Life without PayPal is possible
As of 8 January 2020 our store will no longer be offering customers to pay via PayPal.
As most of you who have purchased items from me know, a significant amount (about 40-50%) of my business relies on made-to-order products or so-called “pre-orders”, where a part of the customers' payments are used to finance the projects. I have so far had a clean track record with very few returns and have had only 2 claims in 2019 (both were settled by me - one was filed only one day after the purchase was made).
On 4 January 2020 I opened the pre-orders for the Dirty Bird whale. It was a great success because, I hope, that product was received as an exciting and moderately priced product. I encouraged early ordering by offereing a free blue whale for the first 50 orders.
So, commercial success set off the alarm bells at PayPal and they wanted information on the sudden influx of cash, which I duly provided. As a result they decided to invoke a part of their Terms of Service that require me to keep a reserve with them. This is fine and in keeping with standard banking practices. However, they have literally seized a considerable part of my liquidity overnight and set a “dynamic reserve” limit of 75% of my turnover until a minimum reserve amount of $ 500,000 is achieved (yes, that is half a million dollars in their bank account to safeguard them against claims by customers). This is several times my annual turnover, probably 20 x their actual exposure by the whale pre-order, and I think it is obvious that no company, regardless of the business model, will survive longer than a few weeks on 25% of it’s turnover. It is basically an expropriation. It is a measure designed to destroy a business which goes way beyond the quite rigorous bank practices for securitising loans.
To add insult to injury they also refused to provide me with contact details for their complaints manager, a requirement under EU banking regulation. I have now sent this case to the Commission de Surveillance du Secteur Financier in Luxemburg (where PayPal Europe is based) for arbitration and to see whether this corporate behaviour is consistent with EU banking regulations.
I have therefore discontinued the use of PayPal to avoid further unneccessary outflow of funds for this crackpot scheme.
For reassurance: 80% of the funds that came in with the whale pre-orders are safe and there is no threat to the project's execution.
What does it mean for you, as Horseplay Toys customers or suppliers?
- All open orders that were paid via PayPal will be fulfilled.
- The impact on day-to-day business of the funds seized by PayPal for the reserve can largely be compensated by reducing costs. This will mostly be achieved by fewer art commissions, a reduced pace of new product development for 2020 and other internal optimisation schemes.
- Other, additional, payment methods have been added to the checkout, including GooglePay, ApplePay, AliPay, bank deposit and various regional bank/debit card schemes. Further options will be added as they become available. I will also no longer settle invoices by PayPal.
- While PayPal made a lot of their seller protection, all major credit cards and most payment schemes will offer similar compensation if you do not receive your goods. PayPal's main attraction is that they make it very easy to file a claim. But as I wrote above: I don't expect that you would have to file that many claims against me anyway.
- Our refund and returns policy will be updated in due course to reflect what I like to believe is a very generous refund and exchange/returns practice.
- If you have no other payment means available than PayPal, then email us, so that we can find a suitable arrangement for you to make your purchase.
- Credit/debit cards: Mastercard, VISA, AMEX, Maestro, JCB, Diners Club, Discover (some via ePay).
- Shopify Payments, G-Pay, ApplePay, AliPay.
- Bank deposit (IBAN).
I hope that this sheds a little light on this unusual and rather unexpected measure. I would like to thank the many buyers, artists, suppliers, friends and supporters for bearing with me thus far. I hope that we will get over this with a minimum of disruption over the next couple of weeks.