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I know that I write blogs that are philosophical or generally strange in nature, but today I thought I would touch on a subject that I have a pretty solid information about because of my job, one that has been negatively affecting streamers for awhile.
I'm talking about Chargebacks. If you're a streamer that has received a lot of donations, I'm sure you know what this word is and have felt it's pain. For those of you don't know, let me explain to you what a chargeback is and how it works.
Let's say you go to a store and buy a pair of shoes with your credit card. You walk out of the store with the shoes in hand, you get home, open the box, only to realize you've been swindled! Someone switched out your shoes when you weren't looking! You decide to go back to the store and talk to the clerk which sold you the shoes, because surely they will be nice to exchange them for the shoes you wanted.
Except the clerk (and the business owner) are actually assholes and refuse to give the right pair of shoes to you, suggesting that "all sales are final." Well, that's just ridiculous! I shouldn't have to pay for shoes I didn't want!
So what do you do? You called your bank or whoever is backing your credit card, and you tell them that the purchase of $59.99 from the Nike store was a mistake because they purposely sold you the wrong product. WITHOUT EVEN VERIFYING THAT'S THE CASE, the bank or present backer will IMMEDIATELY give you your money back, then send a Chargeback notice to the store owner aka the Merchant (that's what we call people who process credit cards at my job).
The merchant then has 30 days from the date the notice is stamped - so if it takes 15 days to get to them, they have 15 days, to get evidence to the bank or backer (Visa, Discover, Mastercard etc.). It's not just simply evidence either - you have to have living proof that the card was physically swiped. If you manually entered the card, you lose the case instantly even with video evidence the person was there. With the new EMV regulations, you lose the case instnatly if it was SWIPED as an EMV card WITH video evidence of the person there.
If the merchant loses the case, they pay an extra $15 for the chargeback (other processors have higher fees) PLUS lose the money AND the stock of inventory. The customer does not have to return the goods.
So a chargeback is when someone calls their bank, says their card was stolen, got the wrong product and was refused a return etc. and the bank refunds that money to the customer instantly then waits 30 days for the merchant attempt to prove their case. I spoke with one my coworkers who has dealt with a lot of the chargeback stuff, and he said that nearly less than 1% of merchants win chargeback cases, and that was before EMV. Now, it would be way less than that because swiping the card doesn't guarantee crap anymore.
What does this have to do with streamers? Online businesses are WAY worse off when it comes to chargeback. I already explained above that even WITH video evidence, it's hard to win a chargeback case. Online? You literally have nothing. With the rollout of EMV, Merchants now hold more of the blame on chargebacks, including swiped entries. Online transactions can ONLY be manually keyed and will not be using EMV technology in the near future. As a streamer, you will NEVER win a chargeback case. Even if you did, the amount of time and effort it takes to win is not worth it in the end. Most merchants tell us they made more money spending their time and effort selling more stuff instead of fighting a chargeback.
But I understand streamers have to make money, so how does one get around this? First, you stop taking donations. You can't win, and I'm sure once people read this, it's going to get worse. But the truth is, this is happening already, and I decided to explain to people why they can't win this. STOP TAKING DONATIONS.
Second, improve your subscriber stuff. That's not going to stop people from doing chargebacks, but I believe Twitch has to eat that chargeback fee when it comes through. I'm sure there will be some talk about your channel if it happens a lot, but I doubt they're going to ban your channel for chargebacks through their system. You save yourself the heartbreak of losing $15 + your donation every time someone does this through paypal.
Thrid - work with third party resellers who already sell a lot of stuff online and get products on their site. I see people do Tshirts all the time. Someone should be filling this niche to help streamers make a living without having to live off donations that they may never get. Again, much like Twitch, it's likely these guys will have to eat the chargeback fee if it happens.
Last but not least - look into how you can accept donations outside of systems like paypal like an actual credit card merchant account. Why? Because while you have to pay other fee,s there are numerous protections to help you make sure someone has to be REALLY good at hoodwinking the system to screw you over. The company I work for has Fraud modules that make sure people have to enter matching Address information for the card, allow you to block certain cards from not being run at all, assure that it meets a certain amount requirement among other things. They're not full proof, but if you do accept donations, it's a good way to assure that someone has to have a lot of credit cards to continue screwing you over.
