How To Avoid Payment Reversals & Fraud Payments with PayPal For Digital Product Selling Business?

32 replies
Hello,

I sell Digital Products (PHP Scripts) on my website using PayPal to accept payments from my clients. Whenever I receive payments from clients I send them the purchased product via email. Clients install the product and our system track each installation.

From my previous sells, I received 2 PayPal payments reversal notice. I sent the product to both clients and they are using my product. How can they ask for the refund without any reason. It's totally unfair with me.

In previous dispute I tried to clear my side to PayPal by providing "product sent proofs" (email sent screenshot) and "client using my product proof" (installation track), but PayPal didn't considered my proofs and turned down the dispute. My another dispute is pending and I'm expecting the same with this dispute.

1) Does anybody have same experience with them?
2) Why PayPal is penalizing me (seller), though I've proofs of client using my product?
3) How can I avoid Payment Reversal for my digital product selling business?
4) How can I avoid fraud payments on my website using PayPal?

Regards,
Ankur
#avoid #business #digital #fraud #payment #payments #paypal #product #reversals #selling
  • Profile picture of the author tpw
    Remind the PayPal people that this is a digital product that has already been downloaded.

    PayPal is not supposed to be offering Buyer Protection on Digital Products.

    Be sure that your Refund Policy on your website is crystal clear. If you don't want to give refunds, say so, and say it clearly. Then point the PayPal people to that Policy page.

    This will help you win most cases, unless it was a fraudulent transaction and in that case, there is nothing you can do to win.
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    • Profile picture of the author ankur625
      Such buyers don't answers to emails, they just want the product for free. I already providing 15 days money back Guarantee on the product. If they are dissatisfied with my product I'm ready to give 30 days or more money back guarantee. They don't have to use such cheap way.

      Originally Posted by tpw View Post

      Remind the PayPal people that this is a digital product that has already been downloaded.

      PayPal is not supposed to be offering Buyer Protection on Digital Products.

      Be sure that your Refund Policy on your website is crystal clear. If you don't want to give refunds, say so, and say it clearly. Then point the PayPal people to that Policy page.

      This will help you win most cases, unless it was a fraudulent transaction and in that case, there is nothing you can do to win.
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      • Profile picture of the author tpw
        Originally Posted by ankur625 View Post

        Such buyers don't answers to emails, they just want the product for free. I already providing 15 days money back Guarantee on the product. If they are dissatisfied with my product I'm ready to give 30 days or more money back guarantee. They don't have to use such cheap way.

        If you want to give them the product for free, then you shouldn't be in here complaining about the problem.

        Many software sellers have adopted a "no refund" policy and PayPal honors that policy.

        Many information product sellers have adopted "refund policies" that void the refund offer IF the buyer attempts to use PayPal to reverse the payment. The reason being is that PayPal will charge us a $20 penalty on payment reversals. If the buyer asks for a refund, we give it. If the buyer attempts to acquire a refund outside our normal channels, the refund policy is null and void.

        As a seller, you have got to decide which policy makes the most sense for your business, then post it in a public place and enforce it.
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        • Profile picture of the author ankur625
          Originally Posted by tpw View Post

          If you want to give them the product for free, then you shouldn't be in here complaining about the problem.
          I'm not saying to give the product for free. What I mean to say was "It's unethical way" to get the product for free. It's like cheating the seller.
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          • Profile picture of the author tpw
            Originally Posted by ankur625 View Post

            I'm not saying to give the product for free. What I mean to say was "It's unethical way" to get the product for free. It's like cheating the seller.

            Well, you are right.

            But many people online take great joy of making it a habit to try to get one over on people.

            They think that if they can screw you for $20, then they are better than the next guy.

            There are whole forums dedicated to that kind of behavior.
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    • Profile picture of the author Steve Wells
      Originally Posted by tpw View Post

      Remind the PayPal people that this is a digital product that has already been downloaded.

      PayPal is not supposed to be offering Buyer Protection on Digital Products.

      Be sure that your Refund Policy on your website is crystal clear. If you don't want to give refunds, say so, and say it clearly. Then point the PayPal people to that Policy page.

      This will help you win most cases, unless it was a fraudulent transaction and in that case, there is nothing you can do to win.
      I agree...

      I have one many cases this way, the only cases that I do not always win, are chargebacks, when someone claims that their card was used without their permission.

      I hardly ever have any issue with returns, but the ones I have lost are the chargebacks, even though I have won a few of those.

      Protection for Buyers

      Protection for Sellers
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  • Profile picture of the author sethalexander
    Although I can't answer your question directly.

