PayPal’s Black Eye Bad for E-com?
E-commerce marketers like Fair Indigo or any marketers with positive brand perceptions who accept PayPal may want to rethink that decision for the time-being. PayPal is being sued for allegedly misleading donors to the PayPal Giving Fund.
When consumers land at checkout on e-commerce sites, PayPal is usually a payment option. Often shoppers, especially during the holidays, will choose to give through the app at the same time.
PayPal itself reported that on Jan. 10, in relation to the fund’s 2016 numbers.
“During the course of the year,” writes Franz Paasche, SVP Corporate Affairs and Communications, PayPal, “our customers made $7.3 billion in contributions, including over $971 million given during the holiday season alone.”
For the purposes of this article, Fair Indigo is simply one example of an e-commerce marketer with a brand reputation that may be in conflict with the allegations against PayPal.
Robert Behnke, co-founder and president of Fair Indigo, emailed a response to Target Marketing’s request for comment on Thursday.
“We learned of the allegations and pending lawsuit this morning,” Behnke wrote. “It’s really too early to comment intelligently on this until all of the facts come fully to light. If the allegations are true, it would be serious breach of trust by PayPal.”
The Problem for E-com
According to an article Wednesday in the New York Times, “hundreds of thousands of charities have never received donations earmarked for them.”
So for brands wanting to be associated with doing good or at least doing right by the customer, a PayPal association may not be the greatest gift at checkout right now.
“In a world of fleeting fads, disposable clothes, and questionable ethics, we stand for something different,” writes Fair Indigo on its site about organic and fair trade clothes, “Style with a Conscience.”
The Fair Indigo site also says: “We accept all major credit cards (Visa, MasterCard, American Express and Discover). We also accept PayPal.”
Will shoppers think those statements match? How much will they care?
The Effect on Nonprofits
The federal class action lawsuit alleges PayPal lists hundreds of thousands of charities that aren’t getting the money the company implies they will—instead, PayPal redirects the donations to charities that are registered both with PayPal and its fund site, writes Matthew Haag for the Times in “PayPal Redirects Charitable Contributions Without Consent, Lawsuit Says.”
In his article, he says that a named donor filing the suit, Terry Kass, found that her donations weren’t reaching their intended destinations. Citing a soup kitchen that runs on a shoestring budget, DC Central Kitchen, Kass says it didn’t get her money via PayPal and nonprofits like those can use every dollar they can get. She only found out about the problem because she asked the kitchen’s representatives.
Haag further writes: “Donors are not informed before or after making a donation whether their intended charities have accounts, Ms. Kass said. In a frequently asked questions section on the Giving Fund’s site, it says that organizations not enrolled will be informed of the donations and be given at least six months to register accounts to claim the gifts. Otherwise, it says, ‘We may reassign their funds to another charitable organization.’ ”
Neither PayPal’s site nor its Twitter account mentioned the matter as of Thursday.
Haag’s reporting shows PayPal’s attorney says the company will defend itself in court.
What do you think, marketers? Is a bad association during a pending lawsuit enough to remove a powerful vendor from your site? Would you take some other action, such as placing a brand statement next to the payment option? Or leave it alone? This isn’t PayPal’s first brush with controversy, and e-commerce marketers stayed with the company in 2014: “PayPal Chief Reams Employees: Use Our App or Quit.”
Please respond in the comments section below.
— noah feehan (@noahfeehan) March 2, 2017