I'm not going to proofread this because I want to start warming up for the Killer Instinct tournament today, but I thought I would at least leave this here in the hopes that the information will spread. I've seen a lot of posts by streamers related to this so I thought it was time to bring out the truth.
Given the seriousness of this blog, I will be checking back to answer questions since I work in the industry and I'm sure I've poorly explained stuff.
 
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How is selling a product and then getting charged back the same as a donation bouncing? To me the donation case is much closer to somone left their wallet in your "store" and a day later came buy to pick up their money, then to a person buying something at a merchant.
With the donation there is no exchange of goods. It's literally "here, have my money" and the next day "oops I got super smashed last night and spent 100$ donating instead of buying food".
If you don't fight the chargeback, you have no fee to pay, no? Unless I'm missing something here the only damage to the streamer is his joy over a received donation gets taken away the next day?
Why would you advise people to stop taking donations? Even at 90% chargeback you're still getting 10% of people just GIVING you money.
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On April 03 2016 23:31 Branch.AUT wrote:
How is selling a product and then getting charged back the same as a donation bouncing? To me the donation case is much closer to somone left their wallet in your "store" and a day later came buy to pick up their money, then to a person buying something at a merchant.
With the donation there is no exchange of goods. It's literally "here, have my money" and the next day "oops I got super smashed last night and spent 100$ donating instead of buying food".
If you don't fight the chargeback, you have no fee to pay, no? Unless I'm missing something here the only damage to the streamer is his joy over a received donation gets taken away the next day?
Why would you advise people to stop taking donations? Even at 90% chargeback you're still getting 10% of people just GIVING you money.
I think you missed something - If you fight the chargeback, you will lose. You can't win in a chargeback case taking online payments. It's impossible. It's nearly impossible WITH PHYSICAL EVIDENCE. It's literally impossible to win, especially with the new EMV rules. The time you spend fighting the charge back could be spent making money some other way.
It's not easy either. There's a fuck ton of paper work and inspections that have to happen. You literally have to hire a consultant if you want to truly win to prove that you were following the rules - AND EVEN THEN, you're still likely to lose.
If you don't fight the chargeback, you pay the fee. If you fight the chargeback and lose, you pay the fee.
You're also forgetting that someone can charge back $1. Someone could chargeback $.01 and force you to pay the $15 fee, which again, you will lose. I cannot enforce the idea enough that fighting an online donation chargeback is an instant loss. To speak on your first question - A donation, an exchange of goods, whatever you want to call it - it's all the same to credit card companies. You could be donating to a charity and then charge it back and they would have to pay the fee and lose the money you "donated" to them as long as they didn't try to fight the case. Earn $1 to lose $15? If 90% of your donations are chargebacks, that last 10% better be some big fucking donations.
This is why most donations are done using physical dollars - you can't charge that shit back. Bigger charities know that and tread that line very carefully to make sure they don't get screwed out of donations. Some don't even except credit cards or even "bank" cards for this very reason.
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How frequently do chargebacks happen in stores, and how frequently do chargebacks happen for online streamers? What percentage of potential money is lost by streamers who encounter chargebacks?
Your shoes example of a chargeback showed that chargebacks can be perfectly justified; that customer wasn't being a jerk (in fact, the vendor was). I could see a stream donator/ subscriber trying to rescind his money if he didn't receive something that was promised; I can't see a significant number of them lying and being dicks for no reason whatsoever. This sounds more like a theoretical issue than a substantial, real one.
"If 90% of your donations are chargebacks, that last 10% better be some big fucking donations."
Honestly, it sounds like you're just making up numbers. 90%? Where does that come from? I'd imagine it's probably more like < 5% of donations are chargebacks, but I'll happily wait for you to supply some statistics.
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theoretically it sounds bad but are a large number of donations this bad?
any streamers you'd like to cite?
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On April 04 2016 03:43 DarkPlasmaBall wrote:
How frequently do chargebacks happen in stores, and how frequently do chargebacks happen for online streamers? What percentage of potential money is lost by streamers who encounter chargebacks?
This isn't that common. It depends on the company in question. Some bigger companies never have this problem. Others do and have had to pay hell for it. I can't imagine tons of streamers experience this, but this more about the weight of the possible problem, less about whether or not this problem has expanded to the point where it's overwhelming.
