The eBay PayPal 5% Hold Solution

The eBay PayPal 5% Hold Solution
EventHorizon1984
17 January 2009

• "In a very small percentage of cases, eBay asks PayPal to hold a payment in a seller’s PayPal account for up to 21 days."  Monroe Labouisse, "Director of PayPal’s business on eBay in the US and Canada"

eBay Public Relations published another puff piece, eBay Item Holds Explained (eBay Ink, Richard Breyer-Hay), regarding PayPal's holding of seller funds for "21 days".  As in prior years, eBay-PayPal described the account holds as affecting a small percentage of sellers.

And then they quantified IT.

This is what eBay-PayPal said in the January 16th article:

"We’re talking about single-digit percentages. Usually less than 5% of transactions."
Monroe Labouisse

To understand the magnitude of what "5%" represents, here's what was said earlier in the article:

"PayPal’s history with hundreds of millions of eBay transactions"
Monroe Labouisse

Based on "PayPal's history", "5%" would represent 5 million transactions put on hold for every 100 million transactions.

Here are the numbers from eBay's SEC (U.S. Securities and Exchange Commission) filing, 23 October 2008 10-Q Quarterly Report  Form 10-Q. 

Quarter 3, 1 July 2008 to 30 September 2008

Active users:  83,000,000
Number of new listings:  555,600,000
Gross merchandise volume:  $14,395,000,000

Active registered accounts:  54,800,000
Net total payment volume:  $11,569,000,000

Given that neither transactions nor sellers are homogeneous, here's what a "5%" hold policy could represent in a completely off-the-cuff fashion:

Active eBay users affected:  4,150,000
Number of new listings affected:  27,780,000
Gross merchandise volume, HELD:  $719,750,000

Active registered PayPal accounts affected:  2,740,000
Net total payment volume, HELD:  $578,450,000

eBay-PayPal considers numbers like these "small."  We wonder what they would consider to be 'big'?

...

"What's life without the ability to make stupid decisions?"
Dr. Gregory House, House

...

See also our follow up article The eBay PayPal 20% Hold Solution.

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