城府 发表于 2016年10月18日 06:24
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Can a Small-Business Owner Ever Win the Battle Against Credit Card Companies?
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Q: I run a paint-and-sip studio, where people can make art as they drink, and we have a strict cancellation policy: Cancel less than 24 hours before your class and you don’t get your money back. On many occasions, after a person doesn’t show up for class and loses their money, an infuriating thing happens: They call their credit card company and say they want the charge removed. The credit card company calls PayPal, which handles my transactions. I always provide ample evidence -- a receipt, emails with the customer and so on. But nearly every time, PayPal tells me they ruled in the customer’s favor. The money gets taken out of my account, and I get hit with a $20 fee. Can I ever win? -- Scott, New York City
A:Ah, the dreaded chargeback -- bane of many a small-business person’s existence. Chargebacks were devised decades ago to protect credit card users against fraudsters, but today, in one of the great unintended consequences of the ecommerce age, they’ve turned many of those users into fraudsters themselves. And Scott is a victim to a particularly infuriating category of chargebacks: The finance industry calls it “friendly fraud,” because the finance industry operates from a very different definition of “friendly.”
Related: What to Do When Customers Don't Pay
Here’s what friendly fraud looks like: A customer purchases a product or service, then goes straight to his or her credit card company, claims to have been misled or cheated (or to have never received the product or service in the first place), and then tries to get the charge knocked off. The card issuer examines the claim and renders a decision. If the complaint is found to have merit, the sum in question is withdrawn from the seller’s account. Win or lose, the seller is charged a fee ranging from a few cents to $30.
Sounds reasonable, right? Or reasonable-ish? Except that there’s a hole in the process that you could drive a truck full of alcohol and painting supplies through. The problem is that credit card companies will often just accept the chargeback regardless of merit. Buyers -- from professional fraudsters to mere hobbyists -- know this and have been busily exploiting it: According to a report published by Aite Group in August, at present, “60 to 70 percent of chargebacks are the result of fraud.”
What’s a business owner such as Scott to do? If the seller wishes to appeal -- or “re-present” -- there’s an additional fee, win or lose. This would be like if NBA teams had to surrender two points to get a ref to review a blown call. Consequences could be grave. If chargebacks exceed 1 percent of total monthly volume, sellers could lose their merchant account entirely.
“Most merchants hate chargebacks, because the deck is stacked against them,” says Colin Rule, who used to head the resolution center at PayPal and eBay. Many sellers don’t even bother re-presenting, Rule says: They don’t want to pay the fee, and anyway, “they don’t think they’re going to win.” When you’re talking about a small sum -- Scott charges only $50 for a two-hour class -- the expense quickly becomes prohibitive.
Related: What You Need to Know About the 3 Biggest Global Payment Methods
But let’s say that Scott, on principle, decided to fight every chargeback. He puts a tail on these scofflaws. He beats signed confessions out of them. Here’s what would happen: He’d likely lose anyway. That’s because he’s a service provider, and credit card companies will really only accept evidence produced by sales of tangible goods, meaning third-party shipping information, which Scott, who sells an experience and not ironic cat T-shirts, will not have.
It gets worse. Even if he wanted to go down swinging in these disputes, he can’t. He uses Rezclick, a reservations service that works exclusively with PayPal. This means that when a customer books a class on Scott’s site, the merchant of record isn’t Scott. It’s PayPal, because PayPal, not Scott, is technically the company that deals with the customer’s credit card company. It also means that PayPal, not Scott, is the one who’d decide whether to re-present a chargeback to the customer’s credit card issuer.
You see where this is going? PayPal isn’t exactly jumping to re-present on Scott’s behalf, which leaves him to lose the chargeback and pay the fee. PayPal does offer “seller protection” for chargebacks and the like, but, again, it benefits only sellers of tangible goods. According to a PayPal spokesperson, “We are interested in eventually trying to expand seller protection into the intangibles and services space in limited markets and countries.” Sounds interesting, indeed, but of no help to Scott in his time of need.
But let’s splash some light onto this dark, dark canvas. A growing number of solutions have sprung up to attempt to patch this chargeback hole. One of them is cocreated by Rule, the former PayPal and eBay guy. He’s built a cloud-based platform called Modria, which, among other things, encourages buyers to bring disputes directly to the merchants -- effectively cutting out the credit card companies so that disputes might be resolved to both parties’ satisfaction, without getting sucked into the chargeback vortex. However, at $550 a month for 1,600 disputes, Modria is too big for Scott’s studio. Other similar companies are also geared toward larger operations.
Related: Oops, IOU? How the World's First Modern Credit Card Was Invented.
So what should Scott do? As it turns out, he already has the answer in hand. Although he uses Rezclick for classes booked online, he uses a different service, Square, for payments taken in person. And Square covers $250 a month in chargebacks, even for folks who, like Scott, sell only intangible goods. Square also offers an online reservations system called Square Appointments. It can be embedded directly onto Scott’s site, and it will handle cancellation fees automatically.
Scott would be well advised to look into this solution, with the lone caveat that with less angst in his professional life, his art could potentially suffer.
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