Hi, We run an online game that does well. While the game is free we allow players to buy points which they can use for upgrades, additional searches etc. We use PayPal for the majority of our sales, and have very few problems. Still, as part of maturing as a company, we are concerned about the weak protection they have for legitimate sellers of non-tangible goods/services. We are looking at best practices for increased security. It seems there is very little out there. In fact, we can't even find a great definition of the differences bewteen a tangible and intangible good. (Is a letter a tangible good?) We are looking at increasing our odds with PayPal chargebacks though, and so we have the following plan. We invite feedback from you: PART A: Monthly Spend We might limit monthly spend to $Y unless they are verified by paypal (or Verified by Visa). Does that verification even matter? PART B : Lifetime Spend 1) Allow players to spend up to $X without an issue. 2) At $X of lifetime spend, all players get an email sent to their paypal email address. It asks them to confirm their physical address, and then to click a link. That link confirms they received the email, plus also takes them to a clear Terms and Conditions page, including a list of the purchases made to date. They then have to type a code from their email into a field there. This provides some level of proof that indeed the PayPal email owner a) controls the account b) has verified they are content with what they have purchased They cannot make further purchases until they go through this process. 3) At $4X players are sent a similar email to their PayPal email address. It includes their purchases to date. We'd then ask them to print it out and fax it to us. We could, of course, use registered post to mail a physical document to them asking them to type in the code in the game. It would confirm that they have indeed received a physical item and that the address needs to be verified. We could, of course, try sending a game card or the like to that address which has a code. That is more neutral and fun. So what are your thoughts about this? Thanks!
@eyashwant: Thanks for the reply. It's as simple as we can make it. PayPal and the Credit Cards will generally side with a buyer of virtual goods. Trying to rebalance that seems to require that we do something along these lines. Do you use PayPal, and perhaps have extra comments? Thanks!
I do use paypal, I know credit card chargeback problem. But it is better you contact paypal and may be they can help you? Did you contact them. Yes, Paypal is buyer safe, not seller safe. No other go.
Thanks. PayPal isn't interested in helping out. That's probably not great ROI for them as that means talking to people rather than just taking money. I think that would change though if you found the right person. Do you have a phone number or email that you found actually worked? If so, please send!
scammed many times, paypal is so evil to sellers... I've seen verified kido accounts, doing chargeback on 200$ goods that had been shipped, delivered, with proof, and paypal still sided with the buyer... was good the times of e-gold
As for your plan, did you think that this kind of verification process could also turn away legitimate users? who are too lazy to go through all this hassle? u might risk to loose more then just dealing with chargebacks... on the other hand also, you provide points for usrs, so you don't have anything to loose. If you were shipping some products and risking physicially loosing an item, I understand... but for digital points it's not worth the hassle. Just incorporate risk of charge backs in your business model.
What % do you see charebacks.. you may just have to write this off as the cost of doing business online. I'm unfamiliar with paypal protection for selling digital goods, but what about requiring verification via their verified e-mail. I know that Google checkout will let you verify the charge, debit the account but not "receive the funds" Not sure how good at programing you are, but what about running a script that goes through a decidated Google checkout email for new e-mails and request that the buyer verifies the payment prior to the charge goung thorugh.
We are not worried about chargebacks per se, TBH, it's way less than 1% lifetime. We are lucky to have a fantastic community, and honestly we're very lucky to deal with them on a regular basis. But the problem isn't the chargebacks -- it's if you have one big chargeback in a month PayPal goes apeshit. Even if you win, they try to set all sorts of criteria that cause problems for you, as their solution to any security issue is "put all risk on shoulders of seller"...and take a heft % of their sales as "risk". Oh and take a big ass up front fee too.) That is ludicrious but you know, that's what PayPal does, and they are one of the important sales channels. But they are also at the hands of the banks' and their clients. So reducing makes sense. So to simplify this: does ANYONE know what they consider tangible vs. intangible? What can we do to fit tangible?
Thanks sandrodz. In line with that, I read this on PayPal's site and got a giggle "We have also assembled a team of chargeback specialists who will help you put together the information you need to dispute a chargeback." and "If you dispute the chargeback, our specially trained chargeback team will help you build a powerful case." No, they'll ignore you and take 10% of your funds ongoing so that they have security on THEIR side. So the statements on their website are at a minimum misleading at worst criminal. </rant> Since PayPal is hermitting and ignoring us, I spoke with a Merchant VISA provider, and they mentioned that most cases are quiet grey, and so this plan makes a lot of sense, especially if you can get the IP so as to confirm address, BUT, nothing is foolproof. Fair enough! They did indicate though that if I outlined some standard cases I could probably get recommendations on how to handle those.
Paypal is probably the worst in your situation, anybody can chargeback their money without a problem...
problem with other payment gateways is that they are less popular. on the other hand if u have most of ur customers have credit card to pay, OP can go for a direct cc processing terminal. I believe this can be obtained through a bank, or through some online providers of the service, from the top of my head 2co.com and others... chargebacks on these must be initiated through a bank, it's allot of hassle, and typical low amount transactions are'nt eligible, so will be harder for scammers to iniatiate considering cost of time and paperwork. paypal just makes it too easy, and hassle free, this is the problem.
