​PayPal terminates services to Mega

PayPal has ceased processing customer payments for Mega, because it believes that Mega's encryption end-to-end model presents an 'insurmountable difficulty'.

Cloud storage provider company Mega is on the hunt for an alternative payment processing service, after its relationship with PayPal fell through.

PayPal said it will no longer process Mega's customer payments, after concerns that Mega's "unique" encryption end-to-end model presents an "insurmountable difficulty". However, Mega highlights that its legal obligation as a cloud provider is much the same as any other US cloud storage services provider, including Google, Microsoft, Apple, and Dropbox, and yet PayPal does not appear to have the same concern.

"The encryption models claimed by various USA and other entities apparently do not represent any problem to PayPal or the parties behind PayPal," Mega said in a statement.

Mega said PayPal's concern first arose after a report published by NetNames claimed, incorrectly in Mega's view, that the business is not a legitimate cloud storage service. This eventually saw Visa and MasterCard terminating their payment services to the companies named in that report, and then putting pressure on PayPal to do the same.

Mega noted PayPal's "non-negotiable" decision to terminate its services to the company was after Mega had provided statistics and evidence to PayPal, Visa, and MasterCard to show the business is legitimate and legally compliant.

"PayPal has apologised for this situation, and confirmed that Mega management are upstanding and acting in good faith. PayPal acknowledged that the business is legitimate, but advised that a key concern was that Mega has a unique model with its end-to-end encryption which leads to 'unknowability of what is on the platform'," the company said.

The company added that it is currently in discussions with a number of alternative payment service providers, anticipating that these discussions will be concluded sometime in March.

Until then, as compensation for customers, Mega said it will temporarily not enforce its storage limits or suspend any accounts for non-payment, and has extended existing subscriptions by two months, free of charge.

The New Zealand-based company, which was founded by controversial internet figure Kim Dotcom, was launched in January 2013 and claims to now have more than 15 million registered customers in more than 200 countries.

Dotcom resigned as a director of the company eight months after launching the company to focus on his defence against extradition by the FBI and pursue his political ambitions.