Avoiding charge backs

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Online merchants and communities suffer very high rates of charge-backs when selling to young users. Here is how Plastyc delivers a charge-back-immune payment service.

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Avoiding charge backs

  1. 1. Patrice Peyret – CEO, Plastyc, Inc. Reducing Charge Backs for online purchases made by teenagers and students
  2. 2. The Charge Backs Problem with young users Junior makes a purchase with a parent’s (or a friend’s) “borrowed” credit card Mom discovers the transaction after the facts and disputes it.
  3. 3. Typical sources of problems <ul><li>Funds loading </li></ul><ul><li>Issuance </li></ul>Funds mis-use Repudiation of transactions 4000 GOOD THRU 03/10 DEBIT CARDHOLDER NAME 4000 0000 0000 0000 4000 GOOD THRU 03/10 DEBIT CARDHOLDER NAME 4000 0000 0000 0000
  4. 4. Tightening Issuance <ul><li>Verify: </li></ul><ul><ul><li>Consistency of [Name : Birth date : SSN] </li></ul></ul><ul><ul><li>No match on OFAC list </li></ul></ul><ul><li>of cardholder, or parent of minor cardholder </li></ul><ul><li>Out-sort manually user applications with low consistency scores or with OFAC hits </li></ul><ul><li>Verify physical address by sending prepaid card to billing address of funding credit card </li></ul><ul><li>(also avoids funding fraud) </li></ul>
  5. 5. Good Funding <ul><li>From parent credit card </li></ul><ul><ul><li>Use same billing address for parent credit card and delivery of teen prepaid card </li></ul></ul><ul><li>From parent banking account </li></ul><ul><ul><li>Positive verification of account ownership </li></ul></ul><ul><li>Parents have a separate online web access </li></ul><ul><ul><li>(from the teens) with their own username & password </li></ul></ul><ul><li>Plastyc takes liability for funding fraud => transactions done with disputed parental or other funding are not reversed </li></ul>4000 GOOD THRU 03/10 DEBIT CARDHOLDER NAME 4000 0000 0000 0000
  6. 6. Valid Purchases <ul><li>If card is declared stolen or lost: </li></ul><ul><ul><li>Plastyc implements Visa’s Zero Liability policy and covers any loss from subsequent transactions </li></ul></ul><ul><li>If card number is stolen and used in a card non-present transaction </li></ul><ul><ul><li>Plastyc will not reverse the transaction if the online merchant has linked its user namespace to Plastyc’s and provides usernames for disputed transactions </li></ul></ul><ul><li>If online transaction is disputed by legitimate user </li></ul><ul><ul><li>Plastyc will fight the repudiation if the online merchant has linked its username space to Plastyc’s and provides usernames for disputed transactions </li></ul></ul>
  7. 7. 100% Cover for Partner Merchants <ul><li>Plastyc takes liability for the origin of funds: </li></ul><ul><ul><li>No issuance to un-verified users </li></ul></ul><ul><ul><li>Funds from parents are indeed from parents </li></ul></ul><ul><ul><li>We don’t reverse purchases if funds are found to be disputed </li></ul></ul><ul><li>Plastyc takes liability for stolen/lost cards </li></ul><ul><ul><li>Visa’s zero liability policy </li></ul></ul><ul><li>Plastyc takes liability for transactions with online partners: </li></ul><ul><ul><li>If the namespaces between Plastyc and online merchants are linked, then Plastyc will: </li></ul></ul><ul><ul><ul><li>Fight repudiation with legitimate cards </li></ul></ul></ul><ul><ul><ul><li>Not reverse charges made with stolen card numbers </li></ul></ul></ul><ul><ul><li>as long as online merchant confirms user ID with which the transactions were carried out </li></ul></ul>

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