The original plan was to sell certain retro items on Amazon's Marketplace and possibly Ebay. I figured that the fees and taxation requirements were a logical expense in exchange for increased traffic and ease of payment.
While I wasn't concerned about getting hit with accusations of money laundering, I was extremely concerned about chargebacks and Amazon siding with the buyer instead of the seller for pretty much any reason.
Which got me thinking-- how and when did it get this bad? A wad of cash or a check in envelopes isn't the most scalable or amazingly convenient payment solution on Earth, but it is more equitable and irreversible than the current system.
In fact, I was surprised to learn that Venmo doesn't do chargebacks. Aside from Venmo's strict and arbitrary laws about money laundering ("ISIS beer funds" is a fun googleable term here), it is an infinitely more ideal way to pay than Paypal or etc.
"Want to buy something? Venmo me the money and I will send you the item. If you don't trust me as a seller, then find someone you trust who is also selling this item, because by default I do not trust any buyer."
Cash gets counterfeited. Checks bounce. Invoices go unpaid. Debtors go bankrupt. Packages get pilfered. The world is full of shoplifters, skimmers, change raisers, rip dealers, embezzlers, commercial burglars and opportunists.
It didn't "get this bad" - it used to be much worse. Shrinkage is a cost of doing business and it's priced in to margins. If your business venture can't withstand a normal level of shrinkage that all your competitors deal with, then you didn't have a business to begin with.
It used to be that your storefront getting robbed—because that’s essentially what this is—was a temporary setback. As long as you had also made enough profit to afford to restock, and had taken appropriate precautions to deposit your revenue in the bank regularly, such losses cold be considered just a cost of “doing business in a bad neighbourhood.”
Nowadays, though, a business that might regularly get robbed—digitally—is untenable, because even if you want to restock and continue on, and even if your business is profitable enough to always be able to afford to eat such losses, your payment processors will still “fire” you as a customer. (Or see the “neighbourhood” you’re in and never take you on as a customer at all.)
I don't do invoices. I don't do credit.
And if the package is stolen from the mailing service I choose, then hopefully I purchased some type of tracking service for it to fulfill an insurance claim from the post office.
There is no justification for the new "chargeback culture" that exists in our society. Only the most centralized sellers can eat these costs. This is a temporary win for consumers-- just wait until friendly indie sellers are pinched out of existence.
Customer protection. A lot of those "friendly indie sellers" are selling substandard goods, failing to ship products or engaged in outright fraud. Chargebacks exist as a dispute resolution mechanism of last resort.
If you can't eat those costs, you don't have a business. If your chargeback rate is over 1%, you're doing something seriously wrong and your merchant will eventually close your account. If you can't comfortably absorb the shrinkage from a chargeback rate of below 1%, your margins are far too small.
There's nothing stopping you from running a mail-order business that only accepts cash, but customers will quite reasonably baulk at the risk and inconvenience. If you don't trust your customers enough to accept credit cards, why should they trust you enough to send you an envelope full of greenbacks?
Everyone agrees on this point.
>If your chargeback rate is over 1%, you're doing something seriously wrong
Not everyone agrees on this point.
The point the gp is making is that the chargeback rates are too high due to circumstances beyond his control.
He can't stop people from taking advantage of the system as it currently operates and basically committing fraud against him at a higher rate. There's no policy he can implement to prevent this. Because he's not in control.
It still boggles my mind that in most major US retail chains, if you return a high value item, e.g. a TV or appliance, you can get a refund without the store clerk checking the merchandise.
It’s an unfortunate reality that in the US, consumers have been conditioned to expect lengthy return periods, and then still game the return system with various tricks. Need a tent for a camping trip? Great, use it for camping season, and return it within the 60 day return window for a full refund, no questions asked!
In my personal experience, when my company receives shipping containers with returned “defective” products, anywhere from 25-50% of the returns are working just fine.
In contrast, in Canada, Mexico, or many European countries, return periods rarely extend beyond 30 days.
With online sales, the same issues seem to have cropped up in a different form. Amazon can’t be bothered to actually verify whether returned merchandise is actually defective, or if the returned box actually has an item in it. If you ask to see the merchandise that triggered a chargeback, be prepared to shell out for freight, and wait weeks for your shipment to arrive. When it does arrive, and you find out that the merchandise is perfectly functional, or the customer kept the merchandise and sent back an empty box, good luck trying to find an Amazon rep who can adjust your account balance in a timely manner.
The return system on Amazon for consumers seems designed to encourage bad behavior. If you’re returning an item, and select your reason for return as “I didn’t like it”, you’ll be charged the cost of return shipping. If you claim that the listing was “inaccurate” or that there was a vague “quality problem”, Amazon will immediately let you download a prepaid shipping label. Better yet, you can test the different options for yourself, since Amazon doesn’t prevent users who selected one reason and have seen the return shipping cost from selecting another that has no return shipping cost.
