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Choosing a platform for checkout (moving from PayPal)
Guys! I have a question to discuss. Hosting providers should be aware of this issue, since our businesses are very similar in this regard. So I'm posting this question on "LET" and I hope I'm not breaking anything.
We have a website that acts as a repository for digital content (files, licenses, software, etc.), where we sell it. We have near 30–40 transactions per month, with a monthly turnover of $5,000.
The current payment platform is PayPal, which is the most common for the North American market, where everyone has PayPal and all major credit cards are accepted.
In general, everything works acceptably, and one could even put up with PayPal’s commission of about 4.6%. However, we have a more serious problem.
The fact is that some of our goods cannot be returned (since the return is not supported by the original content provider/copyright holder), and, accordingly, refunds are not possible for them. Also, some users prefer to download some digital goods and then return the money (in fact, this is fraud on their part).
The client opens a case with PayPal, then transfers it to the claim. We upload all the evidence of using the service, all the client’s logs, and all support conversations with him (even when the client admits that he is wrong!), but PayPal in 90% of cases makes a decision in favor of the client.
And PayPal deducts from:
- 100% of the funds received from the client
- About 20 or 25 dollars for processing a case—I don’t remember exactly.
- There is also some kind of fee.
- Plus, we lose the amount we paid to the content provider.
In total, we lose about 180–230% of the selling price of the goods!
In this regard, I would like to find another payment platform where there are no refunds without our consent at all or where refunds are carefully and impartially considered by an independent arbitration of the payment platform. At the same time, it would be nice if the platform commission was around 1-2.5% and not 4.6–5%, like PayPal.
Do you have any advice from your real experience?
Comments
Btc or stripe.
I suggest you read some articles on https://www.offshorecorptalk.com/
There are plenty of payment providers, you just need to find the right one for your business and jurisdiction.
Is this the unauthorized content you were searching for, Anti-DMCA VPS? And you're still accusing someone of fraud for seeking a refund on pirated material?
PayPal is garbage. Try Stripe and enforce 3DS on all truly non-refundable services (e.g. license). Any chargeback that is submitted is on the burden of the customer and they can't use "fraud" or "unauthorized charge" as an excuse; it would have to be "product not delivered" or a genuine screw-up on your side.
I think Stripe also offers chargeback protection for a smaller additional fee: https://stripe.com/radar/chargeback-protection
You may want to balance enforcing 3DSecure on new clients and then dropping it after they have become trustworthy so they don't have to 2FA every time.
PayPal is mainly for physical goods.
You can deliver the activation code by registered mail instead of email.
Once you provide the USPS tracking number, you are more likely to win the case.
Not certainly in that way. We sell a lot of legal items too. In any case, the question is not related to this. The issue is that customers often get both the product and their money back, initially targeting fraud. Or, they buy goods that they do not understand. Let's say a client buys a license for a computer and gives the wrong computer ID. Then he says - modify the license for free, or I will ask for a refund. And we have already purchased the license from the vendor, who issued it to the ID provided by the client. And according to the vendor’s rules, he does not have refunds for digital products (which, moreover, can be used even after a refund).
Wrong. They does digital products too.
But the problem is that PayPal has its own refund policy and does not take into account the essence of the financial transactions that it services. Also, I think, from the beginning of opening his account, a PayPal client has something like the right to the first 2-3 refunds before the client is recognized as a consumer extremist and they begin to refuse him refunds.
That's why we, aka clients, use PayPal. No Paypal, no deal unless your price lower than others at large (30%+ for me) or monoploy in the market.
Can not say I have had the same issues others seem to have when selling digital goods, normally I can reason with PayPal and provide proof that X customer has used X service/product etc that being said Stripe is certainly far better.
Second Stripe, between the do-it-yourself API and the prebuilt Checkout forms, you could probably get something up and running quickly. In contrast I've heard enough PayPal horror stories to not trust them.