    You could try using another payment processor. I've setup Google Checkout easily. They might be more on the merchant's side. I can't say from experience though.

    Or, code in some sort of activation into the scripts. Then if someone wants a refund you kill their site.

    Chargebacks are part of life. Like someone buying an IM product then asking for a refund after learning all the info. As long as they are a low enough % of total business you'll be fine. Also, if a person wants their money back PayPal will take their side. They want the Buyers happy first.
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    • Profile picture of the author tpw
      Originally Posted by sethalexander View Post

      Also, if a person wants their money back PayPal will take their side. They want the Buyers happy first.

      Not true.

      If you have No Refunds posted on site, then PayPal will always side with the vendor, unless it was a fraudulent transaction.
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      • Profile picture of the author sethalexander
        Originally Posted by tpw View Post

        Not true.

        If you have No Refunds posted on site, then PayPal will always side with the vendor, unless it was a fraudulent transaction.
        Well, in the absence of that statement since he hadn't mentioned it.
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      • Profile picture of the author etoainshrdlu
        Originally Posted by tpw View Post

        Not true.

        If you have No Refunds posted on site, then PayPal will always side with the vendor, unless it was a fraudulent transaction.
        This has been my experience as well. As a buyer I got shafted on Flippa and Paypal took their side.
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  • Profile picture of the author thedark
    In normal cases, disputes, etc, paypal will never give the money back to the buyer. But, for chargebacks, the decision is at the bank, which, in most cases, won't trust paypal security and will decide in favor of their client.

    On unauthorized payments, paypal will investigate and will decide in favor of buyer even if it is their responsability to ensure maximum security, and the password safety should be their problem.

    However, if someone breaks into your account and use your money you won't be happy. In the first place, the buyer never intended to use your software. He was used by the scammer to get access to your product. But because the hacker downloaded a copy of your product, does not generate you so much losses because he would have never paid for it with his own money. Only that he will use it without your concern.

    However, if you track the usage, and you have enough data that the account holder is the same person who use the software purchased, then paypal should be aware about this. If you built a system to track usage, think of a system to limit usage from your side. For example, make some needed data or files available only from your server, based on a licence or api key.
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    • Profile picture of the author ankur625
      My current pending PayPal dispute is about "unauthorized payments". My tracking system captured the domain name where my product was installed. I checked the whois record. The domain is registered to a different name whois not showing email for that domain.

      I suspect, someone hacked a paypal account, paid me, received the product and installed it. That's why original account holder reversed the payment. In this case, hacker happpy (got my product), PayPal account holder happy (will get payment back), PayPal happy (for proving great service) I'm unhappy (I lost a copy of my product).

      Loosing a single product not a big deal but what if there are hundreds of "unauthorized payments" per month? Also my account can be at a risk of termination by PayPal. I'm I guilty for this? Off-course not and it's totally unfair with me.

      Thanks for this suggestion [system to limit usage from your side] I'll have to figure out some system where I can implement extra security from my side.

      Originally Posted by thedark View Post

      In normal cases, disputes, etc, paypal will never give the money back to the buyer. But, for chargebacks, the decision is at the bank, which, in most cases, won't trust paypal security and will decide in favor of their client.

      On unauthorized payments, paypal will investigate and will decide in favor of buyer even if it is their responsability to ensure maximum security, and the password safety should be their problem.

      However, if someone breaks into your account and use your money you won't be happy. In the first place, the buyer never intended to use your software. He was used by the scammer to get access to your product. But because the hacker downloaded a copy of your product, does not generate you so much losses because he would have never paid for it with his own money. Only that he will use it without your concern.

      However, if you track the usage, and you have enough data that the account holder is the same person who use the software purchased, then paypal should be aware about this. If you built a system to track usage, think of a system to limit usage from your side. For example, make some needed data or files available only from your server, based on a licence or api key.
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      • Profile picture of the author tpw
        Originally Posted by ankur625 View Post

        My current pending PayPal dispute is about "unauthorized payments".

        "Unauthorized Payment" means that someone used a stolen debit card to access your product.

        You cannot stop that kind of reversal.
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        • Profile picture of the author ankur625
          No problem, if they return the money to actual PayPal account. Hacker stolen their money so he/she deserve to get money back.

          But hacker also stolen my product ($49 USD), what about my compensation? Was I responsible for "Unauthorized Payment"? I'm I guilty for this?

          PayPal should manage their system to restrict "Unauthorized Payment". Why should seller (me) suffer in this case?

          Originally Posted by tpw View Post

          "Unauthorized Payment" means that someone used a stolen debit card to access your product.

