I must start by saying that Paypal is a fantastic addition to the Ebay site, and was until very recently, seperately owned.
Ebay bought Paypal a couple of years ago, amidst the USA Court Case Drama, which cost Paypal millions of dollars in compensation.
Ebay have sought to stabalise Paypal, and how it deals with its day to day business.
Paypal works on the basis that both seller and buyer have a paypal account and the seller requests (by sending an invoice) the buyer to pay. Presuming the buyer chooses Paypal for that transaction, then Paypal will pay from the buyers account the amount due, directly into the sellers account, (basically a transfer).
If the buyer does not have sufficient funds in their paypal account, then paypal will transfer from either their debit/credit card or bank account into their own paypal account and then tranfer the amount due to the seller.
Fees are charged to the receiver of the transfer between 2.8% and 4.2% of amount received. THE SELLER IS NOT ALLOWED UNDER EBAY RULES TO SURCHARGE FOR THIS. Although some sellers still do, but they are very few and far between.
HOWEVER: PROBLEMS CAN ARISE.
Namely, if an item is delivered damaged, or not complete, or not delivered at all, the purchaser can open a dispute with Paypal.
This is brilliant for the buyer, as they feel protected and secure. For the seller however it is a total nightmare. Upon receipt of the complaint from the buyer, paypal open a dispute and will WITHOLD monies in the sellers account for THE TOTAL OF THE INITIAL PAYMENT.
e.g a buyer purchase multiple items, say ten for a total of say £150, pays by paypal, but one of the ten arrives slightly damaged, complains to Paypal. Paypal will withold the whole £150 until dispute settled. Dispute settlement, unless you agree to immediate refund can take as long as 60 days. But! why should you agree to £150 refund for slight damage to one of ten items? Perhaps a smaller refund could be negotiated, but! as stated this often takes 60 days+, in all that time the £150 is being witheld.
If you have drawn that money, or there is insuffienct monies in your account to withold £150, then Paypal will reverse your latest withdrawals from your account and pay it back to themselves to enable them to withold the disputed monies. That's right, they will take money to cover themselves.
This is entirely legal, although in my opinion very morally wrong; Often proof of damage is hard to quantify to the seller, often the complaint to Paypal is in a foreign language, often decisions are made by paypal, the seller never really knowing what the problem was.
More alarming is that Paypal will only accept proof of delivery if it is tracked with ONLINE TRACKING. We often use a courier who obtains signatures, but doesn't list a copy of that online, therefore paypal will often refund whilst accepting that we may have a signature for the item, but as not shown on online tracking site, will still refund the payment as if not received.
To be fair, these cases are usually quite isolated and rare, about 1% of my overall sales, that is seen by ourselves as part of the overall cost of using Ebay/Paypal, although quite costly all in all.
Paypal is there for one thing; Paypal. Fantastic system, 100% of the time works fabulously well for the buyer, but not so for sellers.
We still use Paypal for our transactions, what choice do we have? In fact we are hugely pleased with the paypal system, but the oddities do leave a taste in your mouth.
Some sellers chose not to use Paypal, mostly for the above reasons, they will state this on their listing. There again, I finish as I started by saying that Paypal is a fantastic addition to the Ebay site, but there is still a fair way to go to aid sellers when there are apparent difficulties and disputes.