Bad actors Take Advantage of PayPal's Incentives and Rewards Programs
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Bad actors have been taking advantage of PayPal’s incentives and rewards programs. The company has closed 4.5 million accounts and lowered its forecast for new customers after this incident. 

After this incident, the payments giant will be overhauling its marketing plans to expand its user base to 750 million active accounts by 2025. The company will abandon this goal that was attributed to a large amount of spending on sales campaigns last year. 

Chief Financial Officer John Rainey after the company released its fourth-quarter results said, “We regularly assess our active account base to ensure the accounts are legitimate. This is particularly important during incentive campaigns that can be targeted for bad actors attempting to reap the benefit from these offers without ever having an intent to be a legitimate customer on our platform.”

The company shares plunged after the disclosure of the earnings report which fell short of Wall Street estimates. According to PayPal, the low-income customers are spending less as they struggle to keep up with the increase in the prices amid the highest levels of U.S. inflation in years. 

The disruption in the supply chain which affected the shipping times and customers shopping in stores during the holiday season has resulted in slow growth in eCommerce spending. The share prices of PayPal tumbled a record 25% to $132.40 at 9:42 a.m. in New York.

Last year PayPal started offering its first-ever signup incentives to encourage new customers to open an account, handing as much as $10.  

According to a PayPal spokesman for the San Jose, California-based company, the findings of the firm’s risk management team discovered many of the accounts were being created by bot farms. System fraudsters use them to manipulate internet activity.

Learning about this, PayPal immediately started closing those accounts and attempting to recoup the incentives from those customers. PayPal will now be refocusing its marketing efforts on increasing the usage of its products among active customers. 

Lisa Ellis, an analyst at MoffettNathanson, said in a note to clients, “You can officially add PayPal to your list of pandemic high-fliers that are experiencing a quite-bumpy landing.”

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