          You cannot stop that kind of reversal.
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          • Profile picture of the author tpw
            Originally Posted by ankur625 View Post

            No problem, if they return the money to actual PayPal account. Hacker stolen their money so he/she deserve to get money back.

            But hacker also stolen my product ($49 USD), what about my compensation? Was I responsible for "Unauthorized Payment"? I'm I guilty for this?

            PayPal should manage their system to restrict "Unauthorized Payment". Why should seller (me) suffer in this case?

            That is what they call the cost of doing business.

            The vendor has to write off the fraudulent transactions, receiving no cash repayment for the loss, but you can write off those losses on your taxes at the end of the year.

            In order to have the ability to do business, we have to take a risk that we will occasionally get screwed. It happens to all of us.
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            • Profile picture of the author ankur625
              Originally Posted by tpw View Post

              That is what they call the cost of doing business.

              The vendor has to write off the fraudulent transactions, receiving no cash repayment for the loss, but you can write off those losses on your taxes at the end of the year.

              In order to have the ability to do business, we have to take a risk that we will occasionally get screwed. It happens to all of us.
              I love this, "Business is all about RISK". LOL
              I accept it. But what if there are too many fraudulent transactions?
              Also, PayPal may delete my account if fraudulent transactions go beyond certain numbers?
              I was wondering how phpsugar, Flippa manage their PayPal transaction?
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  • Profile picture of the author twister85
    It always happens. All the buyer has to do is to click the Issue refund button but we have to struggle a lot.

    So all you have to do is Not to worry as it s normal and submit your Item sent proof remind PayPal that it was a "digital" product and never look at it.

    but be aware if you get any emails from PayPal to reply to any conversations or To take a action or the dispute will be claimed in the buyer's favor.

    And yes to avoid refunds, Stay in contact with the buyer and Try to understand their problems and try to solve them as Buyers are not crazy to ask for refund just to get their money back.

    Cheers!
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  • Profile picture of the author Aura
    GOLDEN SOLUTION:
    Don't use PayPal. Use Liberty Reserve.
    Ask your clients to get the currency converted.

    Also, I know a way to evade and avoid chargebacks, but it requires some resources.
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    • Profile picture of the author ankur625
      Originally Posted by Aura View Post

      GOLDEN SOLUTION:
      Don't use PayPal. Use Liberty Reserve.
      Ask your clients to get the currency converted.

      Also, I know a way to evade and avoid chargebacks, but it requires some resources.
      I appreciate your suggestion. But my country have "strict rules" for international transaction. Even when I get a payment in my PayPal account, I can't keep the balance more than 2-3 days, PayPal auto withdraw the amount to my bank account.
      Goolge checkout is not available here.
      Liberty reserve need "thousands of documents" for verification.
      I guess wire transfer have $20 or $50 USD fees per transaction, and price of my product is $49 USD, LOL
      There are few payment gateways and they absolutely suck.
      It makes me crazy. Do you have any other suggestion??? :confused:
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      • Profile picture of the author Aura
        Originally Posted by ankur625 View Post

        Liberty reserve need "thousands of documents" for verification.
        If not an issue, which country do you belong to?
        I got an LR account within minutes, without submitting anything but my email and I guess phone number too.
        Nothing else. They don't require any documents.


        You can easily accept payments, exchange them through and Official exchange service after a month to Western Union or PayPal.

        Liberty Reserve is great. Low transaction fee, can't be chargedback and it's safe. Account won't be limited or frozen, no games like that.
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        • Profile picture of the author ankur625
          Originally Posted by Aura View Post

          If not an issue, which country do you belong to?
          I got an LR account within minutes, without submitting anything but my email and I guess phone number too.
          Nothing else. They don't require any documents.


          You can easily accept payments, exchange them through and Official exchange service after a month to Western Union or PayPal.

          Liberty Reserve is great. Low transaction fee, can't be chargedback and it's safe. Account won't be limited or frozen, no games like that.
          I live in India. Last year I setup a LR account but there were limitations for my account. They asked me to verify the account, I tried but they were asking bank details, tax details, blah blah blah. I felt it was time consuming and lot of verification process, so I skipped it.

          PayPal is best for me, but last year they updated their policies too. And I'm not allowed to keep my PayPal balance for long time(3-4 days). PayPal auto withdraws my balance in 2-3 days, so that I don't even get enough time to hear back from my client (In case its fraud transaction). Also I can't use my PayPal balance to purchase online (It's just one way procedure).

          I still love PayPal as its fast, reliable and secure but such fraud issues disappoint me a lot.
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          • Profile picture of the author Aura
            Originally Posted by ankur625 View Post

            I live in India. Last year I setup a LR account but there were limitations for my account. They asked me to verify the account, I tried but they were asking bank details, tax details, blah blah blah. I felt it was time consuming and lot of verification process, so I skipped it.

