Monday, February 17, 2014

It would appear that GoDaddy does not fully trust PayPal accounts for payment.

Recently I went to pay for a renewal of a domain I have with GoDaddy. I decided to use PayPal instead of a credit card. I tried to pay but kept getting a payment screen in PayPal to pay using a credit card. This didn't make sense. I have a balance in PayPal so it makes sense to me that I should be able to pay using my PayPal balance.

Now when something doesn't make sense there's a good reason, so I decided to investigate. I asked GoDaddy what was going on and received a response which contained the following:

"We will only accept PayPal accounts that are backed by a Credit Card. We do not accept the following: · PayPal account only backed by check. · PayPal account backed by a non-verified bank account. · PayPal account backed by a VERIFIED bank account. · PayPal account backed by PayPal version of funds on hand. PayPal will not let you select an account the does not meet our criteria. PayPal will prompt you for a credit card number if your PayPal account does not have one applied." 

This made me wonder why GoDaddy would do this. I can only guess that GoDaddy is doing this because they've experienced fraudulent activity in the past and this is the approach which best protects them, or perhaps minimises the time wasted (such as the delay if people by by cheque).

I have a verified PayPal account, there is a current balance, I've previously linked a bank account (which I've removed to minimise my exposure to PayPal) and I would have thought having money sitting there in the verified account would be enough. But it does not appear to be for GoDaddy.

The implication is if you are a business then if it isn't enough for GoDaddy, then perhaps it isn't enough for your business. This is a pretty big slap in the face for PayPal in terms of credibility, but it is also a lesson for any smaller business using PayPal. Large businesses will lead in terms of how to best handle fraudulent activity simply due to the sheer volume of transactions they perform. A percentage of the transactions will be fraudulent and they'll adjust their processes to minimise fraudulent activity and balance this against potential lost revenue. As a small business this sends a message that there may be an issue with purchases through a PayPal account that isn't backed by a credit card.

As a small business we are not informed about how fraud occurs for security reasons. We are kept in the dark because if they did tell us, some people would use that very same information for fraudulent activities. All we can do is to look for clues such as GoDaddy's behaviour to alert us that there may be an exposure we need to consider.

In my use of PayPal I minimise my risk from both PayPal and customers using PayPal using a number of procedures. However to put this into context my use of PayPal is low, the size of a single purchase is very low and the risk is low.

Personally I feel GoDaddy's procedures here are damaging GoDaddy's business. I don't need to exclusively use GoDaddy for domain registrations and have a number of businesses I can use. I'm a GoDaddy customer and have been for years. GoDaddy probably restricts PayPal payments because of fraudulent activity, but if I'm a trusted customer of GoDaddy, then they should also trust my use of PayPal with a verified account. This is a renewal, I have plenty of other business with GoDaddy, so the risk to GoDaddy is minimal. I'd understand if I was a scammer setting new domains with fake details for a quick time limited scam, but this limitation on an existing long term customer doesn't make sense. The limitation could be with PayPal but that then means GoDaddy is using a supplier that gives their customer grief and creates friction in the transaction that can and does lose business for GoDaddy.

Kelvin Eldridge
Call 0415 910 703 for IT support.

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