You have a point, but I am not sure how much Paypal stands behind its customers. Off the top of my head, here are things I've experienced with Paypal that I have found pretty negative:
1. As a buyer, I purchased a camera from a web storefront almost a year ago and paid using a credit card through Paypal. The web storefront proved to be fraudulent and never sent me the camera. Now, if I had paid using my credit card directly rather than through Paypal, I would have been completely protected without much of a hassle factor. All I would have to do is call my credit card company, enter a dispute, and the transaction would have been immediately voided and all money returned. I can attest to this as I know the law regarding credit cards (at least up to now). You as the consumer are always protected from credit card fraud by law for anything beyond $50. And just about all credit card companies will cover that last $50 also. (I was even refunded four months after I made an annual payment to Digital Railroad, a company that I leased software from for my website photo search engine, which got greedy and went bankrupt. The credit card company investigated the matter and refunded me the remaining eight or nine months out of the amount I had paid, which I thought was very cool).
Now, back to the above ripoff -- Paypal is just a middleman between the customer and the credit card. They took weeks to investigate the matter, kept asking me for more information, treated the matter in their usual incredibly impersonal (computer-phone tree) way that makes everyone but the most dedicated give up, and they finally refunded most of my money but kept something like $22 with no explanation.
I then called my credit card company, explained the situation, and boom -- all my money was credited back.
2. I have no idea what will happen if I, as a seller, am paid by someone who then lies to Paypal to get their money back; if their transfer of funds proves insufficient, etc. I have a strong feeling that in such cases, sellers will get hosed by Paypal. After all, Paypal is owned by Ebay, who seems hell-bent on favoring buyers rather than sellers. Sellers can't leave feedback for buyers. If a seller makes a mistake in listing a price in a buy-it-now auction and someone jumps on a too-good-to-be-true deal within 15 minutes of the listing, then the seller is forced to sell the item, or endure a negative feedback from the buyer as well as full forfeiture of the Ebay auction fee and commission. If I get stiffed by a buyer, however -- no problem. I can't do a dang thing.
I once sold an item to someone who had a problem with it. The item was fine, my return policy stated that I accept returns but the seller would have to pay shipping costs both ways unless the item was DOA. The buyer contacted Paypal, who disregarded my return policy and basically favored the buyer over the seller in all instances. Sellers don't have a chance if they get defrauded by buyers. Not a chance.
3. Paypal does all kinds of sneaky stuff to get you to withdraw funds directly from your bank account as opposed to using your credit card for transactions. I believe that this is because they make a bit more money if you use your bank account rather than a credit card. But you also get more protection if you are using your credit card. If you buy something on Ebay and use your Paypal account to pay, you are automatically paying by a direct withdrawal from your bank account. You have to be savvy enough and curious enough to hunt down the option to use your credit card. That option is often completely hidden, with no explanation, if you have any funds whatsoever in your Paypal account. You have to stop whatever you are doing in such a case, go to your Paypal account, withdraw any funds in your Paypal account, then go back to buying whatever it was on Ebay that you were using your Paypal account for. Only then will you even be able to see an option to pay for the item using your credit card.
4. I am not sure if anyone has seen ads where Blockbuster or Tiger Direct offers something like $20 or $25 back if you buy something from them using Paypal. I've been hooked by offers like this twice in the past year and have never been able to get Paypal to pay me back. It is a total scam because Paypal will never issue the rebate, and unless you have documented the offer with screen grabs, you have absolutely no proof and no recourse. Also, when you call Paypal, they tell you that the merchant is at fault. When you call the merchant, they tell you that Paypal is at fault.
Well, I actually did get some money from Paypal for the above instances. I called the Paypal phone number which I give below as a reward for reading so far into this diatribe. Feel free to pass this on.
If you have the above problem, here is a "secret" phone number to get to a supervisor.
Paypal: call this phone 402-935-7733, at some point just enter #47550 and that seems to be a magic number to get to an operator and supervisor. Both times, I talked to a supervisor about the above situations, and without asking for paperwork or anything else, the supervisors issued me the promised rebate to my account. Unbelievably, the credit to my account actually did come through. The above phone number and extension was given to me by a supervisor there. You have to ignore the constant phone tree runaround that this number gives you and keep entering the above extension. At some point, the phone tree robot will get overridden by the extension above, and you will get transferred to a supervisor.
Your consumer advocate.