Factorio Forums

The latest Friday Facts mentions "chargeback" and "chargeback fee". What are those? More specifically, who pays a fee to whom? I couldn't figure it out from the context, and I'm not familiar with the industry.

-TC

Basically, when a credit card payment is found to be fraudulent, it is "charged back", and the bank that acquired money from charges for your business charges you a "chargeback fee". It depends on a number of factors on an individual basis, but some estimates I've seen estimate that a business loses about $2.40 for every $1 that is "charged back" because of fraud. So $100 in fraud costs the business $240.

Thank you for the reply, but it is still not clear who is paying a fee to whom. Are you saying that when a payment for Factorio is found to be fraudulent, the Factorio team must pay a fee to its own bank?

-TC

T__C wrote: ↑

Fri Jul 19, 2019 12:50 am

Thank you for the reply, but it is still not clear who is paying a fee to whom. Are you saying that when a payment for Factorio is found to be fraudulent, the Factorio team must pay a fee to its own bank?

-TC

Yes (Wube pays the bank).

Thank you for the explanation.

-TC

Jap2.0 wrote: ↑

Fri Jul 19, 2019 1:23 am

T__C wrote: ↑

Fri Jul 19, 2019 12:50 am

Thank you for the reply, but it is still not clear who is paying a fee to whom. Are you saying that when a payment for Factorio is found to be fraudulent, the Factorio team must pay a fee to its own bank?

Yes (Wube pays the bank).

In case someone gets confused later: you have money taken back by whoever does payment services for you.

In the end that is usually VISA or MasterCard, or someone like that. If VISA takes money from your bank, your bank takes money from you.

If you go through someone else like Stripe, or PayPal, the same thing applies: they takes money from you. Normally because Stripe or PayPal had their bank take the money from them, which the bank did because VISA took the money from the bank...

Basically, whoever processes the credit card says "we won't be left paying for fraud" and passes it on to, ultimately, Wube. Just like check fraud used to work: send a check that can't be paid, but get the product before anyone finds out, and profit. The person holding the bad check loses.


Theoretically this makes sure that the person selling stuff, like Wube, works hard to make sure they don't let people buy with stolen credit cards. In the real world it means that nobody does, because Wube don't do the fraud detection - they pay someone to do it, which is smart, because it is very hard - but everyone else involved doesn't care. Only Wube really loses money, so the incentive doesn't work nearly as well as it should.

slipperycheeze,

I appreciate your effort to clarify the system, but I think you've focused on the chargeback, while my ignorance was mostly about the chargeback fee. To paraphrase my understanding:

The chargeback makes whole all the agents in the payment chain. Wube does not lose money on the chargeback. Wube breaks even on the chargeback because it is just the return of money that was paid to Wube earlier.

Wube loses money on the chargeback fee. If Adamo and Jap2.0 are correct, then the chargeback fee is a fee paid by Wube to the bank. I would guess that the chargeback fee is ostensibly meant to cover the bank's cost of processing the chargeback, but in reality is a bit of profiteering by the bank.

-TC

T__C wrote: ↑

Fri Jul 19, 2019 3:39 am

slipperycheeze,

I appreciate your effort to clarify the system, but I think you've focused on the chargeback, while my ignorance was mostly about the chargeback fee. To paraphrase my understanding:

The chargeback makes whole all the agents in the payment chain. Wube does not lose money on the chargeback. Wube breaks even on the chargeback because it is just the return of money that was paid to Wube earlier.

Wube loses money on the chargeback fee. If Adamo and Jap2.0 are correct, then the chargeback fee is a fee paid by Wube to the bank. I would guess that the chargeback fee is ostensibly meant to cover the bank's cost of processing the chargeback, but in reality is a bit of profiteering by the bank.

-TC

That is my understanding, yes. This is in line with the overall lesson that is in the world of credit cards, vendors (in this case, Wube) have taken on the risk cost of processing credit cards, and ultimately work that back into the price of their products, for better or worse.