Super smart, great advice here 👆
When a buyer wins a PayPal case, the buyer is expected to ship the goods back to either the seller or PayPal.
PayPal issues the refund after receiving tracking number.
For digital goods, you should deactivate the license code.
If you can't deactivate, you shouldn't be selling it in the first place.
Before switching from paypal, maybe you should consider rising product prices so you actually make a profit /s
But yeah, stripe and maybe some sort of crypto payment service should be fine, you just gotta deal with 2/3 customers daily asking "Where Paypal", "Can't find paypal", "How paypal", "When payapal" etc.
Asking both as a customer and provider of some services, if a customer asks you for a refund, and you know damn well you risk (with great certainty) to lose 180-230% the price of those goods, why not approve the refund and lose just 100% +/- 3-4%?
How is 180-230% better than 100+/-4%?
Doesn't the PayPal dispute require some sort of confirmation that the customer tried to ask you for a refund directly and you refused? (I might be wrong here)
I understand that this isn't THE solution, but A solution that would reduce your losses by 80-130% 🤷♂️
Only platform where you can realistically ensure that no refunds can ever be processed is crypto.
Evidence doesn't matter to PayPal. We write detailed responses to complaints, provide pictures of statistics on the use of the service/digital goods, and attach emails from the client where he says that he made a mistake. And nothing—the decision is in favor of the client.
Moreover, customers often do not participate in the claim and just open it with the reason “unauthorized transaction". Despite the fact that the client sends us an email with a screenshot of the PayPal transaction, PayPal satisfies their claims even with the reason “unauthorized transaction". It's just surreal. The client pays himself and then opens a dispute with the reason that he was not the one who paid!
Sorry for being blunt, buddy. But please stop giving PayPal advice. It looks like you have no idea what you are really talking about.
Margin is good; we are expensive store with the highest pricing in the world. We are selling for RRPx1, and very often for RRPx1.2 or even x1.25.
But you didn't get the point, and you definitely missed the figures posted above.
Once again. PayPal reverses the customer's transaction, and you lose 100% of the selling price. And the vendor/content owner doesn't make you a refund, but you already paid them your dealer's cost (it's near 70%). At this point, your loss is 170%. And you are continuing to lose with PayPal. The next thing is the PayPal claim processing fee (near $20–25). So, 170% + $25. And if the bank is involved, you pay another fee for chargeback with the issuer bank involved (BTW, Stripe does it too!). I don't remember exactly, but let it be $25 too. So, if your selling price was $100, you would have lost $220.
So, the problem is definitely not in the margin or our price. The problem is with PayPal.
Then stop using PayPal
https://www.urbandictionary.com/define.php?term=/S - I do understand that paypal is pretty shit, provider/seller wise, dealt with it myself
The problem is that the client has already consumed the service! Sometimes one file, sometimes dozens. Sometimes the client comes after 1–2 months. Sometimes after 4 months. That is, even when the client buys something he doesn’t need, he still wants the money back. Or the client bought what he needed and wants his money back.
I call this consumer extremism. The client agreed to the offer, received what we were selling, and then changed his mind. In many cases, they do not get in touch, although they responded perfectly before. That is, they silently open the claim with the "Unauthorized transaction" reason, and silently wait for PayPal to decide.
And I don't want to encourage this behavior, so I always fight with such customers. Because they are consumer extremists. I want there to be as few of them in the world as possible.
My 2 cents.
If your website is already cloaked in a shadow of sketchiness as someone suggested, you might switch to a crypto processor without gaining additional stigma. Shipping a code by registered mail doesn't prevent the buyer from getting a refund via PayPal but may increase the psychological barrier to open a dispute as the fraud is more deliberate.
Guys, concluding the debate. To make it clear.
The only thing I really need is a payment gateway with fair arbitrage! Where the arguments of the parties are actually requested and a fair decision is made. It would also be a huge plus if the store had a refund policy. And not the payment system (gateway).