All this is to say, I deeply empathize with the original comment and the child comment. If you’re selling low-volume, high-value goods, a bad string of chargebacks can easily threaten your business. If I’m selling 100 $50 dollar items a month on Amazon, and I suddenly get 3 chargebacks, that money is immediately deducted from my balance. To contest the chargebacks, you’ll have to go through the whole rigmarole I described before. Stripe’s underwriters are doing what makes financial sense for them, but that’s small consolation to the entrepreneur.
It’s awfully easy to say that any business with more than 1% chargebacks is doing something wrong, but if you’re a low volume seller trying to grow your business organically, a bad month or two (“variance”) can seriously crimp your cash flow and the threaten the survival of your business.
I buy almost everything online (normally eBay, because I like the convenient price comparison between different vendors, and the consistent search and checkout interfaces). I almost never have any issue.
"It is not possible to cancel a payment without the consent of the payee".
Aka, if i give you money and you say you don't want it, you can cancel the payment.
But on Amazon or Ebay, you pay me for an Xbox, I ship it, and 3 days later "IT'S BROKEN" and I lose all my profit + shipping fees
However, I am not able to trust you as a buyer on Ebay or Amazon. No matter what I do to cover my bases, there is a risk that Amazon and Ebay will reverse the transaction, and I will lose my money, time, and even my item.
Conversely, when you send me cash or a cash equivalent by mail, I am now 100% fulfilled, and any failure to deliver on my end should become public knowledge quite quickly. However, caveat emptor.
It’s not about preventing 100%, it’s about making it difficult to the point that it’s not a way to efficiently move that much money.
I mean, technically Apple could be used to launder money.
And frankly, any service that looks to offer some marketplace should be aware of money laundering potential, and how you are going to limit it. And don’t get me started on other issues like fraud.
This is one of the reasons I'm a big fan of cryptocurrency. Your service would not have been shut down by the payment processor if you were able to handle the money yourself without relying on a third party.
The world probably hasn't reached the point where going cryptocurrency-only would be viable for your service, but onerous anti-money laundering regulation is just pushing more people towards cryptocurrency, at the margin.
If your cryptocurrency-based store wouldn't comply by the same regulations that third party was required to comply with, though, then you, as a merchant, would be breaking the law. Which takes you back to square one, cryptocurrency or not.
It's just that with cryptocurrency you get to decide to break the law and continue accepting payments, instead of being based to Stripe.
You are correct that the law is still there, but it's the difference between innocent until proven guilty and guilty until proven innocent.
One is just accepting payments, the other is processing them for vast amounts of third parties.
Because money laundering can happen at any level, and specific regulations apply, you don't need to be a card payment processor processing "payments for vast amounts of third parties".
As long as you accept payments, even for a lemonade stand in the corner, you need to comply with these.
In fact you probably misunderstood what Stripe demanded on the parent's situation: they didn't demanded the parent's store comply with the same regulations Stripe does as a card payment processor. They demanded they comply with the regulations a store should comply with.
> This is one of the reasons I'm a big fan of cryptocurrency.
> Your service would not have been shut down by the payment
> processor if you were able to handle the money yourself
> without relying on a third party.
Yeah but this is also the ethical problem of cryptocurrency. Most people agree that money by itself has something bad attached to it, at some level it encourages people to do evil stuff. If you now look at cryptocurrencies, this is even worse! We complain that most major banks partake in speculation with food. But we completely ignore that with these currencies far worse stuff is possible without going through the process of money laundering, the state is completely not involved.
This is a crazy double-standard if you consider that many hackers consider themselves having a much higher ethics than any other business person.
What?! This is not true. Money is not inherently evil. Money is a tool, just like a hammer. I can build things with it or do harm with it.
The equivalent would be to complain about specific uses of cryptocurrencies, or in the other direction, about the very existence of banks and commodity markets.
¹ (just taking your example, not necessarily my opinion)
But without payment processor you need to handle a lot of that yourself (security, refunds, fraud, recurring payments, taxes, EU VATs, etc.). All the complicated stuff that caused us to outsource payment services in the first place.
People dealing in significant amounts of cryptocurrency will eventually have to be regulated in some way, also.
The part I'm protesting (in this thread, at least) is the part where the regulations on banks and payment processors are so onerous that they refuse to work with legitimate businesses.
Average joe has to adhere to the letter of law and what ever corporations throw at them.
Edit: To be fair to Stripe, they did tell me that it was not them, but their underwriters that were responsible for the decision.