Getting burned with non payments. Need payment processor that protects digital goods

[businessbuilder]

Looking for a payment processor that fits our business. We are located in USA.

We are a small marketing company where we generate specialized contacts that are sold to 3rd party businesses.
The 3rd party can order anywhere between 100$ and 2000$ worth of contacts at one time.
We've been burned twice now for non payment.
The contacts we sell are useless to us once they leave our hands.

We've looked at traditional merchant accounts but they don't seem to fit us.
-Too many fees.
-Too many undisclosed details.
-Simply not enough volume to justify it...

Of the online modern ones:
Paypal is no good because it doesn't offer any protection for the sale of digital goods.
Square seemed good enough but it seems to be a customer service nightmare and random freezing and deactivation is offsetting.

key points:
*100$-2000$ sporadic order processing
*volume is low (under 4000$/month)
*need protection from chargebacks for selling digital goods

Thank you!!!

[Harold Mansfield]

No one offers strong support for the sale of digital goods, and credit card companies always have the buyer's backs and the laws are in their favor even if the card holder is a scam artist.

You could try Escrow on all sales over a certain amount, and also look at 2CO, they process for a lot of digital products and content websites.
https://www.2checkout.com/

Also try strengthening your terms of service, and dissatisfaction policy and make them easy to find on your website. Maybe even include a check box on your invoices for people to signify that they've read them.

I've had one bad charge back for digital services. Having my terms linked to on my invoice was a huge help in the dispute process. I still lost to the credit card company (because they don't care if their client is screwing you), but Pay Pal had my back and it cost me considerably less.

[MyITGuy]

Paypal is no good because it doesn't offer any protection for the sale of digital goods.

While their TOS does state they don't provide protection, I believe they limit their scope to disputes regarding receipt of item, so far I've had positive results with digital goods (Web Hosting/Domains) as I can provide proof that e-mails were delivered/opened and that the access logs to the account showing activity (Proof of delivery).

However, if a credit card is stolen or a charge back is issued with the credit card company rather than PayPal then your likely hood of a successful dispute will go downhill fast since credit card companies are on the side of their consumer.

Have you looked into the issues that are causing the disputes/charge backs to begin with?

[businessbuilder]

Thanks for the replies!
If I understand correctly, there is no way for us to effectively defend a charge back going through the consumer's cc company.
The best option is along the lines of wire/escrow for larger payments.

What we're learning is that our consumers tend to be, high risk (to put it nicely).
Though, that is our fault...we give them the opportunity to take advantage and many will.

We have a website but most of the business is done locally, face to face at the consumer's location.
There are few potential consumers for our product so we've been extending the olive branch to each.
This in turn has left us exposed and we've payed the price.
We've only been paid in cheques so far.
We want to reach out to other states as well as accept more payment options.
(At some point we'll probably want to also accept cc through the website but that is for another day)

We're changing our "olive branch" policy to one that is more defined and safer for us.
It'll be bounded by a list similar to Square's "Collect Payment Authorization" list for cheques.
The cc ones will follow similar to Square's "Document Non-Swiped Payments" list.
Our policies for payment and recording were way way too relaxed in the past...
Accepting cc adds on additional risk so we need to be more careful.

2checkout.com looks interesting. It accepts paypal too.
Compared to paypal it's basically an extra 0.2% per transaction
The main advantage would be to use their customer support as opposed to paypal's when there's a problem?

[Harold Mansfield]

Thanks for the replies!
If I understand correctly, there is no way for us to effectively defend a charge back going through the consumer's cc company.
The best option is along the lines of wire/escrow for larger payments.

What we're learning is that our consumers tend to be, high risk (to put it nicely).
Though, that is our fault...we give them the opportunity to take advantage and many will.

We have a website but most of the business is done locally, face to face at the consumer's location.
There are few potential consumers for our product so we've been extending the olive branch to each.
This in turn has left us exposed and we've payed the price.
We've only been paid in cheques so far.
We want to reach out to other states as well as accept more payment options.
(At some point we'll probably want to also accept cc through the website but that is for another day)

We're changing our "olive branch" policy to one that is more defined and safer for us.
It'll be bounded by a list similar to Square's "Collect Payment Authorization" list for cheques.
The cc ones will follow similar to Square's "Document Non-Swiped Payments" list.
Our policies for payment and recording were way way too relaxed in the past...
Accepting cc adds on additional risk so we need to be more careful.

2checkout.com looks interesting. It accepts paypal too.
Compared to paypal it's basically an extra 0.2% per transaction
The main advantage would be to use their customer support as opposed to paypal's when there's a problem?

The main take away is that if it's a charge back filed with their CC company you're screwed no matter who you use. At least with Pay Pal if they pay with their Pay Pal account you will have some rights and basically have to submit evidence to prove your case. In this situation Pay Pal makes the decision 100% because they are the only party handling the transaction.

When it's a charge back filed with their credit card company, the CC company asks Pay Pal (or 2CO or whoever) for the evidence. The CC company never talks to you. If the CC company decides in their clients favor (duh), Pay Pal (or whoever ) HAS to abide by the decision that the CC company has made for themselves and refund the money. The laws are stacked against us in this case. In my situation Pay Pal went to bat for me, but there was only so much they could do. They don't have the ability to tell a CC company "No". Unfortunately some people know this and can use this to screw you over.

