Controversial

PayPal’s Progress In China

In a story last week, PYMNTS reported that Chinese merchants were cooling to PayPal after the U.S. based payments company froze or, in some cases, deducted funds from local accounts in response to an order from a U.S. judge.

One merchant reportedly told a Chinese newspaper “I dare not use PayPal any more. Now I turn to banking transfer, which is safer and more reliable.”

PYMNTS caught up with Patrick Foo, PayPal’s head of cross border business in China, to get the details on what’s happening on the ground in China.

Foo affirmed that PayPal has complied with U.S. Court Orders that require them to put PayPal accounts on hold in the past and has every intention of doing so in the future. However, he also noted that claims of wide dissatisfaction are ‘exaggerated” and that, on the whole, PayPal’s commitment to security and making sure that buyers are actually getting the real goods they are paying for is not a hinderance to their business in China, but in fact a boon to it.

Further, Foo says, though Chinese marketplaces have a reputation for turning a blind eye to trademark issues and other intellectual property infringements, he also thinks that situation is starting to evolve in China and that PayPal is part of that positive evolution.

Here’s the full text of PYMNTS exchange with Foo on China and PayPal’s future there:

PYMNTS: The Global Times is reporting a mass cooling toward PayPal in China as a result of some accounts frozen over some potentially counterfeit goods. How accurate is that reporting?

Foo: That is an exaggeration. PayPal is the most popular way for international buyers to buy from Chinese merchants and remains the No. 1 payment provider for Chinese businesses selling overseas.

That said, PayPal makes every effort to comply with laws and regulations around the world. If we have been served with a U.S. court order to place a PayPal account on hold, we will be obligated to comply with the U.S. court order. We take any account hold and/or fund transfers very seriously, and we also keep our customers informed as soon as their accounts are affected.

Educating Chinese merchants on our Acceptable Use Policy (AUP), which includes our requirement to comply with intellectual property rights, is an integral part of our business. Over the years, much progress has been made to enable Chinese merchants to succeed in international trade.

We have received encouraging feedback from merchants for how we collaborate with them and the global e-commerce knowhow that we share to help them succeed.

PYMNTS: If the Globe’s piece is an exaggeration, what is a more accurate picture? What are you actually seeing with the use of PayPal in China?

Foo: PayPal in China is respected by legitimate businesses because they value our integrity and assurance that we have zero tolerance for the use of our secure payments platform to facilitate illegal activities. They recognize that we have the global reach and is a trusted brand that brings valuable buyers to their business. We also have the risk management tools to combat the use of our secure payment platform for illegal activities and work collaboratively with law enforcement agencies around the world to build and maintain a safer e-commerce and payment ecosystem.

We are committed to enabling Chinese merchants to succeed in the global e-commerce marketplace and have created several solutions tailored to the needs of our merchants in China:

  • PayPal One-Stop-Solution, which helps merchants with website setup, online marketing, international logistics and payment management. These services are jointly provided by PayPal and established e-commerce service providers. This program seeks to reduce complexity for small-medium business (SMB) merchants who are looking to engage in international trade.
  • In Sept. 2013, we enhanced our Seller Protection Policy by upgrading the transaction amount upper-limit from U.S. $250 to U.S. $750. With this upgrade, sellers also no longer need to provide Proof of Delivery, and can deal with fraud disputes more efficiently with Proof of Shipment.
  • We have also introduced PayPal Package, which is jointly launched by PayPal and Beijing Post in Dec. 2013. PayPal Package has been welcomed and recognized by SMB merchants as a more efficient, secure and cost-effective cross-border logistics service. It now covers 21 major export destinations in North America, Latin America, Europe, Asia Pacific and the Middle East.

PYMNTS: In this kind of case, where PayPal is essentially carrying out a U.S. court order, are you at a disadvantage to Alibaba/Alipay who is China-based and under no real requirement to enforce U.S. patents/trademarks if they don’t want to?

Foo: We believe that the trust international buyers have in PayPal is a tremendous competitive advantage for us and for the merchants that accept PayPal payments around the world. If a buyer does not receive the item they paid for, or receives a counterfeit item, PayPal will help them resolve the issue. We take the complaints of our customers, supporting the rights of trademark owners and our obligation to comply with U.S. court orders very seriously. Our success with both Chinese sellers and international buyers is a result of the trusted and positive relationships we are able to facilitate thanks to our policies and protections for both consumers and merchants.

PYMNTS: What is the due process in cases where merchants are accused of misusing their accounts? Once the money is frozen, the Global Times is reporting it is gone — is that the case, or is there a process by which it can be proved legit and reclaimed?

Foo: If we have been served with a U.S. court order to transfer money from a PayPal account, we will be obligated to comply with the U.S. court order and move funds to the account specified by the court. If the claim amount specified by the court is substantial, it may result in the defendant’s account resulting in zero balance.

Whenever we are obliged to place an account on hold and/or transfer funds, we keep our customers informed. We provide our merchants with information on the court order, such as the file number of the legal case, the name of the plaintiff, as well as the contact information of the plaintiff’s legal counsel, so that the merchant can decide on its next course of action. Our advice to affected merchants is to respond proactively to the plaintiff’s counsel, and to seek professional legal advice as to how to deal with the court order.

PYMNTS: Is there anything a company like PayPal can do in a retail ecosystem like China where trademark infringement and IP violations seem to be a bit more of the rule and not the exception?

Foo: We are optimistic that as Chinese merchants expand into the global marketplace, there will be an increased understanding of the intellectual property framework. In fact, many of our successful Chinese merchants have already linked the importance of respecting intellectual property with sustainable international growth. PayPal remains fully committed to helping Chinese merchants succeed in the global e-commerce marketplace.

We continuously look at ways we can support our merchants and impart our expertise including the following:

  • Merchant support teams that work directly with Chinese merchants and have helped to significantly reduce AUP violations by Chinese merchants over the last 12 months;
  • A dedicated team of Small-Medium Business (SMB) relationship managers to help our small-medium sized merchants grow their cross-border business;
  • PayPal PassPort, an online resource introduced to our China merchants last year to educate and empower small businesses to expand their global sales by uncovering new peak sales opportunities outside their own borders; and
  • PayPal Commerce Insights where we share analytics including corridor performance compared against industry data to help merchants make the relevant business decisions.

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