$1 million Prusa PayPal funds frozen

As we reported in November 2016 Josef Průša, the innovator behind the RepRap Prusa 3D printers, shared on Twitter that PayPal had locked his company’s funds for ‘growing too fast.’ The root cause due to the success of their MK2 3D printer. One month later, over $1M are still locked in the account, and Průša has released a warning to small businesses about using PayPal as their primary payment method.

In a blog article on his website, Průša explains the cause as a case of algorithmic error that would otherwise be excused in a more personal transaction. He says,

You ask why? We grow too fast, we do not ship immediately so PayPal probably thinks we want to run away with the money. The fact that we had only around 3 chargebacks in our 2-year history doesn’t matter to them.

Though this may be comforting to some customers worried about fraud, it is not a suitable way for a company that claims to be able to provide “All Business Solutions” to handle its businesses online transactions. Furthermore, the outright freezing of funds doesn’t even allow Prusa3D to make customer refunds. There’s little peace of mind for the parties involved, and a lot of waiting around.

Right now we don’t have any new information but last information was that they will release funds for printers we shipped. Because our delivery dates are 5-6 weeks it might seem like a reasonable thing but customer can dispute undelivered goods for up to 180 days on PayPal.

The issue deepens

Průša and his well known company are based in the Czech Republic’s capital Prague. With 3D printer sales across Europe and the US, the Prusa3D webstore accommodates five different currencies: the American dollar, British pound, the Euro, Czech koruna and Polish zloty, which makes withdrawing funds from PayPal additionally complicated. Not only can funds only be withdrawn in Czech korunas at a poor exchange rate, but Paypal’s transaction fee also cuts off another 2%.

The initial withdrawal limit from PayPal to a bank account is $500, which can be increased on request once per month. After Prusa3D earned more than $100,000 they had problems getting the attention of PayPal customer service to allow them to increase the limit, and also release any funds beyond the $100 thousand.

Prusa3D’s is by no means an isolated incident. The same thing happened to Australian 3D printer makers Gizmo when they received unprecedented funding from a campaign on Indiegogo.

Closing advice

Though still uncertain when his company’s PayPal account will be released, Průša has learned some helpful things from the process. He gives advice to other independent businesses as follows:

1. Always have more payment processors – if you rely solely on PayPal, even though it is very comfortable, sooner or later you will have the same thing happening to you. It was comfortable for us as it is not easy to get a US processor from Europe, but we’ll move away as fast as possible.

2. If you are using PayPal, transfer the funds to your bank account as often as possible and have a backup processor prepared.

3. PayPal is not your partner but a potential problem. It happened to many companies before and it will eventually happen to you too.

3DPI hope that the matter is resolved soon so Prusa3D can return to regular trading. Either that, or a PayPal representative gets in touch with Průša soon to iron it all out.

Featured image shows one of Prusa’s 3D printer farms. Photo via: josefprusa on Twitter