PayPal charging processing fees???

[Guest]

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[Gerard]

Hi KivaFriends,

Just wanted to take a moment to respond to some of the questions and comments posted on this thread since Liz posted way back on August 1st.

First - on the question of withdrawals:

Here's the nitty gritty of what actually happens.

When you deposit funds into your Kiva account or you purchase a share of a Kiva loan, PayPal sends us an API that tells our database about the transaction. Once we receive that API the transaction is completed on Kiva's end and the transaction appears in your Kiva account. Payment to Kiva follows soon after.

On the withdrawal end, as many have mentioned, things are not as streamlined. We don't have an integration with PayPal at the moment that would allow Kiva to send a similar API to PayPal letting PayPal know that funds should be paid to your PayPal account. Instead, what happens is that you log into your Kiva account, initiate a withdrawal request and provide us with the PayPal account into which you would like us to deposit your Kiva Credit. These requests are sent to a queue. Every week I (yes, little old me) go through this queue and generate a tab delimited text file, and initiate what's called a "Mass Payment" on PayPal's website. As the number of withdrawal requests has steadily increased, I've started to do this process more than once per week. We say on our website and in our emails that it may take between 1 to 3 weeks for Kiva to process your withdrawal request. Though we've been beating our own time frame, we're a small staff and unexpected things do happen, so we may not always be able to meet a less than one week time frame.

Now, I can assure you that we would love to streamline this processes and complete withdrawal requests faster. It would be an all-around better experience for everyone involved, and we're looking at ways that we can make this process more automated. I can also assure you that this withdrawal process is not without its challenges - preventing fraud among them. As such, designing a better, faster, stronger withdrawal system may take some time, but we're working to make sure your withdrawal requests are fulfilled on our end as soon as we can.

On the question of transparency around the withdrawal process:

Liz has already commented on this in this thread, but I wanted to reiterate that we hear your concerns and will make necessary changes to our Help Center to ensure that our lenders know exactly what fees may be associated with a withdrawal. What Kiva states is that A) we'll work to ensure that 100% of the funds that you indicate should go to the entrepreneur do indeed go to the entrepreneur and B) that, if the entrepreneur is able to repay the loan, those funds will be returned to your account as Kiva Credit and you'll have the opportunity to either re-lend these funds, donate them to Kiva's operating expenses, or withdraw them into a PayPal account of your choosing.

Now, as Liz indicated earlier, this means that we should provide you with a resource that lets you know exactly what fees you may be subject to, should you choose to move these funds from the PayPal account of your choosing. We will work to make that happen. Transparency is a value of Kiva's and, when we hear from our lenders that our transparency is lacking,we do what we can to remedy that.

On the question of PayPal's fee structure as it relates to Kiva lenders:

PayPal is not without its drawbacks. However, it looks like the PayPal partnership will save Kiva over $1 million USD this year, which is a huge savings. I want to emphasize what that means to Kiva and Kiva's lenders overall. The biggest savings comes from credit card processing fees, which most organizations pass on to their customers. For Kiva, this means that we don't get charged for every credit card transaction. In just one month - July - PayPal processed 14,515 credit card transactions all for free. This allows our optional 10% lending fee to stay optional, and has given Kiva the room to scale.

That mass payment feature that I previously mentioned is also fee-free, which allows us to complete your withdrawal request without paying a fee.

Ideally, we would like to one day to move to a system where Kiva lenders are able to lend in their home currency. However, right now we're only able to deal in US dollars, which means that lenders using non-USD currencies are going to have to pay currency conversion fees when converting their funds to and from dollars.

PayPal is a big and complicated organization and their fee structure parallels their scope. However, IMHO, without PayPal we wouldn't be in a position where lenders outside of the United States can easily lend and withdraw their funds. What we will work to do is ensure that there is an easy way for you to be informed about what fees may be associated with your withdrawal.

I hope that that helps to clear things up a bit. As always, we welcome any comments or questions you may have.

Thanks,
Gerard
Kiva CS

[wthepoo]

  Gerard, that was very helpful indeed.

And I appreciate your concerns regarding transparency (IMHO you won't even need to re-iterate Paypals fee structure - different from lender country to lender country - but just explicitly state in your Help Center what you stated here:

"What Kiva states is that A) we'll work to ensure that 100% of the funds that you indicate should go to the entrepreneur do indeed go to the entrepreneur and B) that, if the entrepreneur is able to repay the loan, those funds will be returned to your account as Kiva Credit and you'll have the opportunity to either re-lend these funds, donate them to Kiva's operating expenses, or withdraw them into a PayPal account of your choosing."

and in addition that the possible later withdrawal from that PayPal account (e.g. to a bank account) might trigger fees charged by Paypal - especially/at the time only for international lenders).


