🛑 Paypal Just Got Destroyed Over New Fines

Welcome to The Level Ups. Modern business news for the future business leader (in plain-Jane English).

Hope you had a lovely (Canadian) Thanksgiving!

Nobody’s saying thanks Paypal.

• The company added tried adding $2,5000 fines for “misinformation.”

• They faced backlash (and people closing accounts), so they took it back right away.

• Lessons learned: a new definition for branding

Let’s get into it.

Estimated reading time: 2 minutes & 48 seconds.

PayPal Goes Too Far:

It’s not the first time a company added a dumb policy, but it’s one of the most memorable.

Paypal is a global leader in personal and business financial services. Things like money transfers, payments, invoicing and more.

The company was founded by Peter Thiel in 1998 and sold to eBay in 2002 for $1.5B.

Along the way, Elon Musk’s company, X.com, was acquired by Paypal and Musk was made CEO for less than a year (he was ousted in the same year). Both Peter and Elon made millions on the eBay deal regardless.

Funny enough, Elon also wants to name the new everything app X. It worked the first time, might as well.

Looks like Paypal has strayed too far from its roots.

$2,500 Fines For “Misinformation”

The new policy was discovered on the 8th, and people were pissed (more on this below).

Paypal said that if you post something online (Twitter, Instagram, Tiktok, etc.), and Paypal feels it breaks their definition of “misinformation,” they’ll take $2,500 out of your account.

Sure, they could do it. But should they?

The Backlash:

The internet said no.

Daily Google searches for “delete PayPal,” “how to cancel PayPal account,” “how to delete PayPal account,” and similar searches are all up.

Screenshot from Google Trends for the term “delete PayPal.” The spike in searches perfectly matches the policy announcement.

Doesn’t stop there.

Paypal’s stock price dropped 6% since opening yesterday morning. Paypal is -43% this year.

Paypal’s former CEO called them out too:

Paypal Is Backtracking

The company apologized and took it back right away.

They called it an “error” and said it was never meant to be a new policy. I don’t believe it. Something like that doesn’t just happen.

Remember: Paypal is a global company. Since two parties are required for transfers (one of many services), each deleted account has major repercussions.

As one side says, “I don’t use PayPal,” the other side will also have to use something else. It adds up fast, and Paypal knows it.

Especially since it’s not just Paypal. The policy would have applied to Venmo and other subsidiaries.

But is the damage already done?

When Brand Is Everything:

Most people don’t consider that Paypal and other financial institutions also have a brand.

The lessons here are obvious. Do things that piss off your user base, and they’ll stop using your product or buying your services.

But “brand” is hard to describe. There are thousands of different answers to "what is branding?" Jargon.

What if there was a simple and clear way to define it? Try this:

Brand = demand. That’s it.

Most of you will read this and say “duh.”

Sometimes simplifying business jargon helps clarify how we should prioritize marketing.

When we look at branding as the way we influence demand for our products or services, it fits perfectly.

"Brand" is just a fancy way of saying demand.

The key is to consider the customers you want and their psychology. What influences their purchasing decisions?

For some, it’s the idea of belonging to an exclusive group. For others, it’s something that saves them time and money. It could be both, or maybe there’s something for your customers that’s even more powerful.

By this definition, Paypal probably thought appealing to cancel culture was a good idea. They were wrong. I’ll leave you to think over why that might be the case.

Thanks for reading!

See you tomorrow,

Darwin