The reason PayPal continues to be provided with the opportunity to fuck people over is primarily due to their low financial/technical barriers to entry. A website can be configured to accept PayPal payments in less than half a day, and setting up a new PayPal account is a very straightforward process.
Compare this with setting up a merchant account to take payments (here in the UK), which takes weeks, involves finding a payment gateway, all sorts of paperwork and hoop jumping.
Fortunately companies like stripe.com have appeared here and will now eat in to PayPals user base. I can't wait for PayPal to go away.
The sad truth is that Stripe is behaving exactly like PayPal. What's worse is that Stripe's fraud protection is non-existing. In other words, Stripe is actually worse than PayPal, as you risk the same account freeze, closing etc, but in addition, you will be swamped down with fraudulent purchases and chargebacks.
(Disclaimer: I work at Stripe) Stripe does have a fraud protection product, which is enabled by default for every user. It centers around a machine learning system, that uses static signals (e.g. card issuing country) and time-dependent, dynamic signals (e.g. "how many different devices have tried to use this card in the last N hours?") to analyze every charge that hits our systems. Transactions that are deemed almost certainly fraudulent are automatically declined (but can be reviewed in the dashboard or via the API.)
We're constantly working on product & performance improvements, but feel free to get in touch with me directly (tara@stripe.com) to ask questions or share feedback on our models (and fraud product in general).
For posterity, yes you do have this "neural network" thing. It does not really work now AFAIK, but I do hope you will succeed as we definitely need a viable alternative to PayPal.
Though I'm sceptical to this approach. In machine learning 101 we learned that there always exist a statistical method that would beat a neural network. In this case, a system that gathers actual relevant data for statistical scoring. You know hard data, like an up to date list of stolen credit card numbers, a history of chargeback per credit card etc. PayPal has this and of 1000 transactions, we have 1-2 fraudulent chargebacks. Compared to Strip this is the difference between heaven and hell. PayPal sucks, but at least they have a working fraud protection system.
Nothing kills an online business faster than being swamped in fraud and chargebacks. I mean, good APIs are great and Stripe certainly has that, but a working fraud protecting system is what really matters to those of us who sell online.
I deployed Nochex instead of PayPal back in 2005, and it took less than half a day, and came with guaranteed no chargebacks on UK payments and lower fees.
Good PayPal competitors have existed in this space for a long time. PayPal still remains.
Compare this with setting up a merchant account to take payments (here in the UK), which takes weeks, involves finding a payment gateway, all sorts of paperwork and hoop jumping.
Fortunately companies like stripe.com have appeared here and will now eat in to PayPals user base. I can't wait for PayPal to go away.