Recommendations on PayPal for Business precautionary measures

skhron · February 15

I am planning and preparing everything related to popular international payment gateways (like PayPal). Thus, I keep an ear out for any useful precautionary and recommendations on using PayPal for Business.

Recently, I have seen this claim on OGF:

PayPal attracted a LOT of shit customers. There’s people on the overseas forums bragging about abusing the service and getting a full refund.

I would like to hear your opinion on this statement, what business can do to prevent gaining such customers and what reaction is the best in an event of occurrence.

zgato · February 15

Force Chinese users to do ID verification if they use PayPal. You could also block this payment system depending on the ASN type too.

BuyVM sorta does something like this, with CC aswell. If they pay with AliPay or Crypto no fraud check is done.

skhron · February 15

@zgato said: Force Chinese users to do ID verification if they use PayPal.

Maybe you can recommend any reputable KYC/ID verification service?

zgato · February 15

@skhron said:

@zgato said: Force Chinese users to do ID verification if they use PayPal.

Maybe you can recommend any reputable KYC/ID verification service?

Unfortunately I have no clue. Never though about it. Maybe you can check what Binance uses, or just if you want to save money, prevent this payment system unless they pass a fraud check.

RachelMcAdams · February 15

There are a couple of lists of blocked countries somewhere in this forum. They always spark interesting comments and remarks.

@skhron said: There’s people on the overseas forums bragging about abusing the service and getting a full refund.

Can vouch for this.

Neoon · February 15

From experience, if you block an ASN or country, they just gonna use VPN's.
Then you start blocking them and they find another way around it.

But you can block like 90% of the people.
Probably has the same result if you ask for ID from China via Paypal, maybe more efficient though.

crunchbits · February 15

@zgato said:
Force Chinese users to do ID verification if they use PayPal. You could also block this payment system depending on the ASN type too.

BuyVM sorta does something like this, with CC aswell. If they pay with AliPay or Crypto no fraud check is done.

Pretty accurate.

There was a chunk of fraudulent CC orders making its way around and passing Stripe checks too—of course Stripe claimed “3D secure was temporarily unavailable” and still authorized the charges despite peoples rules and was able to skirt all responsibility. Quite interesting how you pay that surcharge for insurance, and it’s yanked the one transaction you might actually need it 😂

Alipay is an excellent option, especially for Chinese customers who are legitimate and just want the service they’re paying for, likewise to crypto. I have (and will continue to) do crypto bonuses and deals specifically because it’s less headache and no fuss. I know it adds some risk to the customer, but it’s best explained by a quote that @MannDude gave me when we were discussing crypto along time ago:

“You don't wear a condom with your own wife, right?”

skhron · February 15

@crunchbits said: There was a chunk of fraudulent CC orders making its way around and passing Stripe checks too—of course Stripe claimed “3D secure was temporarily unavailable” and still authorized the charges despite peoples rules and was able to skirt all responsibility. Quite interesting how you pay that surcharge for insurance, and it’s yanked the one transaction you might actually need it 😂

Thanks for heads up regarding Stripe!

techdragon · February 15

This is a good question but doesn't lend itself to a simple answer.

I think realistically a business can avoid PayPal. They are not the most forgiving for the types of businesses users operate here and charge very high fees.

I think a payment processor like Stripe where you only accept 3DS payments reduces this. I don't believe that ID verification changes the likelihood of chargebacks much in this niche as very few are going to chase an unpaid hosting invoice through a debt collection agency (costs versus potential profit make this a futile pursuit).

As such, knowing their details and or who you're dealing with only helps identify your customer. This matters if you're doing it for AML reasons but I don't think as applied here it is very apt. Many clients could view it as overzealous and you may lose customers to 'sign up and go' competitors. Someone would need to do the research to confirm this but these are just my thoughts.

Therefore I think the 'no prisoners taken' approach here would have to be similar to how bigger providers operate. Charge for account credit which they can then use to pay invoices and or purchase services. However, you can attach T&C that make it easier for you to win cases as you can be very clear there are no refunds - complaints regarding services are less important even in the case if a dispute. However, this could also cost you customers.

I think every business, due to their customer acquisition strategy, may need a bit of trial and error with checkout options as to gauge what really works. For example, B2B often doesn't even involve payment processors as an invoice is raised and a bank transfer settles it.

