As someone who did millions of $ via PP as merchant, I can say the experience is great as a consumer usually but really stinks as a merchant. We had a far higher fraud rate on PP than CC and it was a high price to pay really. Especially because after enough users chargeback or dispute, even though it was very clear they were just scamming us for free product (you could very clearly see it as they did not even tried to hide it; they knew PP would side with them), they would not go in discussion but just block our funds for 30-90 days. Lovely as a startup to have 400k usd blocked for 3 months...

To be fair the manner in which you were defrauded for product sounds like it can also be easily done with credit cards. That being said, I'm pretty sure PayPal can also be hit with a chargeback from credit cards, which they pass to you.

Had it happened with a credit you'd not only have your funds immediately blocked for 90 days, you also get hit with processing fees regardless of if the customer was scamming you or not.

But the blocking of the funds, unlike with Cc, were the non chargebacked funds so our rolling cashflow. With Cc we only lose that one customer payment and that is it. PayPal blocks the entire account. That is very different.

Regular cc merchant accounts will do the same if they believe their risk threshold has been met and this will vary depending on your merchant bank. But I do think that PayPal's threshold is much lower than most due to the higher level of fraud and the fact that no human being seems to work in their customer service and risk management departments. It's all bots, all the way down.

Years ago I used PayPal to pay for an on demand server that was advertised to be ready within an hour. Twenty four hours and zero servers later, I had already gone to a competitor and asked for a refund. The company refused and PayPal sided with them. American Express sided with me. I closed my PayPal account forever that day.

Now we have even better tools available for subscriptions. Check out privacy card.

The privacy card privacy policy isn't very comforting. I assume its partially boilerplate but it did keep me from signing up a while ago

In my experience with credit cards they almost always side with the customer for small charges, and for extremely large charges (and if you're a big enough company) they side with the merchant. I had case where free credits were offered for a cloud provider, but they decided to bill me anyways. Chase decided to validate the charges, and it was clear through multiple calls each agent was making things up about why it was validated (They would give different reasons anytime, from how I worded "free credits"). In the end the cloud provider admitted to the mistake and ended up siding with me, despite chase siding against me (they're supposed to be on the consumer's behalf). So I think in your case Amex probably didn't even consider or evaluate the terms of the sale—they just refunded you because it was within some parameters. This of course can work for or against you depending on the situation.

You are probably right. It was a small amount. I would be surprised if the charge back approval wasn't completely automated. But at least they side with the consumer some of the time. PayPal was just straight up "nope, we don't care that they didn't deliver the product at all".

The OP’s conplaint is actually that paypal sides with the consumer too much, enabling fraud. If I wanted it’s fairly easy to do since paypal pretty much refunds on request if you show you return something, and by something it literally means anything, including an empty box.

The disputes system is horribly inefficient. Reqarding fraudsters is worse than simply losing the money to mitigation efforts, as reqarding them incentivizes them too!

Right now payment processors are fairly detached from the negative repercussions, so they basically encourage customers to do chargebacks or disputes.