Comment by netcan | Hacker News Reader

Comment by netcan | Hacker News Reader

I think a lot of the things being built around bitcoin at this stage are for/by enthusiasts. But, riding on the recent theme of coming up with startup ideas, the seems like good ground for an exercise.

If bit coin keeps gaining traction, where will it spread to first? Here are some of my thoughts:

Markets where chargebacks are a big problem: (1)easily resalable physical goods (ipods, supplements), (2)Gambling.

International ecommerce: (1) This already involves more than one currency. (2)Fraud is a bigger problem (3)transaction fees are higher (4) transaction times are higher.

International ecommerce - problematic markets: (1) high fraud markets that CCs/Paypal don't serve. (2)restricted currency markets(

P-2-P Markets: (1)mutual fraud concerns. (2) no "customer" that needs figure out bitcoin.

Avoid official detection: (1)drugs/illegal markets (2) bitcoin tax haven.(3)money laundering & other criminal banking needs.

*I notice a theme in my thinking: bitcoin as a credit card replacement.

Why do you think chargebacks are a problem?

They are a problem and annoyance for merchants, yes; but a great benefit for consumers. Can you imagine buying ipods of randomer on the internet and once you send the money, it's gone. They can send you a box of sand instead and there's nothing you can do. That's a disadvantage to consumers.

The idea is behind chargebacks is good, but the implementation is somewhat lacking. An example, my wife has an online shop, and (unsuprisingly) uses Paypal. A company bought an item from her. The transaction went smoothly, they paid, she shipped the item. Unfortunately, the card details they used to pay with got stolen. So they chargedback a number of transactions that has been made with this card. One of them was my wife's. Here's what my wife had to do: dispute chargeback with Paypal; get in touch with the buyer and ask the buyer to inform their bank that this transaction was legit. Then wait 6 months. Eventually she got paid back, bar the PAypal "processing fee", which wasn't a lot, but since the item was pretty cheap, it ate all the profit she made. We tried to get this paid back, but to no avail. Now, it's good that the buyer charged back accidentally and acknowledged it. But there are lots of who do this for profit, and with the broken banking/paypal customer (as in 'merchant') support system, have fun getting your money back. This is why chargebacks might be a problem.

Again, they are a problem for sellers. More people are sellers these days, but we gear our consumer law and financial devices to advantage buyers. Buyers are more often the people with more to lose, and are certainly more numerous. Buyers have been ripped off throughout history and we have learned, slowly, to make things easier for them.

Economically, if you don't build in buyer protection, they may stay away entirely.

You see, I'm not saying that buyer protection is bad, but the payment provider companies should offer the same level of support to merchants. Now for a buyer (legit or fraudulent) it only takes couple of clicks to get their money back. And it is virtually impossible for a seller to dispute this.

I understand that must be frustrating as a seller, and perhaps the balance has shifted too far, but consumer history has taught us that having this relationship tilted in favour of the buyer is a good thing.

Chargebacks and fraud are an absolutely monumental problem for most internet merchants. Especially high risk stuff like gambling and porn.

Each chargeback costs the merchant about $30 and then after so many chargebacks your credit card billing rates change. Too many chargebacks and you lose your ability to take credit cards all together.

But without them a lot of folks wouldn't use internet services at all, because of the very real danger of abusive sales practices.

They are more than a problem & annoyance for merchants. They are completely prohibitive to a lot of services. Chargebacks essentially mean that a merchant has no guarantee that they get to keep a payment till 6 months after it has been made. In market where goods are easily resale able, this adds significant costs in fraud and fraud prevention. My guess is 5%+ for the more vulnerable merchants. This hits smaller/new merchants disproportionately. It also raises the required skillset for being an online merchant.

To minimize fraud merchants will often refuse risky business like international orders or orders where the billing and deliver addresses don't match.

There are several interacting "margins" limiting ecommerce. Merchants not skilled enough in fraud protection. Market to fraud prone. Low margin markets where 2.5% processing fees + 2.5% fraud + 2.5% fraud prevention make it unserviceable. Move any of the boundaries and you will allow more merchants to exist.

Are they great for consumers? There are invisible effects that ultimately hurt consumers. A site may refuse to deliver to you. It may hold back shipments until the fraud checks are done. You may be paying more. A site may not exist at all because they were unable to deal with chargebacks.

escrow serves the same purpose, you confirm you are happy with the product before releasing the funds, but you cannot just claim the funds back yourself once the are in escrow, that requires the other parties agreement. What it does is even the playing field between seller and buyer, which benefits all honest parties. the current status quo is that the merchant/seller whatever takes all the risk for a potential chargeback down the line.

Reply on news.ycombinator.com