A data transfer glitch creates payment headaches for VeriSign gateway users

A glitch in transferring data over the weekend from VeriSign Inc.’s payments gateway service to PayPal is creating major reconciliation and settlement headaches for numerous online retailers and other businesses.

Over the weekend VeriSign and PayPal conducted the biggest transfer to date of payments and account data from VeriSign’s payments gateway to PayPal, which acquired VeriSign’s gateway in a deal valued at $370 million in October. But during the course of transferring information, customers did not have access to account reporting tools, which typically allow them to check critical payments information such as account information, transaction histories, transaction logs and other payments-related data, says a spokeswoman for eBay, which owns and operates PayPal.

While eBay and PayPal say that payments were being processed during the data transfer, the systems glitch has caused ongoing account reconciliation problems, which PayPal and eBay say will be fixed within the next business day. “Merchants were seeing some reporting issues; they were having trouble accessing some of the VeriSign reporting tools,” the eBay spokeswoman says. “While payments were going through and being authorized, they were not being settled. Some merchants may still see payments on their transaction histories and their transaction logs that are pending. We expect that by tomorrow morning all of those pending payments will be settled. The issue has been resolved.”

Some major Internet retailers that use VeriSign and PayPal for payments processing, including Drs. Foster & Smith Inc. and Omaha Steaks, aren’t reporting any major problems. But another online retailer with more than $60 million in annual web sales says the PayPal glitch has caused settlement problems that affected more than $50,000 in credit card transactions. “We saw some very significant anomalies that impacted about 20% of our daily sales,” says the retailer, which asked not to be identified.

PayPal and eBay emphasize that there were no interruptions in payments processing as the data transfer problem was identified and worked on. But the glitch will cause serious ongoing customer service problems for eBay, which is using the acquisition to propel PayPal into the ranks of large card processing networks, say payments systems consultants and processing executives. “This probably is not a life-threatening situation for most businesses, but any time there is an outage, even for just several minutes, processors will be barraged by phone calls and will have to respond instantly,” says Jeff Foster, executive vice president of payments processor Retail Decisions. “The key is how fast they are communicating with their customers about resolving the problem. The big test of how they are impacted by this will happen during the next sales cycle.”

PayPal and eBay aren’t disclosing how many merchants and transactions were affected by the data transfer problem. But it’s also clear the problem does involve a substantial processing volume. VeriSign`s payment gateway, which is now owned by PayPal and eBay, processed more than $40 billion in total payment volume in 2004.