TL;DR - Statistically, one would suggest that this is a dime in the bucket. Philosophically, shit is still hitting the fan and will continue hitting the fan for some time.
Your shoes example of a chargeback showed that chargebacks can be perfectly justified; that customer wasn't being a jerk (in fact, the vendor was). I could see a stream donator/ subscriber trying to rescind his money if he didn't receive something that was promised; I can't see a significant number of them lying and being dicks for no reason whatsoever. This sounds more like a theoretical issue than a substantial, real one.
Donations though are not as easy as "i didn't get what I wanted." I think the common reason a chargeback happens for a streamer is because they have on-screen messages, so trolls decide to take advantage of the fact that they can issue a chargeback for the $1.00 donation getting their message on screen for free, and essentially charging the streamer $15. This is the internet we're talking about - people will do crazy shit because they can still hide behind the idea of anonymity.
Again though, I would think we would hear about this from more streamers if it was happening more statistically, but it doesn't look like it does. I'm simply explaining both the possible weight of the problem if it becomes an issue for someone, and pointing out the fact that once more people know this, no one is safe. Before the new EMV regulations, it was nearly impossible to win a charge back from an online transaction. After EMV, it will be impossible. Even swiped transactions are considered more volatile. Hell, EMV Chip transactions that are stolen will still be blamed on the merchant. The weights have shifted even more toward the consumer than they already were for the same security.
"If 90% of your donations are chargebacks, that last 10% better be some big fucking donations."
Honestly, it sounds like you're just making up numbers. 90%? Where does that come from? I'd imagine it's probably more like < 5% of donations are chargebacks, but I'll happily wait for you to supply some statistics.
Yeah, I was using the same example from the person I was responding to. If you have that happening, I sure you hope you figure out what the fuck is going on before it's too late.
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On April 04 2016 04:25 BeStFAN wrote:
theoretically it sounds bad but are a large number of donations this bad?
any streamers you'd like to cite?
I'm searchiong more, but he has a tweet that shows his emails. I'll find it here in a sec, but this the start.
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On April 04 2016 05:11 hoby2000 wrote:Show nested quote +On April 04 2016 03:43 DarkPlasmaBall wrote:
How frequently do chargebacks happen in stores, and how frequently do chargebacks happen for online streamers? What percentage of potential money is lost by streamers who encounter chargebacks?
This isn't that common. It depends on the company in question. Some bigger companies never have this problem. Others do and have had to pay hell for it. I can't imagine tons of streamers experience this, but this more about the weight of the possible problem, less about whether or not this problem has expanded to the point where it's overwhelming. TL;DR - Statistically, one would suggest that this is a dime in the bucket.
That's what I thought... yet you're saying very extreme things like "STOP TAKING DONATIONS." Why throw away a huge percentage of one's stream income just because a few people rarely ask for their donations back? From what you said, it's clear that it sounds awful in theory, it's almost a non-issue in practice, and we really shouldn't be overreacting. We should be aware that it can occur and from time-to-time does occur, but streamers shouldn't stop taking donations o.O Thank you for explaining what a chargeback is (I had no idea), but I feel like your post also came across as "Warning: This is a huge issue!" rather than "Here's something that occasionally happens and it sucks".
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Yeah I think it would be stupid for streamers who make as hit ton from it to do this. Like just look at streamers like Summit/lirik/etc who easily make over 1 mil a year with just donations. Even with chargebacks they will make a shit ton more then if they just did subscribers.
Honestly I don't see any upside to getting rid of donations as a streamer other then the rare occasion where some guy does a chargeback. I bet it sucks, but not enough to take out that income and just get subscriber info lol.
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I'm glad I got out when I did and never had to deal with this bullshit.
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You seem to all be from the US, but which law applies, the streamer's or the pseudo-donnator's?
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I think you forgot to mention an important point about how charge back always win. If you donate or pay via paypal using a credit card directly(not uploading funds into PP), all you have to do is call the bank within 48 hours and the payment will be cancelled. It takes 2-3 working days for paypal to receive or send funds from your card so calling the bank to block the payment instantly screws over the merchant. However if you do lose the chargeback case on paypal or if you do it too frequently, your account balance will go into negative and might even get closed. I bought some game keys off a shady website once, they were used when delivered so i filed a chargeback. Although i got my bank to withhold payment i still lost the case and has negative on my paypal account.
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EPT
