Hacker News Reader

Comment by eli | Hacker News Reader

I think you misread what patio11 wrote. As he correctly points out, "Paypal eats 100% of the risk if the merchant doesn't [stay in business]"

New companies fail before getting a product out the door all the time. It's a very real risk.

View on HN

Am I missing something here? Things like IndieGoGo and KickStarter are inherently risky, but not for the payment processor, for the one doing the backing. If you back a project and it goes belly up or for whatever reason fails to deliver or under-delivers that is not "failure to provide service", that was the risk you took when you decided to back them. That money is gone, the horse has left the barn, you have no right to request a chargeback in that case. That's part of the reason why trying to weed out fraudulent campaigns is such an important thing for both IndieGoGo and Kickstarter, once the money has been paid out, unless you can pretty concretely show that the campaign was a deliberate fraud, you're out that money.

Unless your CC was stolen and used to back something without your knowledge I see no reason at all why a chargeback against a campaign should ever be granted (or maybe if the campaign is proven to be a fraud, but in that case I'd expect IndieGoGo or Kickstarter to eat that cost).

That's an interesting position, but do any credit card companies agree with it?

I don't know. I honestly don't really know how the chargeback system functions. I mean, what's to stop me from ordering for instance some hugely expensive item from say Amazon, waiting for it to show up, and then filing a chargeback on it? Does it make a difference if I go through say Paypal to do it? Is there anything stopping anyone from filing a fraudulent chargeback (which is essentially what a chargeback against a Kickstarter or IndieGoGo campaign would be)?

My experience has been that credit card companies act as an arbiter. They give the merchant an opportunity to respond to a chargeback... but they also charge you a fee just for handling it (or maybe the fee comes from the processor... I'm not sure). Too many chargebacks can also put you in a higher risk category which means higher fees for everything.

If you challenge a refund request, PayPal will ask you for additional information and then (at their discretion) fight the chargeback with the credit card company on your behalf. In my experience, this process is huge pain, but it usually works out OK.

Nope, Paypal only eats the risk if they release funds. They rarely release funds on high risk accounts, at least not without retaining a rolling deposit.

That's what we like to call "the point"

And that's... exactly what's going on here, and what everyone is bitching so loudly about.

I'm not saying "don't bitch about paypal", I'm saying "paypal doesn't carry a lot of risk in the first place".

> I'm saying "paypal doesn't carry a lot of risk in the first place".

They do in the first place, which is why as an immediate second step, they protect themselves against that risk by keeping money in an escrow.

Reply on news.ycombinator.com