T__C wrote: ↑

Fri Jul 19, 2019 3:39 am

The chargeback makes whole all the agents in the payment chain. Wube does not lose money on the chargeback. Wube breaks even on the chargeback because it is just the return of money that was paid to Wube earlier.

Wube uses the HumbleWidget to process the paiment, as an agent in the payment chain. I guess the longer it is , the more people impacted, what feels the most injust for me is that out of all the agents, only one allow itself to take a fee in case of a chargeback, and only 1 is responsible to pay 100% of it.

But when no chargeback occurs , sure everyone agree to take its share.

Just another way the corporations stick it to the rest of us / the little guy. In my eyes the fee should be paid by VISA or Mastercard, it is after all their system which was compromised or abused, it had nothing to do with Wube per se, of course they wanted the sale.. The whole credit card system seems ripe for abuse, from people stealing identity and walking into a store and out again with credit on £1,000's of goods, to actual credit card fraud itself. In the UK we extensively used 'chip and pin' on debit or credit cards, a 4 digit number needed at point of sale. I think in America this isn't even widespread? Or have things improved? Anyway, over here now the latest is 'contactless' type cards / sale methods, no PIN for sales up to 30 quid or so, sure it's quicker.. I wonder how many purses and wallets get stolen each day in the UK though?

And you can bet if it were your bank account which were compromised in some way, they'll be first questioning YOUR computer security competence.. Yet their system is burned every second for how many millions globally?

Ghoulish wrote: ↑

Tue Jul 23, 2019 2:56 pm

I think in America this isn't even widespread? Or have things improved?

Here in the US (or at least in my area of it), debit cards typically will require the PIN if you're running them as debit. Credit cards (and debit cards being processed as credit) do not use the PIN, and only sometimes require a signature.

Ghoulish wrote: ↑

Tue Jul 23, 2019 2:56 pm

Anyway, over here now the latest is 'contactless' type cards / sale methods, no PIN for sales up to 30 quid or so, sure it's quicker.. I wonder how many purses and wallets get stolen each day in the UK though?

My gripe with the contactless cards is that now it's easier to steal your card info. Don't need to steal the wallet... just walk by with a scanner.

FuryoftheStars wrote: ↑

Tue Jul 23, 2019 3:41 pm

My gripe with the contactless cards is that now it's easier to steal your card info. Don't need to steal the wallet... just walk by with a scanner.

Still vastly easier to just spend the 73 cents per card, or whatever it has dropped to now, and buy them in bulk.

FuryoftheStars wrote: ↑

Tue Jul 23, 2019 3:41 pm

My gripe with the contact less cards is that now it's easier to steal your card info. Don't need to steal the wallet... just walk by with a scanner.

Very true, it's something that perhaps many do not realise. You do not even need a dedicated scanner, an app for your phone is enough, then all someone need do is brush their mobile in the general area they think your wallet / purse / card's are - and let's face it, they'll all be in the same place, and voila. You can get something called an RFID Blocking Wallet / Purse / Sleeve. If you're reading this you should probably get one, they are £2-3ish for a simple metallic sleeve / envelope for a card.

It boggles my mind a little that this contact less system was even approved or developed, wasn't it obvious that there could be would be rampant fraud?

But that still doesn't give the thief the code on the back on the card ?

BlueTemplar wrote: ↑

Sun Jul 28, 2019 1:19 pm

But that still doesn't give the thief the code on the back on the card ?

A scanner wont give you the 3 digit number on the back, but it will allow you to clone the card, and if it's a contact less type then potentially at least, take directly from your bank account. It must vary from country to country or even state to state, but that code isn't always needed.

I do question however how prevalent this practice of scamming contact less cards is. You'd have to setup some sort of fake business with associated bank accounts? And then some sort of third party payment processing too? Or don't you even need that and can have payments set up to a non business bank account?

Fake ID is commonplace, and setting up a business is just a matter of paper work. So I can see the potential for abuse there - but don't know enough about specifics of how the system works to attempt to figure out how likely it is. Criminals must be willing to take those steps though, I can only guess how much a thief might earn doing this just by travelling on public transport for a day, then taking the money out ASAP / convert it to bitcoin or the like.

