PayPal Goes After Bots, Shuts Down 4.5 Million Accounts
PayPal said today that it has closed approximately 4.5 million accounts and lowered its forecast for new customers. The news comes after the company said it found “bad actors” were taking advantage of its incentives and rewards programs that were launched in recent years.
PayPal now says it no longer expects to achieve 750 million active accounts by 2025. PayPal is also overhauling its marketing strategy going forward, Bloomberg reports.
“We regularly assess our active account base to ensure the accounts are legitimate,” Chief Financial Officer John Rainey said on a conference call with analysts Tuesday, after the company released fourth-quarter results. “This is particularly important during incentive campaigns that can be targets for bad actors attempting to reap the benefit from these offers without ever having an intent to be a legitimate customer on our platform.”
PayPal began offering incentives for new users and referral bonuses for current users early last year. These bonuses are usually $10, and even as high as $20 for a limited time. But the firm’s risk-management team discovered that many of the accounts were being created by bot farms. Using these bots, fraudsters took advantage of signup incentives and other rewards. PayPal immediately began closing those accounts and attempting to recoup the incentives from those customers, the spokesman said.
PayPal said it will refocus its marketing efforts on increasing usage of its products among active customers. In its earnings report the company said that low-income customers are spending less as they struggle to keep up with rising prices amid the highest levels of U.S. inflation in decades. Growth in e-commerce spending also slowed as supply-chain disruptions affected shipping times and consumers did more of their shopping in stores during the holiday season.
Meanwhile PayPal is facing a lawsuit for freezing funds and allegedly unilaterally seizing funds from some users, without cause and without any fair or due process. That case is still ongoing.
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