PayPal extends buyer protections to digital goods

April 30, 2015 02:47 PM

PayPal, which is about to head out on its own after it splits from eBay Inc. later this year, today expanded its “global purchase protection” program to include “intangible goods,” such as digital music, books, games and tickets, along with software downloads.

Physical goods are already covered under the money-back program, which has been in place basically since PayPal was founded in 1998, says Tomer Barel, PayPal’s chief risk officer.  Consumers seeking to use the protection program must file a claim within 180 days of a purchase made via PayPal. 

The protection plan doesn’t apply to such items as real estate, motor vehicles, prepaid cards and industrial machinery. PayPal parent eBay also does not allow for the sale of digital goods on, except via its classified ads. Additionally, PayPal’s seller protection program—through which merchants can be protected against transactions where buyers claim they did not authorize transactions, or buyers claim they did not receive orders—does not yet apply to digital goods.

“We see more and more intangible goods being purchased by our consumer base,” Barel says. “The segment is growing and becoming more significant.” PayPal did not provide details about how many of the purchases it processes involve digital goods but did say the dollar value of digital goods purchased with PayPal is growing by about 20% each year.

In the United States, the market for digital content and subscriptions increased 27% year over year in 2014, to $16.1 billion, according to web measurement firm comScore Inc. That growth makes digital content and subscriptions the fastest-growing online commerce category last year, a comScore spokesman says. The estimate includes purchases made on desktop computers and mobile devices, and takes into account downloadable music, movies, books, video games and apps, but not event tickets, which comScore does not consider digital content. “If this category grows at the same rate, 2015 could see more than $20 billion in spending in this category,” the spokesman adds.

Expansion of the PayPal protection program comes as the payment processing arm prepares to separate from eBay by the end of the year. An independent PayPal will be free to forge alliances with retailers and other financial firms, as Google Inc. and Apple Inc. seek to turn their products into tools for digital payments. EBay’s marketplaces business, which is facing competition from Inc. and China’s Alibaba Group Holding Ltd., has seen revenue growth lagging that of PayPal, which it bought in 2002.





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