Prusa’s Patience with PayPal Has Run Out: 3D Printer Company Founder Warns Companies to Use a Different Payment Service

The Internet has made a lot of things both easier and scarier at the same time, and banking is one of them. I do all of my banking and bill-paying online; it’s rare that I write a paper check these days, and I know people who don’t use checks at all anymore. Why would they, when it’s so easy to transfer money online thanks to services like PayPal? The hugely popular and successful online payment system makes it easy to take care of normally stressful transactions, from splitting a check at a restaurant to figuring out how to pay a vendor halfway across the globe.

Services like PayPal make it extremely easy to shop online, too. I actually remember the first time I heard of it, probably over a decade ago when using eBay for the first time. I was suspicious of it at first – it sounded shady to me. Why would I give my money to this company I’d never heard of before? The fact that it’s so easy to shop online means that it’s also a little too easy to end up giving your money to a fraudulent company, but as I soon found out after doing a little bit of research, PayPal was designed specifically to prevent customers from losing money to frauds.

 However, according to some users, the stringent safeguards that PayPal puts in place can cause plenty of trouble for companies. Josef Průša, creator of Prusa 3D printers, has been relying on PayPal to handle the transactions of his increasingly successful business – but not anymore, he says.

As Průša describes in a recent blog entry, the company had more than $1 million blocked by PayPal without warning, leaving them unable to pay their suppliers. According to Průša, the fact that the company had so much money in their account set off red flags that have proved to be virtually impossible to circumvent.

“We cannot send money, cannot transfer them to our bank and we cannot even refund customers. This happened without warning over night and of course you don’t anticipate things like this,” he says. “We cannot pay our suppliers with PayPal, which is what we used to do. You ask why? We grow too fast, we do not ship immediately so PayPal probably thinks we want to run away with the money. The fact that we had only around 3 chargebacks in our 2-year history doesn’t matter to them. The only logic is = growing too fast, something is wrong.”

No more PayPal for Prusa.

Partnering with PayPal, he continues, has meant that several roadblocks have been thrown up in the company’s path to success, apparently in the name of consumer protection. After a company reaches $100,000 per month in sales, all income above that amount will be held by PayPal for 21 days. Customers can request an increase in the release amount once per month, but according to Průša, his requests were ignored for a couple of months, until PayPal finally increased the amount by $50,000.

“After some time, they realize it is not enough and they increase the release limit drastically,” he adds. “But they also employ a so called rolling reserve, for example they will hold 12% for the duration of 60 days. We were ok with this as reserve in case something went really wrong… but..When the rolling reserve grows to several hundred thousand dollars, they block your funds altogether. They even block the option to refund customers who ask for it, for example when they change their minds during waiting.”

According to Prusa’s website, lead time is currently 6-8 weeks for the new MK2 printer.

From PayPal’s standpoint, it makes sense to put certain blocks on funds, as several respondents to a related Reddit thread pointed out. It’s ultimately all about consumer protection, and PayPal’s rules state that while pre-sales are permitted on a limited basis, shipment must take place within two weeks. I find that reassuring; I’ve bought countless things from countless vendors online over the years, without ever being 100% sure that they were legitimate companies or not. They always were; I’ve always received what I paid for, but online commerce makes it a little too easy, without safeguards like PayPal’s, for fake companies to rake in money from customers and never deliver, disappearing into the ether.

That safeguard, however, makes things a bit tough for 3D printer manufacturers or other companies that take pre-sales way ahead of expected delivery. That’s pretty standard for many companies; how many of you have placed an order for a new 3D printer months before it began shipping? Most of us have no problem doing that with a reliable company; the problem with PayPal, Průša says, is that they don’t distinguish between reliable, well-established companies and scam artists.

“For PayPal you are always a possible scammer and fraud. We told them that we will have a bump in the sales. Sent them the Make: magazine explaining what is going on but no one cares. They don’t care about the important information, they always ask for historical records but nothing about our stock of parts, how many employees we have and if we are shipping on schedule we promised. Growth = problem, at least by PayPal logic,” he says.

Fortunately, PayPal is not the only payment processor that Prusa is using, and that’s the point that Průša is really trying to drive home: if you’re a growing company, don’t process all your funds through one service, especially PayPal. His company is using the service only for US orders, and they have plenty of stock on hand so that shipments will not be affected. Still, he says, having their funds frozen has been a massive pain and, for a company with less money in reserve, could be disastrous – and it almost has been for other, newer 3D printer companies.

PayPal is a massive company, and the bigger a company is, the more headaches customers are going to have trying to get someone to work with them on their individual situations. We all know that from experience, I’m afraid, with health insurers, banks, Internet suppliers, etc. PayPal’s rules seem to be set in place for good reason, but their rigidity doesn’t leave much room for companies with differing business models to work efficiently. Discuss in the PayPal forum at 3DPB.com.