Comments on: Results: PayPal as a primary payment provider

By: Gabe

Gabe — Mon, 24 Mar 2008 22:44:46 +0000

I have been using PayPal for five years and have processed all online transactions with them for over a year now. It was interesting to hear your experience as I am on the fence with them right now. Aside from the terrible support I have received, one disadvantage for me is the lack of involvement with the chargeback process. Not being able to deal directly with the chargeback response process, I’m left feeling like PayPal is lackluster in defending legitimate charges.

By: iofast.com

iofast.com — Wed, 20 Feb 2008 00:07:31 +0000

I used Paypal and Paypal Web Payments Pro about a year ago for 6 months as the only payment processing system. The web payments pro allowed us to give someone the option of checkout out with credit card but kept it all in Paypal so it could be managed in one place. Our fraud rate hovered around 1% and was a hassle because Paypal screwed us in almost every single issue. We couldn’t represent ourselves to the credit card and Paypal ignored and never presented the information. On almost each occasion we ended up being an insurer for Paypal so that they didn’t have to spend the time and energy to defend themselves… even when it was a confirmed address.

Since then, we moved to linkpoint and worked on the verification system. We now perform our own authorizations and force the customer to enter the correct Address, zip, cvv, expiration and check the card value. The customer cannot proceed if their billing information is invalid.

Since this seemingly simple change our rate has dropped to 0.1% and we are able to defend ourselves with the credit card companies such that we are generally happy with the outcome. Our problems with Paypal were never justified as we always had direct verification that the product arrived at the correct address with direct signatures.

In any case, my point is that going TO Paypal for the purpose of fraud reduction seems a little odd to me as my highest rates of fraud still occur with my Paypal customers and my lowest rates are with my credit card customers and corporate/education purchase order customers who we perform credit checks on. However, if it works for you that is great!

By: Kevin Muldoon

Kevin Muldoon — Tue, 19 Feb 2008 23:09:10 +0000

I have just launched my first ecommerce site so I will be watching this closely. We currently have google checkout installed but will probably use paypal too.

good post

By: Bob

Bob — Tue, 19 Feb 2008 04:23:03 +0000

Actually, Pay Pal has a way for customers to pay with a credit card without signing up for, or logging into their Pay Pal account.

Customers should have this option when taken to the first Pay Pal payments page. But, be sure and document that you have delivered your product to the customer, otherwise Pay Pal will charge you back if the customer complains.

By: Dan

Dan — Mon, 18 Feb 2008 19:49:05 +0000

The credit card transactions were going through all kinds of fraud scrubbing, including MaxMind’s minFraud. They also went through Authnet’s “Fraud Detection Suite” and CDG Commerce’s “Fraud Defense System” before a final run through my own code — checking against past bad accounts on all kinds of factors. There are too many transactions that don’t show any “signs” of being unauthorized… a good credit card ordering advertising for an established website from an IP address matching the billing address… there’s not much to pick up on with any scoring methodology.

As far as services like CleverTools, you’re right, it’s unlikely you’ll see a fraud problem like my advertising sites do and to serve businesses you need to take credit cards (and checks/purchase orders, often). W3Counter, for example, still takes credit cards and has never received a chargeback.

By: Jason

Jason — Mon, 18 Feb 2008 19:42:05 +0000

Great writeup and analysis Dan. I think that deciding not to use credit cards was a bold move. I do also think making the switch to PayPal depends on the situation- obviously. With your service it is a consumable product, so you are out of luck on many fronts with fraudulent charges. With Clever Tools, since it is a service, we don’t really loose out on providing the service. I also think it may be a mistake for us since we will be dealing with many small businesses. But, it is something to think about. Chargebacks suck and really can suck the life out of your company if you are not careful.

Didn’t you at one time employ some sort of Maxmind security measures? A large hosting company I used to work for, used to have tons of issues with fraud. This especially sucked when it cam to domain name because, like you having to buy traffic, they had to buy the domain. Well, they wrote a custom script off Maxmind and it eliminated so much fraud via credit cards.