PayPal Chargeback question.

[newsmike]

I was reading another thread where someone complained about a cancellation after the buyer initiated a PayPal chargeback.  They received the following:

 "The order that you contacted us about xyz was canceled because the buyer opened a chargeback on the order with their payment provider. Fiverr cannot prevent this action and we did not cancel the order from our side."

I asked a few years ago, and no one could explain why someone can order $1000 of services from Fiverr and then initiate a chargeback which gives then a full refund, meanwhile this is not the case everywhere.  For example, I cannot go to Amazon, order a laptop for $2,000, and immediately after delivery issue a chargeback, keeping both the laptop and the $2,000.

How have other vendors structured their PayPal agreements to prevent this?  There must be a refund upon return confirmation component. Which means that PayPal has safeguards that could be enacted to disallow chargebacks.  For some reason that is either not applicable here, or no one cares enough to pursue it.  Thoughts? 

[donnovan86]

16 minutes ago, newsmike said:

For example, I cannot go to Amazon, order a laptop for $2,000, and immediately after delivery issue a chargeback, keeping both the laptop and the $2,000.

I was about to say, that's not Paypal they are using.

PayPal are very generous with the customer protection, up to 6 months. That means if you buy something new, you can ask for a refund up to late June 2024. The problem here is that PayPal won't automatically give the money to you as far as I know. When you initiate a refund, the merchant also needs to agree to that. And now the problem.. Fiver doesn't enter these disputes the way they should, because they would have to deal with dozens or hundreds of disputes a day/week I assume. So they just automatically accept the resolution, which means you can ask for a refund and Fiverr will automatically agree to that. 

I agree they should offer better protection, but most likely it's not worth it for them to pay someone or a new team to pursue chargebacks only, it would be an additional cost for them and... the return is minimal honestly. Even on a $1000 refund, they would get $200 for that team. And that's not even taking into account less expensive orders where they would get let's say $5 from a $50 order. That's why I think they are doing an automatic resolution. And it's also why I always stayed at a very inexpensive rate, I rarely have to deal with chargebacks, if at all. But I heard from people with higher prices that they do have chargebacks from time to time, while the last one I had was pre-pandemic if I remember correctly. 

21 minutes ago, newsmike said:

How have other vendors structured their PayPal agreements to prevent this?  There must be a refund upon return confirmation component.

Yeah, PayPal doesn't offer an automatic refund, the merchant has to agree. But in Fiverr's case, they have an automatic agreement. Most merchants don't have an automatic system and they will either deny the refund and talk with the customer or accept it if the customer is too hard to deal with. But they are the ones to choose.. 

[mariashtelle1]

3 hours ago, newsmike said:

asked a few years ago, and no one could explain why

I think we did have a discussion and I don’t remember how we came to that but it seems that fiverr basically ignores PayPal disputes and if one of the sides doesn’t reply then at some point dispute is automatically accepted. 
Long time ago before we could ask for compensation I would send screenshots, proofs etc but fiverr wouldn’t even resend them to a PayPal dispute. It’s too much for them to deal with. 

[donnovan86]

1 hour ago, mariashtelle1 said:

It’s too much for them to deal with. 

As I said, the financial incentive for them is very low. They would need another department or people that work solely on this and since they only get a 20% cut from us, it doesn't make sense for them I guess. I might be wrong, but pretty sure they would need to hire people and thus deal with extra costs just for this... That's why I always stayed with smaller prices and gig packages, since it's not as appealing for people to do a chargeback for a low amount. They go for the much bigger fish in the pond, that's why we usually see expensive gigs getting hit with a chargeback, at least recently based on forum posts. Or maybe others get hit at lower prices and instead of sharing it here, they move on.

[newsmike]

2 hours ago, mariashtelle1 said:

I think we did have a discussion and I don’t remember how we came to that but it seems that fiverr basically ignores PayPal disputes and if one of the sides doesn’t reply then at some point dispute is automatically accepted. 
Long time ago before we could ask for compensation I would send screenshots, proofs etc but fiverr wouldn’t even resend them to a PayPal dispute. It’s too much for them to deal with. 

This if true, constitutes a serious lack of security for sellers.  That is what we pay the $20 (plus the promoted gigs and the seller plus fees) for.  A safe platform in which to do business. 

[newsmike]

58 minutes ago, donnovan86 said:

As I said, the financial incentive for them is very low. They would need another department or people that work solely on this and since they only get a 20% cut from us, it doesn't make sense for them I guess.

I would think that a group of people trained to do everything to prevent chargebacks, thus preserving Fiverr's 20% would be a great incentive. They should be just allowing chargebacks in the actual cases of fraud or incomplete service by a seller, and if that happens, seller gets booted from platform. 

[edc_lab]

On 12/26/2023 at 5:51 PM, newsmike said:

Thoughts? 

As a new seller, if I have to be honest, Fiverr's approach to chargebacks concerns me.

Yes, I agree, from a financial point of view spending money to recover 20% of the total amount seems not Fiverr's priority, but in my point of view, this can be seen as an opportunity for them, let me explain why:

Let's imagine, they make a Recovery Team to get back the gig's fee, they win and earn the 20% fee.
Then, they need to pay the Recovery Team too and all, or part, of the profit, could be lost (all depends on the gig's size, of course).
So, the thing is, initially, they don't need to focus on all chargebacks, but at least on the ones worth it (the gig's amount size or seller's level could be a starting point).

Letting buyers and sellers know that a Recovery Team is always monitoring our activities like superheroes could definitely increase trust in sellers and, maybe for some buyers, decrease the willingness to scam around.

Of course, the Recovery Team should be tested gradually, to see if Fiverr has enough power to fight chargebacks coming from big companies like PayPal.

They should keep in mind that Fiverr doesn't have to make money on failed chargebacks, they just need to use the money recovered to fuel the Recovery Team.
Spending money to fight fraudulent activities could increase trust in both buyers and sellers so every dollar spent on that, is an investment in making Fiverr a better place.

This strategy could be similar to the one used by big luxury brands in cities like Milan where, for renting small shops, they pay around 600k € a year. But they don't open a shop in that place just to sell luxury bags for profit, they do that for brand presence because that's their main goal.

Fiverr should do something like that, profit or not, they need to enhance trust, and if they make a small loss on the chargeback's amount, it shouldn't be a problem, cause the goal is to let people know that Fiverr is taking care of his customers (see that as spending money for ADVs)!

Of course, this is just an idea based on what I read here on the forum, but planning a strategy needs way more data to understand if it's feasible or not. 

That's it, these are my two cents! 

[alexmartinez663]

Im an eCommerce Manager specializing in Amazon. I can confirm that you can go go to Amazon, order a laptop for $2,000, and immediately after delivery issue a chargeback, keeping both the laptop and the $2,000.

 

You just cannot do it frequently or else you get caught. 

[breals]

17 minutes ago, alexmartinez663 said:

Im an eCommerce Manager specializing in Amazon. I can confirm that you can go go to Amazon, order a laptop for $2,000, and immediately after delivery issue a chargeback, keeping both the laptop and the $2,000.

 

You just cannot do it frequently or else you get caught. 

That's next years Christmas presents sorted then 😀