Paypal tightens the Gift option for making payments

When PayPal introduced the “Gift” option a couple of years ago, it was meant to be a service that would eliminate fees for those transactions that aren’t of financial nature.

Being able to send money to a friend or relative as a gift without paying a fee – or for allowing the sender to pay for the fee, in international transfers – would lower or eliminate transaction cost.

Like everything else, this started getting abused after a while. A large percentage of those “Gift” transactions are nowadays plain attempts to bypass paying any fees to Paypal.

“Our business model is based on profit”, says Martha Zucker of Paypal. “We are in the business to make money, just like our mother company, eBay. Freebies are good but cheaters aren’t cool”, she adds.

Starting next week, all attempts to send a gift transaction via Paypal will be met with a contact form where the sender will need to verify the following information:

• Degree of friendship or relation (e.g. brother, sister, spouse, high school friend, lover etc.)
• Total number of days of friendship or relationship (one would have to subtract days of breaking up with that person)
• How much money the sender makes
• How much money the recipient spent last month on non-essentials (Apple gadgets, non-WalMart clothes, non-generic food brands)
• A photo of the sender and one of the recipient (non-nude)
• A link to their Facebook account and a click on the “Like” button for Paypal (mandatory)
• A signed affidavit that the money sent as a gift is not in exchange of sexual favors.

After these drastic changes are in place, many expect the Paypal profit for Q3 of 2011 to increase by 17%. The new requirements might appear to be draconian to some but they are necessary in order to sustain the service for those that need it.

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