Just how secure is eBay’s pay system?

The claims by online auction giant eBay that the sole use of its subsidiary PayPal will increase online payment security, has come under scrutiny as industry groups and financial regulators turn up the heat on eBay.

eBay has claimed that it is justified in shutting out other payment providers as it will protect consumers from fraud. However a submission by the Australian Payments Clearing Association to the consumer watchdog, notes fraud rates on PayPal could be “more than 10 times APCA’s recorded incidence of credit [and] charge fraud”.

The claim is actually based on a statement from eBay’s head of public affairs, Daniel Feiler, who admitted to a newsletter recently that PayPal’s fraud rate was 0.3% of all transactions while APCA’s was 0.0167%. Feiler told the Australian Financial Review yesterday that comparisons between PayPal fraud figures and APCA’s were “not necessarily like-for-like.”

Meanwhile the Reserve Bank of Australia also waded into the controversy last week, proclaiming: “Should consumers value PayPal’s security features highly, they will choose it over other payment methods and this may, in turn, place pressure on those other systems to improve security for similar transactions. It is possible that, in the long run, this competitive process may achieve safer payment facilities than would be the case if PayPal were the only payment option available.”

Meanwhile eBay is preparing a forma response to submissions to the ACCC.