One of my relative has website that sells digital item, using PayPal Buy Now buttons. The buyer, uses his paypal ID to process the payment. Upon payment, the credit card user downloadeds the item. We don’t know who is the owner of the card and who used it. We get payment through PayPal. The fraudulent card user, complains to the credit card department that his or her card is used without his or her knowledge. The credit card company informs this to PayPal and PayPal willing accepts this as true and immediately put an halt on this particular payment, sends us a notification to send our explanation (there is no use of sending any explanation, as they never give their judgement in favor of the seller who sells digital items online). After a week, we get reply from PayPal that the Issue is resolved, the amount refunded to the card owner or paypal member. Plus, they are asking us to pay a "service charge" of $ 10 which they claims imposed by the credit card company. In addition to that we are incurring ad charges to place our ads in Google AdWords to get the customers to buy the item. The digital item seller has no security, they are not protected or covered by PayPal. It is PayPal’s obligation to verify the card user's authenticity, instead they are claiming refund and service charges from the seller whose is innocent, but they are collecting $ 10 service charge for somebody's fraudulent usage of credit card. How to stop this? Dont say me, stop using PayPal. I cannot stop using PayPal as there is no real alternative to PayPal. Even though it is a big evil for Digital product sellers. Why the credit card company accept such bogus claim that the credit card was used by someone else without the knowledge of the card owner? The credit card company should not accept such claim if the products purchased were digital one. I need some feedback so that I can help my relative.
Paypal offers the lowest fees in the industry for credit card processing and they are able to do that by sacrificing on fraud detection. Actually if you are receiving payments from your customers who are paying through credit cards, you really do not need to use paypal at all. I know you want to continue using them so my advice is to do your due diligence. In short, you should not enable any automated delivery but manually process each order by matching the IP address against the customer's address to see if they do match. At the same time, it would involved you calling the customer to verify each order to see if they ordered it. Write to your customer if you have to. If something seems fishy then go cancel the order. You could also have your customer make a copy of his ID which shows his name and you use that to match up against that provided in Paypal. As long as the card holder have not reported a lost of the card, it would still be considered valid. Since Virtual delivery does not come with any signature or the ability for you to physically examine the card, the right of way is to the card holder. It is really not Paypal's fault as they just want to cut down on cost to you otherwise if they have proper fraud detection, you might be paying fees in excess of 10%. Paypal is not made to handle digital items as they are more apt for physical item which has to be delivered and can be independently verified.
eddy have already told you everything before i can..... so all i can suggest you to go for different processing system that have chargeback protection.... but remember payment system that offer chargeback protection have higher transaction fees... but the fees worth it as it will make sure you dont lose the money no matter what...
Thanks for your good advice. Now I have been struck with the same problem. I provide online assignment help. I have emails and chat msgs to prove that the transaction has been made by the customer and just to avoid paying to the credit card company, has come up with the excuse that it was unauthorised use. Could you advise how to process the case. Also could you let us know more secure alternatives to Paypal or direct receipt of money into account. Thanks.
Actually I have the same problem, then if someone pays by cc then should we take sometime to process which does not seem an efficient way. I am also confused. i have one query how big companies deal with these things accepting payment by paypal like godaddy or other?
Here's how it works. Customer forgets to cancel. Customer files 'unauthorized' with Paypal. Paypal contact you. if you can offer *any* evidence (IP addresses used to log in, that kind of thing) it's an instant win for you UNLESS it actually was a fraudulent transaction. If you can't offer any evidence, but still contest it, Paypal themselves will look at IPs etc used to access Paypal, and if they can't find any evidence of real fraud, they refuse the claim. You get the money, customer gets a black mark. 3 black marks (or one big one) and customer gets a lifetime ban from Paypal. YOU get to put the customer on your blacklist (and any of the free web based blacklists you like). Theft is theft, and the consequences can be tough for the thieves...