            PayPal is best for me, but last year they updated their policies too. And I'm not allowed to keep my PayPal balance for long time(3-4 days). PayPal auto withdraws my balance in 2-3 days, so that I don't even get enough time to hear back from my client (In case its fraud transaction). Also I can't use my PayPal balance to purchase online (It's just one way procedure).

            I still love PayPal as its fast, reliable and secure but such fraud issues disappoint me a lot.
            PayPal is rather more strict than LR.
            Thanks to RBI <3

            Just make a new Liberty Reserve today bud, me too Indian.
            You won't be disappointed.
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            • Profile picture of the author ankur625
              Originally Posted by Aura View Post

              PayPal is rather more strict than LR.
              Thanks to RBI <3

              Just make a new Liberty Reserve today bud, me too Indian.
              You won't be disappointed.
              Thanks buddy. As I said, I tried L.R. last year. They may have updated their system during one year. Can you tell me briefly,

              1) How much time it get to verify.
              2) How many documents they ask for?
              3) How secure are they with such fraud transaction issues?
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              • Profile picture of the author Aura
                Originally Posted by ankur625 View Post

                Thanks buddy. As I said, I tried L.R. last year. They may have updated their system during one year. Can you tell me briefly,

                1) How much time it get to verify.
                2) How many documents they ask for?
                3) How secure are they with such fraud transaction issues?
                1)No verification time. Instant activation.
                2)Signup form is all you need to fill, nothing else.
                3)No CHARGEBACKS are possible with LR, since it's not a feature with it.

                I hope that helped
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  • Regardless of all the what-ifs, it sounds like that most of the frustration is coming from Paypal. Do your due diligence to ensure you have clear policies on your website and if everything is good on your end, change your payment processor. There are many other companies happy to earn your business and fight for the side of the vender vs the consumer, unless of course it truly is a fraudulent transaction.
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  • Profile picture of the author Mr Lim
    I met this situation and you first need to know, Paypal are against digital products, websites trading etc.

    If you were to make a digital deal, is it better to send an invoice privately to your client, insist that on the note box "this digital product is an intangible goods, no refund, etc".

    I rather had dispute after then.
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  • Profile picture of the author BizAssure
    The Penny Auction industry is a prime example of this. We have seen people destroy businesses because they will chargeback BIG $$$ and PayPal with automatically process it because they bought "bids" which cannot be proven it was delivered. So a PA site will send product won then get the money given to them taken away and be out product + revenue. Then they may have any additional money held for months while PayPal decides what to do with there account. Seem like a very bad hole in the system.
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  • Profile picture of the author WeavingThoughts
    You lost because they were CC claims where PP sides with the buyer regardless.
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  • Profile picture of the author monsur
    I am not satisfied with paypal .Few days I sold a site and the buyer downloaded it.Then he opened a dispute saying that he did not authorize the transaction.Then I uploaded 2 live proofs showing that he authorized........But they surprisingly took the spammer side without any logic though I provided strong proofs of being cheated.

    Finally I sent a mail asking the reason of refunding the cheat buyer but I got auto message saying that they are happy to help me further etc. etc! The reply is fully irreverent to my query
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  • Profile picture of the author Moneymaker2012
    You can never be save from chargeback or reversals even if you adhere to all the rules.
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  • Profile picture of the author hsbinmarket
    Thanks for ur post. Lot of people like us will be helpful by it. I am sorry to say I have no answer to ur question. But I shall share my experience as soon as I get the answers. Best of Luck.
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  • Profile picture of the author Corey Geer
    As a writer, I've had assholes who would try to get work done for free by filing disputes saying, "oh, I never got anything."

    It's simple really: DO NOT use their retarded automation tool, you will not win. I'm not even sure a human eye looks at that thing. It'll just assume it was a physical product that you never sent and you will never win any of those cases.

    Call up PayPal, explain to them it was a virtual good and that it was sent. Most of the time, they don't even ask any questions and they just reverse it in your favor.

    HOWEVER, if someone pays via a Credit Card, then just give it up and move on. Credit Card companies could give a rats ass who's actually at fault and they'll usually favor the buyer most of the time just to keep them happy. PayPal doesn't handle Credit Card disputes unfortanutely, that's all up to the CC company.

    I recently lost nearly $300 because while PayPal was fighting for me, the Credit Card company reversed it in favor of the buyer. I provided all the proof I could to the reps and they believed me, but in the end the buyer wins because it's all up to the CC company.

    I really wish there was a way to know when they were using a CC or to block them altogether.
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