Digital Media

PayPal to protect purchases of Uber rides, digital music

On July 1, the payment-services company will start offering buyer protections for services, e-books, software downloads, digital music and much more.

454754269.jpg
PayPal will start protecting purchases of services and digital content the same way it has for physical goods. Getty Images

A lot of the stuff you buy these days isn't stuff at all.

With consumers spending more money on digital goods, PayPal decided it was time to start offering buyer protections for those digital songs, books, travel tickets and software downloads.

The payments-service company for years has been providing buyer protections for physical products, such as reimbursements for packages that aren't delivered. Starting July 1, the company said Thursday, PayPal is extending those kinds of protections to services -- such as hiring an Uber driver or a plumber -- and digital goods purchased through its system. So, if you use PayPal to buy a software download and it's not delivered, or you pay for a digital book and receive something entirely different, or never receive that house call from a local painter, PayPal will step in to help resolve the issue and, as needed, help credit back your account. (Fraud protections have always been available through PayPal for both physical and intangible goods.)

Although the new buyer protections will require more investment from PayPal, consumers won't have to pay anything extra for the service and won't need to do any additional work. They will just have to file a claim, as they would for a physical good complaint.

"Trust...is one of PayPal's most important assets and it's an asset that we invest in," Tomer Barel, PayPal's chief risk officer, said in an interview. "It's crucial for our success and it's one of those things that customers expect from us."

Consumer spending on digital games, movies and apps keeps growing. The global market for those goods was $57 billion in 2013, up nearly 30 percent from 2012, according to an IHS and App Annie report last year. Every year, PayPal manages the payments of billions of dollars of digital purchases using Apple's iTunes, Google Play, Uber and travel services, with these types of payments becoming one of the fastest growing part of its business. So, ensuring that customers continue to have faith in that system is crucial for its business.

Additionally, with PayPal planning to expand into new areas of commerce amid its planned split with eBay later this year, offering services that keep customers coming back will be critical for PayPal to stay competitive against other payment services, such as Square, Google Wallet and Stripe.

The buyer protection service will be used in addition to PayPal's existing risk management tools, which help weed out bad actors in its system and avoid many such situations in the first place.

Buyer protections for a digital goods are more complicated to do than similar services for a physical goods. For one thing, PayPal can't check with a shipper to see if an item wasn't delivered. Instead, the company needs to get proof from sellers from an email or access code.

To see if it could pull off the new service, PayPal started a pilot program last year in the United Kingdom. Consumers responded positively to the pilot, Barel said, with PayPal addressing these new kinds of disputes and payments.

"There is a greater peace of mind," Barel said. "We see also, overall, the level of trust that they see in the purchase process, specifically when using PayPal, has increased."