Last month I posted about a Surreal (and exceedingly unpleasant) PayPal Experience, and also about an Apple customer-service fiasco coincidentally related to PayPal, but unrelated to the first issue. The common theme among both unpleasant customer experiences was "policies that make no sense, combined with explanations that make no sense."

Through an almost serendipitous chain of events, I received a phone call today from Mike Vergara, Director of Account Protection at PayPal (featured in this article), who shed light on both experiences.

The summary for both situations is this: there is a reasonable basis for the policies I was running into, but the communication about them was, indeed, woefully bad.

About my PayPal experience, Mike explained the chain of events that led to PayPal wanting to further authenticate that I was who I claimed to be. It was a bit complex, but once explained, it made complete sense.

Had they explained this at the time, there would have been no problem and no ill feelings. The real problem, he readily offered, was that the communication from PayPal was horrible from the very start. He apologized for that, was embarrassed by it, and (this is what means the most to me) listed his “take away” points from having read my experiences. This means that someone who has a direct impact on how all customers are treated has learned something valuable from my specific experience. This will have no direct impact on me or my account, but wow, the feeling that someone at the top is clueful brings general hope. (Sad reality: those at the top are often not clueful.)

About my Apple experience, I had wondered why Apple required that my PayPal account be linked to a credit card before Apple would let me use that PayPal account to pay for iTunes purchases. My thought was that PayPal knows right at the time-of-sale whether I have the funds, and so Apple can decline the purchase if the funds are not there at the time of sale. Mike doesn't work for Apple, but was able to shed light on this as well...

It turns out that for business reasons that make complete fiscal sense, Apple does not necessarily instigate/complete the payment portion of a sale at the time of the sale. If I end up making several purchases over the course of an hour/day/week, Apple can save a non-trivial amount of financial overhead by processing the payment for the combined group, as opposed to processing each payment individually. The difference would not make a material difference if the per-item prices were large, but with prices as low as 99 cents, saving on the per-transaction charge is huge.

As an Apple shareholder, I appreciate this big savings. I'm sure it's difficult to strike a balance between policies that help the bottom line at the expense of increased hassles for some customers (and clearly, no one will ever be able to please everyone), but I think everyone would agree that the ridiculous customer-service exchange creates a no-win situation. Again, if they'd just communicate better, offering a clear rationale for their policies, so much hassle and ill will could be averted.

Perhaps not many people fall into my situation (wanting to make iTunes purchases without involving a credit card), but if Apple considers it a problem they'd like to solve, an easy way around everything would be to allow a PayPal customer to initiate a payment to Apple to create a credit balance in the customer's iTunes account. PayPal would charge a fee to Apple for this, which Apple would then pass along to the user, such that, for example, transferring $100 from PayPal would result in an iTunes credit balance of $96. It's a win for the customer that wants to go that route, and it's a win for Apple (because they can now make more sales, with less overhead). I'll be sure to mention this idea the next time Steve Jobs calls me for advice. 🙂

In any case, I very much appreciate Mike's unexpected call, his generosity with his time, and the reasonable explanation of the situation.