Nothing more is needed.
Every war has some casualties, in this battle of yours the losses are in money, as you said, 180-230%.
Is your purpose to maximize profit/minimize losses or prove a point? If it's the first, you still have not answered my question why not avoid this and provide a refund.
Depending on your customer base, you don't have many alternatives. Stripe (already suggested) being one of them. The other being non-refundable such as Perfect Money, PaySafeCard, Crypto. But I bet only a small percent of your customer base is willing to work with these due to various headaches.
If you truly "want to fight the extremists", use an anti-fraud module and report each abuser to their database as a fraudster. This way, you're actually doing a good to the world.
I myself fought a similar battle with a provider (not from LET). He provided me with a very shit service that had lots of issues. I tried to work it out with him for numerous days and in the end I asked for a refund. I told them to give it or I'll open a claim. They tried to avoid and literally ignored any message that had the word "refund" in it. Five minutes (I shit you not) after I opened the claim, the provider messaged me "omg I was just about to refund you wtf". Yeah right, you had plenty of time buddy.
Anyone who pay by PayPal may pay by debit/credit card too. Therefore, if you are not satisfied with PayPal arbitrage just stop using PayPal. We had case few years ago when we win PayPal dispute but customer request chargeback in his bank and finally we was need pay to PayPal chargeback fee too.
Several folks suggested Stripe. Why isn't Stripe the answer to your needs?
Probably they dont accept him.
Thank you all, guys, for your opinions. We're going to Stripe. It looks like we will have fewer such cases and a lower processing fee (with the subscription).
Crypto payments are not demanded at all; only a small percentage of the audience is interested in them. We are not some king of dark service or something really illegal. Also, for example, the USA is not a crypto-welcome country, as is China. And average customers, as well as old-school people, have no idea what crypto payments are. It dramatically limits the crypto audience and cuts off 98% of it.
Sounds like it is just the nature of your chosen customer base.
As a consumer, any service provider not using PayPay is a red flag to me, which is probably not that uncommon of a position.
But perhaps you just may want to a better job of client verification on the back end, but that would also have a detrimental impact on your customer base.
Stripe Radar Chargeback Protection.
In this case, the legality of the service has nothing to do with it. Now we are talking about absolutely legal transactions for the legal goods where we are a dealer and got everything from the vendor. And in general, the illegality of our service is only an unresolved issue of copyright for materials in the international legal field. In general, many people have this problem; otherwise, everything is legal.
In general, I personally think that all online sellers are susceptible to fraud and chargebacks. For example, we can see how crazy Hetzner’s KYC policy/anti-fraud system has become. Moreover, reading analytics on the US market suggests that all industries have a chargeback percentage of 0.5% to 3%. Where 0.5% are offline businesses like retail and HORECA. And these numbers do not include fraud.
So, we usually sit at 2.85% (on average), and we just got 4% this month. And since we are talking about only 2 transactions out of 40, the step in changing the indicator is very large. For 100+ transactions, the step would be 1, but now it’s about 2.5–3.
Thus, I believe the problem is actually something else. In the USA, there is a developed cult of refunding payments if the client is dissatisfied with something (and it doesn’t matter what exactly! this is often not even asked!). The principle "the customer is always right" in action, view from the client's side. Therefore, we see thousands of Karen of different genders who everywhere demand attention to themselves, a refund for any reason, plus the opportunity to keep the goods. And services like Amazon have made a huge contribution to the corruption of the consumer society in North America.
By the way, other regions, like the UK and China, do not bother to hide their desire to get everything for free, and the Chinese simply ask to give them everything for free, and the British engage in fraud without hesitation. I don’t want to offend anyone, but we have statistics for 10–15 years, and they are like this. I didn’t want to offend any nation; these are just conclusions from our big statistics.
P.S.
By the way, today we uploaded the refund policy from our vendor to PayPal; this is a huge transnational company that everyone knows. Let's see in which direction the claim ends.