Chargebacks
Now that it’s possible for UK and US mobile developers to sell applications on the Android Market, some developers are complaining that the terms and conditions are being overly harsh on applications under $10.
In addition to a 48 hour refund period, billing disputes will be handles as follows…
"…billing disputes received by Payment Processor for Products sold for less than $10 may be automatically charged back to the Developer, in addition to any handling fees charged by the Payment Processor. Chargeback requests for Products $10 or more will be handled in accordance with the Payment Processor’s standard policy…."
The difficultly is that if a developer sells their application for less than $10 then, after a chargeback, they end up owing the payment processor handling fee (typically $10 to $25) through no fault of their own.
So when might chargebacks occur and how often? What’s the ‘Payment Processor’s standard policy’?
For many years, I sold tens of thousands of Windows Mobile and Symbian titles direct to end users using my own company credit card merchant account. At the time, with the merchant account I was using (NatWest in the UK), whenever there was a dispute, the bank sent a ‘Request for Information’ letter asking for evidence of the purchase. Some merchants might have a signature, passport copy or something validating the purchase. For the case of downloaded software, I didn’t have any evidence so had to write back saying I had no additional information. Within a few weeks, the transaction might get charged back.
I learnt that chargebacks can occur for four main reasons…
- It’s a fraudulent transaction with a stolen card details.
It’s one of banking’s secrets that while they advertise to consumers that their cards are guaranteed against fraud the reality is that, for customer not present transactions, it’s the retailer/merchant that takes the risk. This is written into the merchant’s T&Cs.
In practice, I found fraudulent transactions rarely happened compared to the number of non-fraudulent transactions. However, when they happened, they happened big time. The fraudulent end user purchased everything they could and I always ended up with a huge chargeback. This may be less of a problem on the Android Market because they will have probably also purchased someone else’s software, not yours.
- It’s someone who has forgotten what they purchased.
People often forget what they have purchased and if they don’t recognise the entry on their card statement, it can also cause a ‘Request for Information’. In these cases I printed out and sent back everything I had on the transaction including the product title.
In most cases, the person realised what they has purchased and there was no chargeback.
This is the tricky scenario for Android Market sales because Google is not going to allow investigation for applications under $10… and if the iPhone App Store is anything to go by, this means the majority of applications. Hence, depending on various banks’ processes, people just instigating queries for legitimate entries on their card statement might cause a chargeback.
- It’s someone who purchased who isn’t happy with the product.
This rarely happens. However, you soon learn you can’t please everyone. There’s always the customer from hell. It’s best to remind yourself, not everyone is of sound mind. In many cases, where the customer contacts you first, you can prevent chargeback fees by just refunding the customer rather than them going through their bank for a chargeback.
- It’s someone who purchased with the intention of requesting a chargeback.
This is one scenario that Android developers, on the forum post I mentioned, are worrying about. I found this rarely happens. It’s usually distinguishable from the stolen credit card scenario by virtue of the number of few software titles purchased. However, given by the number of people demonstrating unsound social skills on the comments of the Android market, I wouldn’t be surprised if this became a problem.
One final thought is that the Android 48 hour refund period seems to violate the UK and European distance selling laws that have much longer ‘cooling off’ periods.
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