PayPal Waves Fees in Apology to Customers

To make amends for a disruption in its service earlier this month, PayPal is waiving transaction fees for payment recipients in the United States and some other countries.

Sellers will be credited for any transaction fee — normally 1.9 percent to 2.9 percent — charged on payments made today from 12 a.m. to 11:59 p.m. Pacific time.

The one-day “thank-you” event aims to apologize for the unexplained intermittent service outages users experienced from Oct. 8 through Oct. 13 and to express gratitude for sellers’ continued business with PayPal.

Trust Debt

It’s something PayPal had to do, said Jason Briggs, program manager at the Yankee Group. “The whole industry of payment is about trust,” he said, and PayPal has a significant trust debt with many of its small merchants, most affiliated with parent company eBay’s auction Web site.

“It’s an olive branch,” Briggs said, but “I don’t think it’s enough. Really, the way they’re going to regain reliability is over time.”

With 56.7 million users doing business at a rate of more than 630,000 transactions per day averaging a little more than $50, the single-day apology could cost PayPal little more than $750,000 in revenue.

Merchant Losses

Estimates of PayPal and merchant revenue losses incurred during the technical difficulties have not been released. The numbers, however, add up to significantly more than this reparation will cover. The industry doesn’t have estimates of irreparable harm due to the outages, either.

“I would assume that they lost some merchants,” Briggs said, who will opt to move their credit card payments to other processors.

PayPal’s next moves may help determine whether it remains the 800-pound gorilla in the eBay space.

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