Internet Marketing Payment Processing Suspended

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Internet marketing payment processing has come to a screeching halt for many online small businesses.

PayPal has stopped internet marketing payment processing for many small and “mom-and-pop” businesses for violation of Acceptable Use Policy. They have and are suspending the accounts preventing the receipt and payment of funds. The payments are for digital marketing or advertising services such as safelist/email and traffic exchange programs. Their rationale is that many of the businesses are in violation of the PayPal Terms of Services or Acceptable Use Policy.

PayPal internet marketing payment processingConsequently, these businesses are unable to accept payments from advertisers or make payments to affiliates or other vendors using their PayPal accounts.

The PayPal Acceptable Use Policy  states, “You may not use the PayPal service for activities that… relate to transactions that (a) show the personal information of third parties in violation of applicable law, (b) support pyramid or ponzi schemes, matrix programs, other “get rich quick” schemes or certain multi-level marketing programs,”

Apparently, a number of websites have had their PayPal accounts suspended because they are selling, have sold or provided digital or advertising services to companies and individuals related to pyramid or ponzi schemes, matrix programs, other “get rich quick” schemes or certain multi-level marketing programs.  

The definition of these unacceptable programs is determined by PayPal. However, the terminology like “certain multi-level marketing programs” is ambiguous. A number of MLM companies are listed by the New York Stock Exchange, e.g. Herbalife. These companies were vetted and found acceptable by the NYSE and Securities Exchange Commission (SEC) regulators.

It is certainly within PayPal’s right as a corporation to establish policies such as acceptable use policies and control the use of their product/services. Obviously, PayPal incurs financial risk if/when they process payments for illegal schemes. For example, the  SEC recently closed down Traffic Monsoon for running a ponzi scheme. Millions of dollars are involved. Prior to the SEC litigation, PayPal had suspended Traffic Monsoon payment processing.

Internet Marketing Payment Processing Alternatives

As a small business owner, I use a number of marketing and promotional options as described in this article. Additionally, the article identifies several website traffic generation methods to avoid; safelist/mailer programs and traffic exchanges. I cannot say I had the foresight to avoid using safelists and traffic exchanges. But I recognized the effort and risk involved. Consequently, I kept my affiliate commission balances as low as possible by taking frequent withdrawals.

Businesses impacted by the PayPal enforcement of their policies have several options. The options are:

  • Go out of business – several already have
  • Change to other online payment processors – There are other online payment processors like Payza, Payoneer, and Solid Trust Pay. I seriously doubt they have the capability, reputation, security, and capacity of PayPal.
  • Start using merchant card services – Many businesses already accept credit cards for payment of products and services.
  • Use virtual micro-currency like Bitcoin – Some businesses accept Bitcoin for payment. Product pricing becomes an issue due to fluctuation of Bitcoin values.

In conclusion…

We had similar disruption in the internet marketing environment in 2003 as a result of the CAN-SPAM Act. The industry will work out the internet marketing payment processing issues over time.

For American affiliate marketers, there may be tax issue with regards to Form 1099 distributions over $600.00. PayPal processed Form 1099 for small businesses. Some of the offshore payment processors will not provide this service.

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