Third-party payment processor PayPal introduced new tools last week to help Internet merchants defend themselves against credit card chargebacks.
The new services include a function that allows merchants to learn whether a customer used Visa or MasterCard to make a given purchase and what the last four digits of the credit card number are.
PayPal spokesman Vince Sollitto said the tools were developed in response to merchants’ requests.
“One of the biggest barriers to e-commerce is fraudulent use of stolen credit cards or so-called unauthorized use of credit cards or repudiated use of credit cards,” he said. “As a result, a lot of master merchants and other payment processing services—one of the things they try to do on behalf of people who receive payments for them is cut down on this internally and then also allow payment receiving merchants opportunities to manage their own risks.”
Sollitto said the payment processing company already has one of the lowest rates of chargebacks in the business. Of all online credit card purchases, 2.5 percent are charged back for a variety of reasons. Sollitto said PayPal’s chargeback rate is less than one half of one percent.
Armed with the new information now available from PayPal, merchants will be better equipped to help PayPal defend chargebacks to issuing banks or credit card associations should disputes arise, Sollitto said.
“It’s just another tool for them to help them manage their own risk,” Sollitto said.
In the online gaming industry, the service could mean operators have a chance to avoid the hefty fines some credit card companies levy against them if chargebacks reach a certain percentage of their business each month.
MasterCard, for instance, charges a monthly fee of $25,000 plus $25 per chargeback if the chargeback rate is more than one percent of business for two months in a row.
PayPal’s new services also include mechanisms for merchants to allow multiple users to gain different levels of access to their company’s PayPal account.