Yes. true anyone can give u a great loss while using paypal to accept money. One big & great problem for all sellers who received funds from paypal cannot get the info that what source of funds is used by buyer to send money. I mean to say that buyer has used his/her credit or debit card or paypal funds to pay. If paypal also sends the info to the seller that what mode of payment is used by the buyer than it will somewhat easy to check the fraud transaction. Atleat seller has know that customer has used credit card or paypal funds, by this seller can ask a confirmation from buyer to prove his authenticity. For any digital download there is no physical proof that service is rendered or not. So to over come from this problem u have the right to ask buyers authenticity proof. Even paypal policy say some thing else this must atleast cuttdown the fraud by 70%. Genuine buyer has no problem to sent his proofs. Second you can keep a separate option to cover the risk of fraud(charge back extra charges) and let the buyer know that u will adjust this extra charges after completing 4 successful months. Third for new customers set a limit. This is somewhat perfect. And buyer who are trusted and continue with your website u can also waive off these extra charges. We are also very high victims of paypal chargeback's & account limitations. We have lost nearly Rs.20000/- or more due to chargeback. Even problem is here that If filled a case and the decision is not in your favor paypal also charge USD10 per case. So my suggestion is to you that If you are from INDIA and do need to do a serious business use paid INDIAN gateways. That is more reliable and secure. Atleast buyer cannot initiate a chargeback on its own. Plus Indian gateway are RBI Norms approved. Best thing all major banks are now giving online payment transfer facility. So more options then paypal. Paypal is self a hacker, it will take your money without even giving any notice, can make your account limited for any reason, can chargeback to you for many reasons so best is to avoid paypal. YA one more suggestion use both the payment gateways Paypal+Indian gateway. For higher amount always redirect customers to INDIAN gateway. For new & small amount u can use paypal. See do it. this is my personal experience that same we are using on our website. We get lower sales but atleast fraud prevented. I also need more suggestions to how to prevent from online fraud by paypal. Regards
@rechargeguru.com - he is from canada. To OP :- Why dont you ask your members to sign an paypal authorization form, the moment they sign up and before they do their first deposit? This will surely help you. Then in case of chargebacks, this authorization form which was filled by users with their Paypal email in it, will help you win the case. Think about it, its a one time procedure.
My charge back % is only 1% till now, but i think it will grow up to 5-6 % in coming days. i am dealing as a seller with paypal on large scale now, so i think i might get large number of chargebacks by fraud buyers who want everything for free .
Paypal is a really tricky one to work with because they rarely side with the seller. It sounds like you've got most of the angles covered though but 2 things you may want to add in: Phone verification (make sure its not a skype number either!) and I would strongly recommend you have a cooling off period on the funds of 24 hours. This would mean the customer sends payment and they have to wait a minimum of 24 hours for clearing. I'm pretty sure Paypal runs a more extensive security script once a day that will go through and cancel suspicious transactions/accounts, so by doing this you minimize your fraud exposure. I'd recommend 3 days minimum for this but this can be impractical a lot of the time. You can add a "verified" system which means after the first successful payment (and a week has passed) then all future payments can be completed automatically for the customer. I'm sure you do already but make sure you gather as much information on registration (or even on payment) like full address, age, phone number, etc.
Thanks for the feedback -- I was reading each one, but didn't want to comment to disrupt the flow. Everyone had really good input, thanks! I think a few of them we can add in such as the authorisation form or Verified account for the min monthly spend. That way we can confirm they "exist". (And for CC instead of PayPal we can use Verified by Visa past a certainly monthly spend etc.) Actually I think the entire process outlined above would work well for CC's as well. For us, it's not that there is EVER fraud or chargebacks immediately. I realise others have a different world where the first few days is the issue. For us, the cases are for 3 full months. I think for us it's that someone decides "hey I've done the 3 months, and bought what i could, time to screw them over". So we get the full three months backlog shooting our way. Our chargebacks are low -- less than 1% normally. We have a test case with PayPal now that has the client emailing us explaining in great detail how he's happy, has no mental health issues, although stuck at home and very greatful to play. So if they don't accept that...we have to migrate away from paypal and use in the most minimal of ways. Perhaps we'll open up direct CC and add 10% to PayPal fees for the risk.
Update to my post....... In past 6 months paypal has charge-back from us, not for fraud transaction but buyer a/c got limited. Case one Customer signup on our website. Send the authorization form done good transactions from us. DEC-2009 join till 15-Jan-2010 every thing was ok. On16-Jan-2010 my buyers a/c got limited account access. We have around 15 transactions around INR 5500 paypal all reversed them. When I ask buyer why these transaction got reversed he tell that his a.c got limited, he also sent me the paypal screen-shot showing limited a/c. After 15days investigation all cases gone against me and all money I have lost. In the meanwhile contact to buyer has not been made. Just one email received that he will send money very soon. No money received till date. Recently 3 cases with same problem have been done by paypal. New Client signup 1 or two transaction done. Buyers a/c limited and all our funds were reversed. See I just need to tell paypal sellers that even the online customer is genuine, but u don't know when paypal make someones a/c limited and u got the loss. These are the true experience we have recently got from paypal. I can manage fraud, I can tell the buyer to wait, but how can I know that when paypal going the freeze someones a/c ? This is a big question.