posted on June 15, 2002 11:33:20 AM new
I have a question. If paypal, as some alledge, doesn't use its customers' funds for operating cash; then what is this line item on it's income statement?
"4. RESTRICTED CASH
In connection with processing transactions with financial institutions, the Company pledges cash in the form of certificates of deposits. THE COMPANY USES RESTRICTED CASH to secure letters of credits with banks to provide collateral to other financial institutions for actual or contingent liabilities arising from potential charge-backs, adjustments, fees or other charges due to or incurred by the Company."
It sure would make a lot more sense to know that the reason they ignore people tring to get their accounts unrestricted is that they CAN'T unrestrict them until the funds are 'free' to give back to the customer.
(BTW - PayPal's gross income from restricted cash as of 9/30/2001 was $6.5 Million)
posted on June 15, 2002 05:24:13 PM new
this is a definition from 2001 annual report of a major fortune 500 comany-
RESTRICTED CASH-cash held in relation to specific transactions or financings that is restricted from general corporate purpose.
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i would interpret this to mean this is corporate cash(as versus customer cash) which is segregated either in accounting entry or bank account for specific purpose.
restricted cash is a balance sheet item ,it is a current asset.
customer cash is also a balance sheet item,but it is a liability .
just think of your cash in the bank account,your bank will list your cash in checking account as demand deposit,a liability owed you !!
next Time pick up annual report of your bank and see where they list demand deposits and time deposits,they are all under liabilities.
now when you apply for a bank loan,this would be classifiedas an asset .
posted on June 16, 2002 09:51:18 AM new
it sounds like paypal merchant account provider is asking for a reserve commensurate with past paypal chargeback experience.
the fund in reserve belongs to paypal but it is not available to be used for any other purpose except for chargebacks.
it must be a large sum to earn that much interest.
on a smaller scale,take a look at your own merchant account or propay,if you want to process 3000 dollars worth of cc transaction in a month with propay,i think the reserve is 500 if not more??
posted on June 16, 2002 10:35:58 AM new
The purpose of a reserve is to protect the processing bank from chargebacks. Usually, it is a rolling reserve that is based on the gross of each days income via the credit cards. I can only imagine if PayPals Merchant Account is requiring a Rolling Reserve, then they would have to be using some of the money held in accounts as a way for paying operating costs. Can you imagine if every customer that PayPal has would request to get thier money out of thier accounts, what would happen to this service.
posted on June 16, 2002 11:33:51 AM new
there was a large retail website which after closing shop,still have a few million dollars worth of reserve held by its merchant account provider?dont recall the name of the site,but the provider is chase .
given paypal business model ,there is no way any bank will sleep well at nite??
i heard they have just moved their cc processing to wells fargo bank??
can anyone confirm this??
to the provider,paypal has to be one BIG HEADACHE, and i bet its discount rate ,despite its volume is quite high,say compared to other clients which also accept large volume of cc transactions daily like walmart,lowe,home depot,walgreen,kroeger.
how many of us will fle chargeback against a supermarket??
posted on June 16, 2002 12:44:34 PM new
Stopwhinning the story came out the other day and my lawyer think it's to bring them into compliance with california law.
aol://4344:30.LH1D2lqM.5270425.708389084 I cut and paseted it incase the url dosen't work
InterCept says loss of PayPal business won't hurt
ATLANTA, June 12 (Reuters) - Banking software maker InterCept, Inc. <ICPT.O> said on Wednesday it has lost a major customer, PayPal Inc. <PYPL.O>, but it will not hurt 2002 and 2003 earnings estimates.
InterCept said it learned from a filing with the Securities and Exchange Commission, that PayPal has entered into an agreement to transfer its U.S. credit card processing services from Electronic Payment Exchange, Inc. (EPX), InterCept's wholly-owned subsidiary.
PayPal has entered into an agreement with Wells Fargo for U.S. credit card processing services to take effect no later than November 2002. For the six months ending May 31, EPX recorded average monthly revenue of about $185,000 from processing PayPal's domestic and international transactions.
InterCept does not believe the loss of the PayPal business will have a material effect on its earnings and reaffirmed its earnings per share guidance of $1.15-$1.17 for 2002 and $1.43-$1.45 for 2003.
06/12/02 18:42 ET
posted on June 16, 2002 12:48:41 PM new
If the fees that paypal gets charged for each transaction goes up, then they will have to increase the fees that they charge. It is only a matter of time.
