Why does PayPal want to know where all of us live?
Even if you have never used the PayPal service to make a purchase, the odds are that the Web-payment processing giant knows more than a little about you, and it’s for your own good.
Scott Thompson, president of PayPal, will tell you, “Good people on the Internet leave footprints. There are e-mail accounts, I.P. addresses, things that accumulate over time that you can find on the Internet if you rummage around.” It is information of that nature that PayPal uses to decide to trust you or not when you set up your first account with them, something they have to do in just a few seconds.
Mr. Thompson says that risk management had been the key to the company’s success. Even before it was purchased by eBay, PayPal was willing to let individuals selling on eBay accept credit cards. That was at a time when banks and even eBay itself found it very difficult to trust people who came out of nowhere to sell items on eBay. They know that it is easier to sell things that you don’t have, then disappear, than it is to sell things and actually ship them. They had seen plenty of people do just that.
PayPal has decided is that the Internet actually reduces risk because it provides so much information to identify potential fraud artists. “If it’s a fraudster, you can’t find footprints,” Mr. Thompson said. “They go out of their way not to leave traces about who they are.” Having that risk management at their fingertips is why PayPal spent $169 million buying an Israeli company called Fraud Sciences last year, according to a New York Times story. The smaller company specialized in doing just the sort of analysis and making just the sort of decisions that PayPal needed.
Paypal has a sort of rule of thumb about collecting data on potential customers like you and I. Thompson says, “To do risk management well, you have to have more data than anyone else.” There is always a downside to having a lot of information about you available on the internet, but it is very hard to stop the Web and Web business from collecting data about you. PayPal wants to know where you live because they want to know if they can trust you or not. We can just hope their use stays benign, and that other data collectors are as benign as PayPal claims to be.
Related Posts:
June 21st, 2009
I totally understand the whole privacy debate, but as someone who uses Paypal all the time (as many others) I find Thompson’s arguments reasonable.
I have nothing to hide and I don’t mind if Paypal knows where I live.
If it makes my transactions safer and provides me with better protection from potential scams – I’m OK with their policy.