My case was a service. In your specific case you're actually sending a product. Any record or confirmation that you have that they received or downloaded it along with your clear terms of service that all sales are final ( or whatever), will go a long way. Especially when you're a long time Pay Pal users with no or not many issues.

Not sure how 2CO handles it, I only recommended them because it seems they are the method used for a lot of digital products or pay sites. Personally I use Pay Pal and have been pretty happy with them over the years.

[billbenson]

I think the use of PayPal is very industry dependent. It may vary if the product is B2B or B2C. I can say this though: I'm 90% B2B and never have had a customer request PayPal for payment.

I sell hard goods. I've had a couple of attempts for chargebacks over the years. None were successful when I showed the credit card company proof of delivery. There has to be a way to show proof of delivery for a soft product as well??

[Harold Mansfield]

... I can say this though: I'm 90% B2B and never have had a customer request PayPal for payment.
It's not something that people "request". It's merely a way to accept credit cards.
But I wouldn't use it in your business either. Right tool for the job and all.

[businessbuilder]

Thank you Harold! Your explanation is very helpful.

Could we use a site like dropbox for proof of delivery of our contacts?
If the file was downloaded then it was delivered and we'd have record of their IP.

[Harold Mansfield]

Thank you Harold! Your explanation is very helpful.

Could we use a site like dropbox for proof of delivery of our contacts?
If the file was downloaded then it was delivered and we'd have record of their IP.

I've never used Dropbox like that before so I don't know. What kind of eCommerce are you using to sell your files? Are they static or is it something that is custom prepared for each customer?
There are better ways to track downloads of digital products. Easy Digital Downloads for WordPress, password protected PDF's, even email with a read/open receipt will work.

Is tracking downloads a function of Dropbox? There's also the new DropBox for business, maybe it has something. I'd also look at Google Docs.

[businessbuilder]

We've been only dealing with local companies thus far. We put the files on a USB drive, give it to them in person and receive a cheque for payment. We won't be able to deliver USB drives in person when dealing with other states. Physically shipping it is not viable either since the consumer will expect to access it within 1-2hrs at most after placing an order. We could probably do Easy Digital Downloads.

The files are custom built. There's a negotiation process over the phone. We will likely set up a virtual terminal to complete the sale while it's "hot". Though once again, I worry about the added layer of risk due to the card not being present.

[Harold Mansfield]

We've been only dealing with local companies thus far. We put the files on a USB drive, give it to them in person and receive a cheque for payment. We won't be able to deliver USB drives in person when dealing with other states. Physically shipping it is not viable either since the consumer will expect to access it within 1-2hrs at most after placing an order. We could probably do Easy Digital Downloads.

The files are custom built. There's a negotiation process over the phone. We will likely set up a virtual terminal to complete the sale while it's "hot". Though once again, I worry about the added layer of risk due to the card not being present.

Easy Digital Downloads probably won't work if the files are custom to the user. I'm assuming this is something like selling mortgage leads which I did back before the crash. What we did back then was package the leads depending on how many they were buying and what state they wanted them from, and send them the file.

We billed them using simple Pay Pal invoices. Once payment was received we sent the zipped file with a delivery receipt on it. All sales were final.
We didn't have many problems using this method.

We also had a few brokers who were on monthly plans to get leads redirected straight to them. They were on recurring billing, also through Pay Pal.

This was also 7+ years ago so we were using the tools available at the time.

[newuser]

Chargebacks are easily winnable if you are truly innocent. Anyone can file one, it's up to the merchant to provide proof that it's B/S. You will get charged a fee for the processing of a chargeback, but it's better than losing the item or service and the money. It is a hassle dealing with stupid things like this when you could be focusing on something else. If they go in your favor, the card holder has the option of refiling another chargeback. If you win again, they can no longer file a chargeback. They must persue small claims on their own if they choose.

[Harold Mansfield]

Chargebacks are easily winnable if you are truly innocent. Anyone can file one, it's up to the merchant to provide proof that it's B/S. You will get charged a fee for the processing of a chargeback, but it's better than losing the item or service and the money. It is a hassle dealing with stupid things like this when you could be focusing on something else. If they go in your favor, the card holder has the option of refiling another chargeback. If you win again, they can no longer file a chargeback. They must persue small claims on their own if they choose.
There is a difference between when it's a charge back with Pay Pal, and when it's via the card company. When it's with the card company it's much easier to get screwed because the card company is not on your side, and Pay Pal has not control over them, They could care less if you get paid.

[newuser]

There is a difference between when it's a charge back with Pay Pal, and when it's via the card company. When it's with the card company it's much easier to get screwed because the card company is not on your side, and Pay Pal has not control over them, They could care less if you get paid.

My experience is with merchant processing. I've never done Paypal. It's true, it's all set up geared towards the cardholder since they are who spends the money, but if you challenge the chargebacks with facts and your policy behind it in the explanation process, you should win. I've always won. You still have to pay the chargeback fee whether you win or lose, plus time lost and the hassle of dealing with the ordeal. It sucks but you can win. I think a lot of merchants choose not to fight it and just lose their profits and products/services because they don't want to deal with it or don't know how.