October 12, 2004, 12:00 AM

A code upgrade interrupts payments at PayPal

EBay Inc.’s PayPal has been experiencing major problems since Friday when a code upgrade proved unable to stand up to traffic. PayPal and eBay technicians have been working on the problem, but are unable to say when it will be fixed.

EBay Inc.’s PayPal has been experiencing major problems since Friday when a code upgrade proved unable to stand up to traffic. “EBay and PayPal technicians have been working around the clock to fix it,” says a PayPal spokeswoman. The company is unable to say when the problem will be solved.

The system hasn’t been completely down, PayPal says, but rather has provided intermittent service since Friday morning. “The problem has been at peak usage periods,” the spokeswoman says. She says the code upgrade was to back-end systems and not to the consumer interface.

Scot Wingo, president of ChannelAdvisor Corp. which helps sellers sell on eBay, says the disruption has caused major problems and will continue to do so as buyers think they have paid for their purchases but the merchants can’t tell if they’ve received payments. “Sellers can’t see that they’ve been paid and so they’re not shopping products,” Wingo says. “That could result in negative feedback on eBay, which could be devastating to a business.”

The disruption comes as PayPal is making a play to expand its services beyond the eBay marketplace to general online retailers.

Lonny Paul, e-commerce director for electronics retailer Tiger Direct, which accepts PayPal, says Tiger Direct has not experienced disruptions in payments. Rather, the problems have come from customers who pay by PayPal then follow up to make sure Tiger Direct received their payment. Tiger Direct reps are not able to get online to check accounts at PayPal to determine if the money has been received, he says. “Our customer service department is going crazy because they can’t see into the account,” Paul says. He adds that PayPal called Tiger Direct as soon as it knew it had a problem.

While Paul says Tiger Direct has seen no problems with its Instant Payment Notification service from PayPal, the company spokeswoman says PayPal has not given priority to the merchant portion of payments over the consumer portion. “We’re not happy any time any of our customers have a problem,” she says.

Wingo says PayPal’s debit accounts have also been affected, which means that customers who use the PayPal debit card in offline locations are unable to access their money. “With a stored value service, PayPal is a bank in a way,” Wingo says. “But they’re not regulated like banks are. I wouldn’t be surprised to see some regulation proposed as a result of this. People are pretty upset.”

Wingo says ChannelAdvisor is encouraging its customers to post prominent notices at their checkout pages informing customers that if they want to pay by PayPal, they may not be able to get into the system and they should try again later. As for those who think they are paying, but aren’t, Wingo says sellers will have to e-mail all those customers and ask them to pay again. “It’s a pretty big logjam,” he says.

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