ECON/BIZ: Rating the Current State of Electronic Payment Options

From: Chris Rasch (
Date: Sun Feb 18 2001 - 02:04:29 MST

The author experienced lots of problems with PayPal, credit cards.
Recommends e-gold and EZCmoney.

Rating the Current State of Electronic Payment Options
by Parker Bradley
January 29, 2001

My foray into running a web-based business (
started in November 1999. It has been an incredible series of ups
and downs; the downs being exacerbated, and sometimes actually
caused by the payment systems used. This article presents my
experiences with various electronic payment systems,
recommendations as to the best ones currently available, and what
you should do now, as a business, to avoid getting screwed!

The Bad

Credit Cards (Direct Merchant Account):

BUSINESS SOAR! . . ." -- Or so most
of the ads read. A more accurate
headline might read: "Take credit
cards now and let the headaches
begin, and your financial doom be
foretold." Most people have the
impression that acceptance of credit
cards is a must for any successful
online business.The reality is
different. Far from being a necessary
ingredient to success -- taking
credit cards as a means of payment
may actually destroy your business.

To be fair, accepting credit cards as
a means of payment can be a good
thing for some businesses. However,
if your business deals in valuable,
highly sought after items (like
electronics, fine jewelry, precious
metals, or other valuables), you
better think twice . . . maybe even
three or four times. Credit card
fraud is a huge problem, that "The
Industry" (referring to credit card
brands, like AMEX, Discover, MC,
VISA, et al and their supporting
service providers/gateways) does not
want to talk about, nor address
honestly. "The Industry's" lack of
support, or concern for measures to
prevent internet related credit card
fraud is especially troubling since
practical solutions to the problem
are rather straight forward and not
unreasonably difficult to
implement. Also disconcerting is "The
Industry's" actual encouragement of
irresponsible credit card use through
"Zero Consumer Liability" Policies
and in some cases "No Contest"
Chargeback Dispute contracts with
merchants. The worst, most flagrant,
and irresponsible example of the "No
Contest" chargeback policy, for
merchants, is American Express
(AMEX). If you are an internet
merchant taking American Express, and
a legitimate AMEX customer buys
something from you using their AMEX
card, you may never see your money or
the merchandise again. American
Express has a "cute" little policy
(for internet merchants and some
others) whereby if a customer doesn't
recall making a charge, they don't
have to pay; AMEX then takes the
money from the merchant, even if the
merchant can PROVE that the goods in
question WERE actually purchased and
received by the owner of the credit
card and that the merchandise is of
high quality. (Remember, a chargeback
can slap you in the face months after
the purchase was made.)

So what's the biggest problem, that
has the above mentioned "easy"
solution? The most serious, and
frequent type of online credit card
fraud involves not the theft and use
and a physical credit card, but the
theft and use of valid credit card
information. This can be done in a
number of ways, not the least of
which involves digging through
someone's garbage or the more
frequent electronic theft of
information (suggestions for personal
protection from this type of crime
are beyond the scope of this article
-- but may be written up at a later
time) ranging from fraudulent order
forms on the web to infiltration of
personal and commercial
computers. Depending on the skill of
the perpetrator (they get better all
the time), bad orders generated from
stolen information are often not
detectable as such -- only later
(sometimes much later) does a
merchant realize they've been burned
when money is pulled from their
account due to a chargeback.

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