I have to admit I'm a bit surprised they relied on PayPal in the first place, but PRQ, the famed Swedish ISP created by two of the guys behind The Pirate Bay, and which (as you might imagine) was known for standing up for its users against legal threats, has had its PayPal account frozen twice for unclear reasons. Apparently PayPal had been working just fine for three years, and then suddenly the account was frozen. Employees contacted PayPal, who told PRQ to just set up a second PayPal account for users to use until they sorted things out, and then they'd merge the two accounts. Instead... they froze the second one as well. Of course, if you follow stories involving PayPal, this is hardly uncommon. It seems to happen all too frequently with many sites that use it. PayPal works hard to try to minimize fraud, but it seems to have a super itchy trigger finger to completely shut down sites with no warning and little process for appeal. Relying on it as a sole payment offering seems to be asking for trouble.

PayPal has an unfortunate reputation for arbitrarily shutting down accounts for various organizations, without much rhyme or reason. The latest is that it has frozen the donation account for Diaspora, the heavily hyped up effort to create an open source, distributed Facebook alternative. Diaspora kicked off with a ton of money via Kickstarter, but (as we worried) the project has proven to be more difficult to get off the ground than some expected. It recently sought more donations... only to discover that PayPal froze the account. Whether or not you agree with the project, it seems pretty ridiculous that PayPal just freezes such accounts. We hear stories of this way too frequently for it to be a mere mistake. The world desperately needs more payment processing options, because the ones out there today are woefully limited. Thankfully, there is at least some movement in that arena. We've been hearing a lot about Stripe -- a Silicon Valley payments startup, with funding from some original Paypal folks -- and, it's nice to see that they quickly jumped in to help Diaspora. Still, the more payment solutions out there, the better off we'll be.

PayPal's decision to cut off the account of an organization that was collecting funds to help with Bradley Manning's defense got a lot of attention -- so much that PayPal came out with a blog post explaining that it was just a paperwork problem on the part of the organization, Courage to Resist. Because of this, they've reinstated the account:

We recently placed a temporary limitation of the Courage to Resist organization’s PayPal account as they had not complied to our stated policy requiring non profits to associate a bank account with their PayPal account (for the vast majority of non-profits, this is not an issue).

In a press release issued today, the Courage to Resist organization claimed that their resistance to follow our policy is because PayPal sought to withdraw funds from their checking account.  To be clear: PayPal cannot take such action without the authorization of an account holder, nor does it ever take such unauthorized actions.

Upon review, and as part of our normal business procedures, we have decided to lift the temporary restriction placed on their account because we have sufficient information to meet our statutory 'Know Your Customer' obligations. The Courage to Resist PayPal account is now fully operational.

While it's good that they've done this, not all of this makes sense. Courage to Resist claims that they repeatedly asked for an explanation and for the specific policy that they had violated. If it was just a matter of associating an account with a bank account, why didn't PayPal just tell them that in the first place?

After the story a few weeks ago about Paypal suspending the account of Wikileaks, and blocking it from removing money in the account, many people pointed out how risky it is to leave any money in a PayPal account. It seems that situation is getting worse and worse. PayPal has apparently halted personal payments in India, and aren't allowing merchants to remove money from their accounts. And the reasoning is... not particularly clear as to why:

"Personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service...."

Apparently, this has been going on for over a week, which has to be seriously frustrating to many merchants, but a seriously good thing for various PayPal competitors.

Wikileaks is an incredibly useful and important site, but there are many (mainly in the government) who would prefer it go away. It's somewhat upsetting to find out that PayPal has (for the second time) frozen all of WikiLeaks' assets. Apparently, the last time this happened it took nearly six months to resolve. That seems problematic:

Paypal has as of 23rd of January 2010 frozen WikiLeaks assets. This is the second time that this happens. The last time we struggled for more than half a year to resolve this issue. By working with the respected and recognized German foundation Wau Holland Stiftung we tried to avoid this from happening again -- apparently without avail.

Update: Wikileaks has now removed this message from its website, so it appears that things have been resolved. I'm a bit confused, however, as to why Wikileaks continues to use PayPal given this issue.

