PayPal charge back unauthorized transaction

[Imz]

I'm selling digital codes, example xbox vouchers, steam, itunes credit etc

All of a sudden a couple of scammers appear to have taken a liking to the site and I've received PayPal disputes for unauthorized transactions.

It appears the scammers may have setup a PayPal account with stolen credit cards, and the owner has now claimed a charge back directly via their bank.

How on earth am I supposed to verify ownership when selling digital goods such as an iTunes voucher?

There are countless sites doing some decent sales in this space, they appear to have their refund policy tightly written so customers can't request a refund however unauthorized transactions is even beyond PayPals remit as the bank is processing the charge back and PayPal is in the middle and not offering seller protection especially in this area of business.

PS the codes are instantly provided like other services so as per threads on this forum, I can't post them to the billing address. Also on some sales, their account is instantly credited without codes, so nothing to post. Again, this is to remain competitive with other services online.

 

[Dannyoffshore]

Try getting an anti-fraud software like maxmind or something similar.

You can have a system that first time buyers can only purchase via bitcoin (non-reversible) and only repeat buyers will be able to use paypal. This will lower the fraud but also your customer base.

Alternatively you can call each buyer and verify with them directly. 99% of the time these fraudsters use fake numbers or never answer the phone, such orders you would cancel.

This is a sad part of ecommerce

 

[Imz]

Try getting an anti-fraud software like maxmind or something similar.

I'll check out Maxmind.

Most if not all my audience would prefer to use PayPal, either the scammers are having a field day on the other competitor sites and they can afford to pay out charge backs or they've got something in place.

Hoping this community can shed some light.

 

[Dannyoffshore]

Maybe this attack is coming from competition?

If you're getting rekt on paypal, as I said before I would stop that payment option immediately for new customers. Then I would integrate stripe instead of paypal and see if the scammers will try to use game that system too with stolen cards. That would be more rare and harder to do than plain chargebacks with paypal. Maybe that would even make it not profitable for them if many of their transactions would not get approved

With stripe for the start you can setup the fraud rules to very strict parameters and see what happens with that. You will have to test

 

[Imz]

Maybe this attack is coming from competition?

If you're getting rekt on paypal, as I said before I would stop that payment option immediately for new customers. Then I would integrate stripe instead of paypal and see if the scammers will try to use game that system too with stolen cards. That would be more rare and harder to do than plain chargebacks with paypal. Maybe that would even make it not profitable for them if many of their transactions would not get approved

With stripe for the start you can setup the fraud rules to very strict parameters and see what happens with that. You will have to test

I've had to suspend all payment types cause the scammer appear to be using stolen cards but via PayPal.

Stripe won't allow our business, it's under the prohibited list, they consider it to be "virtual currency", therefore don't want to touch it, same with braintree.

Just reading up on maxmind, sounds pretty decent and not a bad price per transaction. Will contact them and investigate how the competitors are defending themselves.

It's funny, I came here for marketing tips and I'm on the back foot playing defence.

 

[Dannyoffshore]

Good luck!

You can keep bitcoin option active, it is non reversible. Still more and more people are using bitcoin so you can still expect some customers rather than shutting down the whole operation

Plz keep the thread updated on how it goes.

 

[Imz]

Good luck!

You can keep bitcoin option active, it is non reversible. Still more and more people are using bitcoin so you can still expect some customers rather than shutting down the whole operation

Plz keep the thread updated on how it goes.

Will keep this thread updated with the wreckage.

So far:
Disputes by 2 people, unauthorized transactions.

Scammer 1, I have his scanned passport which he emailed from his PayPal email, provided to PayPal, let's see if PayPal try and wreck me even though I did all I could to verify identity. Have to appreciate, someone buying an iTunes voucher, games or other form of digital asset hardly want to scan and provide identity to an online website.

Scammer 2, haven't got much on this guy although it's my own fault, this one slipped through the net due to various sales online.

Defence, going to contact MaxMind and find out more about their checkout, which incidentally supports PayPal too, and they tout protection against charge backs.

Future proof, time to embrace altcoins, have found a coin based merchant, which also supports PayPal, will get the ball rolling and tinker with their API.

 

[Imz]

So an update...

Long story short, I need better fraud systems in place, MaxMind has a service called MinFraud which attempts to reduce the amount of potential charge backs in these situations.

There is also
ShuftiPro for KYC

For address / phone and email validation:
Loqate

PayPal has also advised regarding KYC, however after reading some threads on here some users have already been warming accounts up slowly with small transactions, exceeding limits, becoming verified then selling the accounts on this forum.

One member mentions using local IP, stored cookies etc which goes some way to coming across as a genuine user, so all in all it's a tricky one.

 

[Imz]

Update:

Scammer 2 got their charge back granted, bank voted in their favour as I didn't really have much on him. The time for this was around 4 days.

Scammer 1, after providing a passport, email trail and IP, the bank sided with the buyer side, the process took around 3 weeks for conclusion.

PayPal closed the dispute with a big F you, nothing more I can do about it message and "thanks for your business".