Take care and thanks again,
Wolfgang.

[KivanSteven]

It does help Gerard, especially those who were a little perturbed about the withdrawal time frames because the reason behind it was not apparent.  We greatly appreciate all replies from Kiva, fully aware how incredibly busy the staff always is.

Do you foresee a time when Kiva can absorb credit card fees into its budget in order to cut its ties with paypal?  I know a million $ is a huge savings now, but 5 years from now it might not be all that much due to Kiva's growth and increasing funding.  I doubt Kiva believes it worthwhile to spend a million $ just to break up the relationship it has with paypal but what about courting the actual credit card companies to determine if they might become Kiva partners/sponsors.  They are in as good a position to accept just such a proposal as paypal was.

[cpbailey]

Personally, I think it is an honor that PayPal has selected Kiva and Kiva alone to have no charges for its charitable work.  PayPal has made Kiva possible to transfer money without fees for most lenders under the current technology.  Even if you aren't 100% thrilled with PayPal, I think we need to appreciate what PayPal has enabled here at Kiva.  Let's be gentle in any criticism of PayPal; it is the least we can do.

Colette

[AccountAbility]

I think Gerard well answered most of the issues raised here. 

I do wonder, though, why withdrawals have to go through PayPal at all.  Is that part of the deal with PayPal?  With the current time frames for withdrawals there are any number of bulk check producers and bill pay processors who could meet or exceed the current. 

While withdrawals of $25 a pop are probably PayPal territory, larger amounts are a different issue.  I don't have a PayPal account and quite possibly never will--unless that remains the only way to get a withdrawal someday when I might be thinking more seriously about such things. I would personally rather get charged a small fee for say a $1,000 withdrawal in the form of a direct payment or check than to have to go through the rigmarole of setting up a PayPal account, attaching it to my bank account and then withdrawing the funds.

Dan

[saabnet]

I do wonder, though, why withdrawals have to go through PayPal at all.

I think that the appeal of this to Kiva is that there is no cost to them or their lenders for processing withdrawals this way. Also, the time involved to do withdrawals using the bulk payment tool mentioned also probably means there is little effort for Kiva to do it. So, without getting into transparency and PayPal issues, it would allow Kiva to continue to say that they return 100% of the funds to your PayPal account (even though they have not yet updated the site to say this).

-Scott

[AccountAbility]

So they simply can say that a lender CAN get 100% of their funds returned to their PayPal account.

Other methods might have a fee.  I've seen automated payment processing as low as 25 cents each.

Dan

[saabnet]

So they simply can say that a lender CAN get 100% of their funds returned to their PayPal account.

Other methods might have a fee.  I've seen automated payment processing as low as 25 cents each.

Dan

I think they are probably going to say more than that sometime soon... Can you find out specific info (best possible is the best) on what it might cost. I'm thinking you have to add in postage too, right? I think it'd be good info to have in this thread for the books...

-Scott

EDIT: And envelopes? Sheet of paper explaining things? Is that all included in the 25 cents?

[KivanSteven]

Ill send them the envelopes if someone sends the paper 

[Robert]

I read the most horrible stories here about PayPal. At worst all the money is frozen by PayPal, at best they charge a 35% fee to non-US residents.

This is totally incomprehensible to me. Until now, PayPal hasn't got a single cent from me.

When I made my first loan, PayPal asked me if I wanted them to exchange the money and charge the exchange value in euros to my credit card (thus knowing immediately the exchange rate), or if I preferred to have it exchanged by my credit card operator (thus living in uncertainty for 1 or 2 days). A quick check at PayPal's rate made me opt for the latter choice. Now PayPal knows my preference and doesn't ask any longer, but I still can click the relevant link if I changed my mind.

My participation in Kiva costs me somewhere between 0.7% and 1%, which is the margin that the bank gets on the difference between its selling rate and the central reference rate of the European Central Bank. This fee can never be avoided, like Tatiana said here. I have certainly made more than 1,000 currency exchange transactions in my life, hidden or deliberate, and someone has always earned a small fee. Since we have the euro, the situation is much better and I am really happy about it. The euro has saved my a lot of expenses.

The only uncertainty is when I want my money back. There is a small fee to withdraw less than €100, but I'll not withdraw that small amounts. Maybe PayPal will exchange the dollars at their own rate, I don't know.

Anyhow, I don't speculate now about what will happen in fifty years. If I did, I wouldn't be here. When I joined Kiva, PayPal didn't even know that my country exists and it was impossible to withdraw money into my bank account. In the meantime, PayPal has relocated their European headquarters from London to Luxembourg and a few weeks later it was possible to withdraw money. If problems get solved by themselves in time, why bother now?

I don't say that I love PayPal, but I definitely like PayPal.