PayPal: Risky for eBay and users alike?

As eBay continues to promote its move to a single payment system &mdash PayPal &mdash as being in the best interests of its users, one security specialist believes it may be asking for trouble.

The online auction giant issued a statement to its entire Australian user base this week, alerting them to the mid-July deadline to comply with the new payment policy. From 15 July, all transactions on eBay's Australian site will be limited PayPal, as the company awaits the Australian Competition and Consumer Commission's (ACCC) final ruling on the matter.

"Current policies regarding accepted payment methods still apply. This means PayPal is required on all listings on eBay.com.au. Other payment methods (ie bank deposit, cheque/money order) may also be offered until 15 July 2008... any listings that do not comply with eBay's Accepted Payments Policy will be removed," eBay said in the mail to users.

Andrew Walls, research director and security specialist at Gartner, said eBay must now be very comfortable with PayPal.

"From their [eBay's] point of view monopolising its payment system would seem inherently secure...but at the same time there's an inherent danger in doing so, because if there's a security breach in PayPal significant enough to damage their reputation eBay may run into some real trouble," he told ZDNet.com.au.

Walls added that many users may have their own particular payment method which they believe to be the most secure, but now will be asked to "place all of their trust in PayPal".

"Having multiple payment options gives users the ability to choose which one they prefer on the basis of good security," he said. "Some people may particularly trust their credit card provider when it comes to security, others may have a particularly good association with EFTPOS."

Despite this, Walls does not believe that security is the central concern of any of the parties involved in the ongoing dispute over the exclusive use of PayPal.

"The grumbling is really less related to security and more related to who's making money off the transactions, and in this case eBay clearly stands to benefit from the move," he said.

After ruling that eBay extend the availability of other payment systems by a month, the ACCC has begun accepting public submissions in response to the draft notice proposing to block a permanent switch to PayPal-only transactions by eBay.

According to an ACCC spokesperson, a public conference may also be called in response to the matter, and ahead of the deadline for submissions on 3 July.

"After that there'll be a final decision on whether or not to revoke the [PayPal] notice," said the spokesperson.

The spokesperson told ZDNet.com.au today that eBay will be able to appeal the decision through the Australian Competition Tribunal.