MannDude · February 15

@crunchbits said:
I know it adds some risk to the customer, but it’s best explained by a quote that @MannDude gave me when we were discussing crypto along time ago:

“You don't wear a condom with your own wife, right?”

"Only someone else's wife." - Wayne Gretzky - Michael Scott

techdragon · February 15

@skhron said:

@zgato said: Force Chinese users to do ID verification if they use PayPal.

Maybe you can recommend any reputable KYC/ID verification service?

iDenfy or Jumio. However, they aren't exactly cheap services per individual check - costs may need to be passed onto the client. Might be difficult in practice to justify this to a customer. Or you soak it up as the cost of acquiring a new customer but unless you're talking enterprise level profits, just don't see it being practical.

I wouldn't do it in house unless you have clear legal guidance and data policies.

crunchbits · February 15

@skhron said:

@crunchbits said: There was a chunk of fraudulent CC orders making its way around and passing Stripe checks too—of course Stripe claimed “3D secure was temporarily unavailable” and still authorized the charges despite peoples rules and was able to skirt all responsibility. Quite interesting how you pay that surcharge for insurance, and it’s yanked the one transaction you might actually need it 😂

Thanks for heads up regarding Stripe!

Something else to look into that I briefly started investigating (and some other hosts have said they're looking at) is someone like Paddle. It'll give you access to all the gateways but centralized in one spot and definitely seems easier for accounting purposes. A bit more expensive, but I would strongly suspect that if their anti-fraud/chargeback protection is better than what you get with someone like Stripe directly (effectively: nothing) or they're subsidizing it a bit, then the 5% they want is likely less expensive overall.

alento · February 18

@crunchbits said:

@skhron said:

@crunchbits said: There was a chunk of fraudulent CC orders making its way around and passing Stripe checks too—of course Stripe claimed “3D secure was temporarily unavailable” and still authorized the charges despite peoples rules and was able to skirt all responsibility. Quite interesting how you pay that surcharge for insurance, and it’s yanked the one transaction you might actually need it 😂

Thanks for heads up regarding Stripe!

Something else to look into that I briefly started investigating (and some other hosts have said they're looking at) is someone like Paddle. It'll give you access to all the gateways but centralized in one spot and definitely seems easier for accounting purposes. A bit more expensive, but I would strongly suspect that if their anti-fraud/chargeback protection is better than what you get with someone like Stripe directly (effectively: nothing) or they're subsidizing it a bit, then the 5% they want is likely less expensive overall.

OT: Sorry ... but a question for you @crunchbits since you seem to have investigated Paddle ... 5% seems like a steal when PayPal itself can be even more than that on individual transactions, so I have to wonder -- do they charge 5% or 5% on top of the payment provider (Stripe/PayPal/Alipay/etc.) fee?

skorous · February 19

@techdragon said:

I don't believe that ID verification changes the likelihood of chargebacks much in this niche as very few are going to chase an unpaid hosting invoice through a debt collection agency (costs versus potential profit make this a futile pursuit).

Chasing payment isn't the only reason to know your customer though. Positively identifying a customer can change behavior. By no longer being anonymous their charge backs follow them. Similarly, by identifying them you can know if they've done this before.

Encoders · February 19

@skhron said:

@zgato said: Force Chinese users to do ID verification if they use PayPal.

Maybe you can recommend any reputable KYC/ID verification service?

I'd recommend idenfy. hetzner been making a lot of mjj crying in OGF because this one. don't forget to put manual review on top of this.

I personally just rangeban chinese ASN, and if they're coming from VPN or datacenter IP space, I just won't let them access the billing checkout page at all.
We've been trying out idenfy for taking care of overseas order, it works pretty fine with occasional angry email asking they want to skip it because "muh privacy" lol.

crunchbits · February 19

@alento said:
OT: Sorry ... but a question for you @crunchbits since you seem to have investigated Paddle ... 5% seems like a steal when PayPal itself can be even more than that on individual transactions, so I have to wonder -- do they charge 5% or 5% on top of the payment provider (Stripe/PayPal/Alipay/etc.) fee?

I haven't gone far enough down the path, but on the surface I believe they were just charging 5% + 50c per tx (list price). My guess is they have negotiated better deals directly due to volume, but more importantly I was interested in having all of those gateways under 1 spot and potentially better handling of subscriptions, fraud, and general accounting on our end. Those all add up too.

Recommendations on PayPal for Business precautionary measures

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