I don't buy it. I've done suspicious transaction monitoring for a very long time, and no, it's not that hard.
Certainly not hard enough to prevent your CS people from even giving out a phone number to call for support. Most certainly not hard enough to not be able to address quickly.
Financial transaction analysis is an old science. Experienced people are hard to find, but not exceedingly hard. Systems already exist to mine the hell out of data to tell the scammers apart form the genuine people. An of course, you can build your own system and whatever analysis you want.
And how big do you have to be to be able to afford this? Not large at all. I think you overestimate the difficulty of catching bad guys.
You should note that the recurring complaint is NOT "PayPal froze my funds". The complaint is "PayPal froze my funds and then refused to communicate at all with me". This points to incompetence and lack of consideration much more so than "This shit's hard, yo!"
So, no, financial transaction analysis is not hard enough to screw over your customers.
The notion that pre-orders are scary or generally disallowed has nothing to do with "scams": legitimate people just trying to get business done, who have established names or even good track records, don't always come through on these orders. It is not appropriate for those companies to be mitigating that risk using the credit from their merchant account; in this specific issue, PayPal can even get in trouble for allowing pre-orders to happen using their card providers.
As for Regretsy's continual lack of ability to get CS from PayPal, as someone who has often spent egregious amounts of time talking to PayPal, I honestly think Regretsy is doing something wrong. I also personally feel like PayPal should just ban them from using the service: they don't seem to understand how online payments work, and their reaction to normal procedures is to raise a public shit storm... it's just lame, and it shouldn't be getting play on HN.
As for Regretsy's continual lack of ability to get CS from PayPal, as someone who has often spent egregious amounts of time talking to PayPal, I honestly think Regretsy is doing something wrong.
Customer service != fraud department. Google, Netflix & Paypal seem to have similar methods of dealing with "suspicious accounts". Those methods usually involve something along the lines of shutting the account down and then rebuffing attempts to communicate with the people who made the decision. Customer service evaporates once you've been ostracized by their security systems.
I once asked a merchant account provider how larger companies (airlines, for instance) operate by selling stuff way in the future (booking at ticket 5 months in advance, for example), when they were giving me grief about selling a magazine subscription for a year in advance.
"Big reserves on deposit" is what I was told.
It's probably not quite as simple as that, but I suspect being able to demonstrate a degree of financial solvency (airlines? really?) and having funds in reserve would go a long way towards paypal working with you more. In fact, I think paypal ends up holding some of your funds for you as a reserve against chargebacks after certain conditions are triggered, no?
"It is not appropriate for those companies to be mitigating that risk using the credit from their merchant account."
If I'm not mistaken, if this were an actual, say, visa merchant account, all parties would have much clearer rules laid out. The customer would be protected "they didn't deliver, I'm not paying". The merchant doesn't get "credit" per-se..... they have to deliver goods or the charge-backs start, at which point they are up shit creek, along with possibly their substantial deposit with their merchant provider.
Paypal does not work like a normal merchant account for credit cards - people need to remember that - that's why we have these horror stories.
If a credit card processor tried to pull this stuff they'd have their visa contract yanked in a heartbeat and thir merchant banks would drop them like a hot potato.
The notion that pre-orders are scary or generally disallowed has nothing to do with "scams"
I rather liberally misused scam to mean "sloppy or negligent financials" -- like "let's take lots of pre-orders and with those funds maybe we'll be able to make something happen!" When businesses need to front-load financing from their future customers, the likelihood of failure increases dramatically.
I think it actually is quite difficult, nearly all of PayPal's competitors were bankrupted by fraud (early on it was organized Russian crime rings).
"The origins of Palantir go back to PayPal, the online payments pioneer founded in 1998. A hit with consumers and businesses, PayPal also attracted criminals who used the service for money laundering and fraud. By 2000, PayPal looked like “it was just going to go out of business” because of the cost of keeping up with the bad guys, says Peter Thiel, a PayPal co-founder.
The antifraud tools of the time could not keep up with the crooks. PayPal’s engineers would train computers to look out for suspicious transfers—a number of large transactions between U.S. and Russian accounts, for example—and then have human analysts review each flagged deal. But each time PayPal cottoned to a new ploy, the criminals changed tactics. The computers would miss these shifts, and the humans were overwhelmed by the explosion of transactions the company handled.
PayPal’s computer scientists set to work building a software system that would treat each transaction as part of a pattern rather than just an entry in a database. They devised ways to get information about a person’s computer, the other people he did business with, and how all this fit into the history of transactions. These techniques let human analysts see networks of suspicious accounts and pick up on patterns missed by the computers. PayPal could start freezing dodgy payments before they were processed. “It saved hundreds of millions of dollars,” says Bob McGrew, a former PayPal engineer and the current director of engineering at Palantir."
Well, he got his info through a game of Chinese whispers. He heard it from a Palantir spokesman, who got a brief from Palantir PR, who got a brief from the Director of engineering, who got it from meeting with a dozen scientists and engineers. So you can see that along the way, stuff got simplified and bastardized to the utmost.
And you run a bank which operates across the entire world with hundreds of millions of customers?
Don't make the mistake of imagining that because you've worked in the same space as paypal that you have a grasp on the true scale of the problems they face.
Certainly not hard enough to prevent your CS people from even giving out a phone number to call for support. Most certainly not hard enough to not be able to address quickly.
Financial transaction analysis is an old science. Experienced people are hard to find, but not exceedingly hard. Systems already exist to mine the hell out of data to tell the scammers apart form the genuine people. An of course, you can build your own system and whatever analysis you want.
And how big do you have to be to be able to afford this? Not large at all. I think you overestimate the difficulty of catching bad guys.
You should note that the recurring complaint is NOT "PayPal froze my funds". The complaint is "PayPal froze my funds and then refused to communicate at all with me". This points to incompetence and lack of consideration much more so than "This shit's hard, yo!"
So, no, financial transaction analysis is not hard enough to screw over your customers.