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Comment by gruez | Hacker News Reader

>It's utterly ridiculous. If you want to be the 'merchant of record' then you absorb the risk, it's that simple.

Are you saying that as something to aspire to, or something that's standard practice? I don't think most people would have a problem with bigcorp absorbing the risk, but in practice most e-commerce platforms pass the chargeback risk to their sellers.

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It is the expectation they create, by taking care of the drudgery of having customers Upwork puts itself in an excellent position to reap a chunk of the turnover of the freelancers they put to work, but it also puts the onus on them to ensure that customers pay their invoices and do so promptly and properly.

Note that there is absolutely no dispute at all about the work being performed or the quality of the work, and if there was they might have a leg to stand on, even if that came to light this long after the fact (though, again, that would point to some process errors at Upwork).

The responsibility of payment processing and due diligence with respect to which customers they do business with and how they arrange the various payment options lies entirely with Upwork. In this case Upwork is the seller. They buy the product from someone else and that's two separate relationships, Upwork now suddenly wants to pretend that they weren't part of the transaction after all and that the relationship ran directly from buyer to their supplier but that isn't the case.

Upwork would presumably say that freelancers who don’t use the Upwork tool are deciding they’d prefer for Upwork to not be part of the transaction. In particular this seems unambiguously right for “service not delivered” chargebacks, where managing chargeback risk kinda requires being able to prove that the services were performed.

That's a pretty weird reading of the concept of the gig economy. Upwork clearly wants to own the customer relationship, which is why they do what they can to avoid being cut out of the deal. In a world where Upwork would be happy to be compensated by freelancers invoicing customers directly for work found through Upwork you'd have a point, but that is not the world we live in. Upwork processes the payments, and both clients and freelancers are aware of this and that Upwork takes a cut for providing the matchmaking and process services they offer.

Service not delivered is normally dealt with by services like Upwork through escrow like arrangements or review procedures where the customer will only pay for approved work. Upwork chooses the second method, which means they have all of the control they need to ensure that freelancers only get paid if they deliver, substantially reducing the risk of such chargebacks.

And if these do happen, then the problem, again, lies with Upwork and the fact that they choose a payment method that offers that possibility. They could choose wire transfer instead if they were concerned with customers charging back after approving the work.

It's not a one-sided problem. They could do wire transfers, but that would be a substantial cost for their client side users, since most (American) banks charge $20-30 for outgoing wire transfers. It's not obvious to me why avoiding chargeback issues should dominate all other concerns, as bad as it is.

Credit cards also have fees. When you start talking thousands of dollar transactions CC start being more expensive.

At 1000 dollars 4% is $40.

Apparently the cost of credit card processing amounts to $12.5K, on account of something that the freelancer could not have been aware of. The thing to watch for is whether Upwork improves their processes on account of this happening, changes their terms of service (supply side) changes their terms of service (demand side) or does nothing at all. That will tell you all you need to know.

I think the point is the insecure payment method was Upwork's decision (they don't even allow their freelancer to propose an alternative their own payment solution) as was accepting the stolen card; risk management of non-reversible payments has a cost too, but that's a decision Upwork made. The only security decision the freelancer made was not to use Upwork's spyware. Which would give Upwork valid reason to default to siding with the client over the freelancer in the case of a dispute about completed work, but not to demand a freelancer reimburse them because Upwork had chosen to accept reversible payments with a stolen card and couldn't easily recover funds from their client after the chargeback.

Then Upwork would have no claim to a violation of their TOS. Upwork can't choose between protections and risk.

> We continued working via Upwork while locating in Zurich, as to not violate any Upwork terms.

If that’s the case I would expect Upwork to charge a lower fee when freelancers are not using the tool

> They buy the product from someone else and that's two separate relationships, Upwork now suddenly wants to pretend that they weren't part of the transaction after all and that the relationship ran directly from buyer to their supplier but that isn't the case.

Upwork asserts that they own the relationship between client and freelancer/agency, to the point that freelancers or agencies must pay Upwork thousands of dollars if they want to move their client off of Upwork.

There are different types of platforms:

If you sell something through Amazon and the buyer commits fraud, Amazon will still pay you provided that it was credit card fraud.

If you sell something on your Shopify store and integrate with Stripe, you are responsible for your KYC, and will have to take a loss for fraud.

The former takes a larger percentage of your sale for handling KYC, while the latter lets you keep more, but you're responsible for KYC.

The problem with Upwork, Airbnb, etc. is that they act like the merchant of record but not when it comes to fraud. They try to pass that onto the seller.

Generally, in the payments space, the “merchant of record” is who the banks go to with chargebacks and disputes. I haven’t heard of this as an industry standard.

Large platforms where the customer thinks they are paying the platform, such as Lyft or Uber, take on the chargeback risk. Etsy, Shopify, and others where the customer is paying a vendor tend to pass on the fees to the vendor.

Ultimately, it’s up to the platform how they want to handle this. It’s most likely listed in the terms of service.

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