Looks like you have just discovered chargebacks, something that just about every merchant discovers at some point.
What to do? Some options to reduce your fraud are
- outsource the problem by using an indemnified payments system (a payment processor who do their own fraud checks and don't pass on any chargebacks to you). Pros: easy. Cons: expensive and lots of valid payments will be refused.
- Use an e-wallet that usually has few/no chargebacks, eg Skrill & Neteller. Pros. Easy, not too expensive. Cons: more difficult for people to make payments as they need to create an account with the e-wallet first.
- Use services to help with your fraud detection. Eg. Iovation. Pros: you can keep it easy for your customers to make payments. Cons. a lot of work to implement (relatively speaking).
- Use bitcoin, eg bitcoin247.com. Pros. no chargebacks ever. Cons. about 0.00001% of your customers use Bitcoin.
Edit: I forgot to add:
- require 3D Secure / Verified by Visa payments. This removes the chargeback liability from the merchant in most cases and shifts it to the card owners bank. Pros. much fewer chargebacks. Customers can still deposit directly on your site using their card (apart from the 3D redirect). Cons: entering 3DS details another barrier to making payments so will reduce payments. Plus I'm not sure of the penetration of 3DS cards in the US.
Gittip's professed concern is with ethics (and possibly sustainability), not losing money from chargebacks. The author realizes he has stolen money in his bank account, and that bothers him.
I'm pretty sure that their concern is also not needing to do the dirty legwork related to these cases. The time they need to deal with these problems is away from productive development time.
What to do? Some options to reduce your fraud are - outsource the problem by using an indemnified payments system (a payment processor who do their own fraud checks and don't pass on any chargebacks to you). Pros: easy. Cons: expensive and lots of valid payments will be refused.
- Use an e-wallet that usually has few/no chargebacks, eg Skrill & Neteller. Pros. Easy, not too expensive. Cons: more difficult for people to make payments as they need to create an account with the e-wallet first.
- Use services to help with your fraud detection. Eg. Iovation. Pros: you can keep it easy for your customers to make payments. Cons. a lot of work to implement (relatively speaking).
- Use bitcoin, eg bitcoin247.com. Pros. no chargebacks ever. Cons. about 0.00001% of your customers use Bitcoin.
Edit: I forgot to add: - require 3D Secure / Verified by Visa payments. This removes the chargeback liability from the merchant in most cases and shifts it to the card owners bank. Pros. much fewer chargebacks. Customers can still deposit directly on your site using their card (apart from the 3D redirect). Cons: entering 3DS details another barrier to making payments so will reduce payments. Plus I'm not sure of the penetration of 3DS cards in the US.