EBay tests expansion of PayPal antifraud program

EBay is testing an expansion to its PayPal Buyer Protection program in Germany that it might roll out in other countries if it's successful.

EBay began quietly testing on its eBay Germany site this month a significant expansion of its PayPal Buyer Protection program that, if successful, could be implemented in other countries, a PayPal spokeswoman said Thursday.

The trial expansion of the PayPal Buyer Protection program centers on removing requirements for sellers to qualify for it, which means more buyers will be covered, said PayPal spokeswoman Amanda Pires.

Right now, to qualify for the PayPal Buyer Protection program, eBay sellers must have accumulated at least 50 feedback entries from others who have done business with them. In addition, the sellers must have a positive feedback rating of at least 98 percent.

The expansion being tested in Germany removes those two requirements, so that as long as buyers pay for items on eBay using the PayPal online payment system, they will be covered by the buyer protection program, she said. The other change in Germany is that the maximum amount covered has been raised from Euro 400 to Euro 500 (AUD$636 to $795), she said.

EBay plans to boost adoption of the trial program in Germany next month when it launches a marketing campaign for it called "Pay with PayPal and You're Covered," Pires said.

EBay offers the original PayPal Buyer Protection program in multiple countries, including the U.S., the U.K., Austria and Switzerland, Pires said.

The program protects buyers who either don't receive the items they bought or who receive items that are "significantly not as described," according to information on PayPal's Web site. In the U.S., buyers are covered for up to US$1,000. Coverage amounts vary by country.

EBay President and Chief Executive Officer Meg Whitman mentioned the Germany trial on Wednesday during a conference call to discuss the company's second-quarter financial results.

Whitman said the trial program would be launched in Germany in August, but Pires clarified that it is already operational there and that what will be launched next month is the marketing program for it.

Whitman called the expansion of the program "a significant step up in PayPal buyer protection."

Fraud is a thorn in the side of online marketplaces such as eBay. In January, the Professional eBay Sellers Alliance, a group of about 600 large eBay sellers that collectively generate over 70 million eBay transactions and US$1 billion in gross merchandise volume annually, warned that, in its view, fraud is eroding the integrity of the marketplace and challenged eBay to implement concrete measures to address the issue.

Meanwhile, in February, the U.S. Federal Trade Commission reported that online-auction fraud last year made up 16 percent of all consumer complaints, or about 100,000, second only to identity theft with 39 percent.

Fraud in online auctions can take a variety of forms. Most commonly, buyers may pay for an item but not receive it, or receive an item that doesn't match the description of the one advertised by the seller. EBay estimates that only about one in 10,000 of its transactions are proven fraudulent.

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