Quality of Service

Any time someone uses diminished quality of service as an argument against general freedoms, you should be skeptical. I’d like to say they are 100% full of shit, but won’t because I maybe just haven’t thought of a counter-example.

The true motivation is protecting a market foothold. Good example is Apple making it increasingly difficult to service their machines and shutting down third party repair services. They claim that servicing is dangerous and complicated while at the same time actively designing their computers to be more dangerous and difficult to repair.

It’s fine to not release internal repair manuals or sell replacement parts, but no company should be forced to do these things. Likewise no consumer should be sued for what they do with something they own.

The reason we “need” government protections against this behavior is because the behavior is already protected and encouraged by the government.

The choice is to either remove the government protections in the first place or use the government as a weapon against the companies.

But I’m criticizing the reason itself of improving QOS. It is a statement meant to put you in your place as a naive consumer. The hope is that you accept that there are just some things too complicated for the average person to understand. But I’m telling you it’s bullshit.

Quality of service, reliability. It’s what you need when you want to make sure that when things work, they work as planned. An all or nothing approach. It’s an abused, old way of thinking that creeps into many models.

PayPal is not a bank.

In case you thought PayPal is a bank, they are not. Let’s examine their terms for direct depositing and holding funds.

Note: PayPay often changes the wording and organization of their terms. Here is the archive of the page from the original time of writing.

Agent and custodian.

One way PayPal acts like a bank is that they accept your direct deposits directly. A bank has FDIC insurance. PayPal uses banks to hold your funds, and those banks are eligible for the insurance.

When you add money to your PayPal balance using Direct Deposit … the funds in your balance … will be eligible for FDIC pass- through insurance. PayPal will hold these funds as your agent and custodian and you will be the ultimate beneficial owner of the funds.

To be more accurate, these accounts belong to PayPal, not you. You are merely the beneficial owner of your funds.

So far so good. At least you can direct deposit into PayPal. This use is helpful for those who cannot use bank accounts and have some other way to spend their PayPal dollars.

Let’s move on to another common use: everything else. Buying things using credit cards and ACH through PayPal, receiving payment via PayPal are common ways of transferring value into PayPal dollars.

If funds are received in your account other than through Direct Deposit, there might be a delay between the time that funds are credited to your PayPal account and when we actually transfer those funds to one of the custodial accounts.

Your PayPal balance funds might not be insured by the FDIC during this period, although we will still be holding the funds as your agent and custodian.

There might be a delay. No explanation as to why there is a delay, nor where the money exists during this delay. We can only assume PayPal holds it in a non-custodial account or in their own rolling reserve.

Remember PayPal is not a bank. A bank often has more obligations to you, such as paying interest or making money in any way other than floating yours.