Jordan Touts PayPal as Fraud Fighter

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PHILADELPHIA -- ETail 2005 delegates sitting out PayPal president Jeff Jordan's presentation yesterday missed a sales call.

The chief of eBay's online payment method pitched attending e-commerce executives and suppliers on PayPal's virtues. He was particularly smart in positioning the credit card alternative as a bulwark against online fraud -- quite visibly the concern of many in the room.

"You can, and should, look at your payments provider as another level to reduce fraud costs," Jordan said.

What are options for e-commerce companies? Bank account payments through ACH and stored value balances that delude consumers into treating their money as funding. There also are credit cards, which limit bigger-ticket purchases, and money transfer services.

PayPal's advantage over these payment methods is its structure. Details are collected only once from users when setting up the account. No bank account numbers or credit card details thereafter are exchanged between buyer and seller.

Cybersource's online fraud report claims online fraud accounts for 1.8 percent of merchant sales. Gartner Inc.'s figure is lower, at 1.14 percent, and First Annapolis' estimate of charge-backs only is even more conservative at 0.33 percent. By contrast, PayPal sellers report an online fraud rate of only 0.17 percent of online sales.

Jordan gave other reasons to consider alternative payment methods. For example, they increase sales, as experienced by PayPal user Tiger Direct. This reseller of computer equipment reports 87 percent of customers paying through PayPal are new to its site. Also, the fraud rate on PayPal orders is claimed as half of Tiger Direct's overall rate.

PayPal's checkout process is speedier, too: three clicks.

Identity theft and fraud are on the minds of PayPal's customers. A company study found 93 percent want assurances that merchants won't share their credit card information with other vendors.

"Phishing is a huge industry problem," Jordan said, describing the phenomenon where fraudsters impersonate an online brand through fake links to gather financial and personal information from unsuspecting consumers.

EBay is victim to a large number of phishing attacks. The online auction platform urges user education. Never type personal information into a link sent by e-mail. Go directly to the site instead.

"This problem is one of the biggest consumer barriers to e-commerce," he said.

That said, PayPal now is the largest online payments network nationwide, generating revenue of $1.3 billion last year for eBay. It is an accepted payment on Hotwire and Apple iTunes, among other sites. The user base exceeds 79 million accounts. A new service for small to midsize businesses, PayPal Website Payments Pro, launched in June.

Nearly 10 percent of all U.S. e-commerce is funneled through PayPal, according to Jordan. One out of seven transactions crosses national boundaries. Consumers in more than 40 countries send PayPal, and those in more than 20 countries receive this currency.

"Our goal," he said, "is to be the global standard for online payments."

Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting

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