You may recall earlier this year that eBay experimented with requiring customers to use eBay-owned PayPal for payments on eBay auctions down in Australia. However, public backlash, combined with government threats convinced eBay to hold off for the time being. However, folks over at Slashdot are noting that eBay has now changed its terms of service in the US to push more people towards using PayPal. Specifically it's no longer allowing checks or money orders for payments on most items, saying that electronic payments, merchant accounts or direct payment for in-person exchanges are the only options. However, as the Slashdot post notes, in the electronic payment space, eBay then blatantly says it will not allow Google or Amazon's payment programs to operate on eBay because they compete with eBay.

While eBay may be allowed to do this, it definitely seems like a good way to shoot itself in the foot. If customers don't want to use PayPal, they're simply going to bypass eBay entirely, and use an alternative. That not only cuts eBay out of the transaction, but also the listing fee. eBay tries to position this as being about making the experience better for both buyers and sellers, but that's clearly untrue. Instead, it seems like eBay is afraid to compete on the merits with its payment solution, knowing that many, many users are increasingly fed up with PayPal. Yet, rather than fix PayPal, the company's response is to ban the competition.

As was widely expected, Amazon has now launched a new payment service for online retailers as something of a PayPal competitor. Basically, it will let people use their Amazon account info to buy things at other stores. Of course, as others have discovered, taking on PayPal -- while simple in concept -- has proven a lot more difficult in practice. Companies like Google and Yahoo have tried and haven't made much of a dent. Hell, even Amazon has tried this before, though that was a beta launch that never went very far. Actually getting retailers to implement this and then getting customers to use it is the challenge at this point, and it seems likely to be an uphill battle. There's definitely a sense that many people don't like PayPal, but it's so well established that to provide an alternative, you really need to offer something that provides significant value above and beyond Paypal -- and it's not clear that Amazon really does that.

You may recall that eBay execs were trying to require the use of subsidiary PayPal for payments in Australia -- which resulted in a bunch of protests. That, in turn, resulted in the Australia Competition and Consumer Commission (ACCC) saying that this probably broke the law. Not surprisingly, eBay has now agreed to indefinitely delay the plans to require PayPal, saying that it would wait for a final ruling from the ACCC. Of course, it still seems like a situation where this would present another opportunity for eBay competitors to try to steal customers away from eBay.

Plenty of other companies have tried to take on PayPal and discovered that it was a lot harder than it looked. Even though there are a lot of folks dissatisfied with PayPal, most attempts to compete with it have fallen flat. Even Google's efforts haven't really made a huge dent. However, could Amazon shake things up a bit? Over the years, it's done a few things to put its toes in the water of personal payment systems, and now some are predicting that it's gearing up to launch a full on PayPal competitor in the next few months. The analyst who wrote that report notes that Amazon isn't "just another" PayPal competitor, suggesting that its knowledge and experience with online retailing will allow it to create something better. It would certainly be an interesting fit with other "web services" that Amazon has been offering lately -- and would even tie further into Amazon's existing knowledge and scalability. That said, for whatever reason, this market has been a tough one to crack, so we should probably wait and see what the specifics are (if any) before determining its likelihood of success or failure.

Last month, we wrote about plans by eBay in Australia to ban all non-PayPal payment solutions from the auction site. This has set off quite a firestorm, especially from folks who don't particularly like PayPal. Australian regulators are looking into the matter, and have asked for comments from anyone interested, some of which it's posting online. Most of the comments come with the name of the individual and/or company who sent it in -- but a few were posted anonymously, at the submitter's request. However, it appears that regulators didn't do a very good job scouring for metadata, as someone who looked more closely at the PDF file discovered that it clearly says "Submission by Google re eBay" in the metadata (found via Slashdot).

While this has some wondering if "tensions" are escalating between the two companies, I think it's safe to say that tensions were already quite high between the two companies concerning their competing payment solutions. After all, when Google first launched Google Checkout, eBay quickly banned it from use on the site, claiming (with a straight face) that Google wasn't trustworthy enough, since it didn't have a track record of payment solutions. Then, you may recall a year ago, that Google (childishly) planned a "protest" outside of eBay's own user conference, which resulted in eBay removing all ads from Google for a little while. Considering that eBay is Google's largest advertiser, this was no small move. So, somehow, I doubt the fact that Google filed a comment against banning other payment systems in Australia is going to be seen by either party as an "escalation" of the tension between the two companies.