon. By the way, I learned this in my IITB days in one of those “cack sessions” – long and aimless discussions among friends in the hostel – that provided a rich source of informal learning in the days when there was no Internet, Google, Wikipedia or Facebook.

There are two facts that are key to understanding this issue.

  1. Only 8% of the brain cells in an average human brain are filled with information. In other words, a large majority of people have nothing stored in 92% of their head. For exceptionally knowledgeable people, the figure goes up to 14%.
  2. Brain cells grow from a person’s birth to the age of 20, after which they actually start dying. The pattern of destruction of brain cells is absolutely random across the surface of the brain.

Let’s take two people ABC and XYZ. They belong to a similar academic background and have acquired above average level of knowledge, so around 10% of their brain cells are filled with information. Let’s call these “filled cells” to distinguish them from the remaining 90% “blank cells”.

Let’s assume that the destruction of brain cells commences at the age of 20 from “filled cells” of ABC but from “blank cells” in the case of XYZ.

This would mean that ABC would start facing memory loss from 21. Whereas, XYZ won’t. Depending upon when filled cells in XYZ’s brain start dying, it’s quite possible that XYZ might not suffer loss of memory until he’s much older. In the extreme situation, if the cell destruction is restricted to XYZ’s blank cells all his life, he’ll escape memory loss altogether.

Which is why memory loss hits different people at different ages.