[tomschwiha]

I think the bank of the consumer is also completely automatically getting the money back. The risk is on the initiator if the payment (=PayPal).

[tgsovlerkhgsel]

Yes, I may not have described it well. The "try" only refers to "if the other bank is bankrupt, they get stuck with the loss" - they don't have to argue with the other bank. So unless PayPal's bank fails, it's a very simple process for the customer's bank.

In general, the bank of the entity initiating the debit will only let someone initiate debits to the extent to which they'd be willing to give them a loan.