Ghoulish wrote: ↑

Sun Jul 28, 2019 3:12 pm

BlueTemplar wrote: ↑

Sun Jul 28, 2019 1:19 pm

But that still doesn't give the thief the code on the back on the card ?

A scanner wont give you the 3 digit number on the back, but it will allow you to clone the card, and if it's a contact less type then potentially at least, take directly from your bank account. It must vary from country to country or even state to state, but that code isn't always needed.

I do question however how prevalent this practice of scamming contact less cards is. You'd have to setup some sort of fake business with associated bank accounts? And then some sort of third party payment processing too? Or don't you even need that and can have payments set up to a non business bank account?

Fake ID is commonplace, and setting up a business is just a matter of paper work. So I can see the potential for abuse there - but don't know enough about specifics of how the system works to attempt to figure out how likely it is. Criminals must be willing to take those steps though, I can only guess how much a thief might earn doing this just by travelling on public transport for a day, then taking the money out ASAP / convert it to bitcoin or the like.

Now i am no thief, but if i were, i wouldn't go to public transport, that is for poor people, they have no money to steal, full of cameras, and everyone might report in the same area. I would go to various chic/luxurious places so as to maximize the potential per card number, else rather buy them at 73cents if that is the price. ( if i was rich i'd be extra careful there x) ).

Banks don't monitor each transaction (unless you specifically pay them for), so if you just have the account number of someone/credit card clone, you can process most automated transaction. It would go unotice if not for the victim complaints, in which case the bank make sure it's a legit complaint, try to put the responsability on victim's shoulder or at least share it, but in my country eventually they are legally compelled to cover the entire cost from the victim.

This is simpler to understand when the victim and thief are in the same bank. If only 10% victim complaint, the bank as a conflict of interest seeing the thief as a productive company. ( taking like 20 cents to dozens of thousand with a hacked ATM , highway toll machine, airport parking thing ). Especially if the thief also sells stuff like ringtones for mobiles, porn videos, advice on how to find the love of your life , kind of business where many many small transactions would be common and automated.

If it's more 99% victim will complaint,i think taking the cash as soon as possible is logical, either bitcoin, and before people just ordered stuff on the internet or magazines and sold them. ( That could be one of the source of the chargebacks ).

For international each transaction is not physically represented, there is no fund transfer every second between every bank for each customer that makes one, it's only let's say at the end of the day that the banks sum up the differences and sold only the balance. https://en.wikipedia.org/wiki/Clearing_house_(finance) that's those guys job to manage that part and its safety they are like "a bank for banks". (with the same conflict of interest).

Now as to why a country would not voice a complaint through its bank if money is regularly stolen, i guess that is what is called a diplomatic lever, depending on the quantity of money. I don't see many country ORDERING to the USA or China for example that the fraud stop or be punished. Like maybe they want to but on the other hand they receive more than they lose ( or would lose even more), like it's only the random citizens who lose something when there is CC fraud, and the counterpart is the whole state ( or just some individual depending on how corrupt is your place) that receive benefits of not complaining too much !

On the other hand, a "small/poorer" country whose individual would have developped a practice of preying on bigger countries like those fake money that awaits you if you agree to pay the lawyier fee first. ( https://en.wikipedia.org/wiki/Advance-fee_scam ), what do you think the big countries has more interest to do ? Ask for the money to be given back to its citizen, or ask other stuff, like oil, space for military, economic advantages ?

I guess scamming contactless card is only one part of the fraud, but some others that are similar in consequences and roughly rely on the same mechanism are pretty common.

mmmPI wrote: ↑

Sun Jul 28, 2019 6:57 pm

If it's more 99% victim will complaint,i think taking the cash as soon as possible is logical, either bitcoin, and before people just ordered stuff on the internet or magazines and sold them. ( That could be one of the source of the chargebacks ).

Considering what happened to Silk Road, we can guess that USA's three-letter agencies have the means (if there's a will) to identify even those bitcoin transactions that went through a "blender".

BlueTemplar wrote: ↑

Sun Jul 28, 2019 7:37 pm

mmmPI wrote: ↑

Sun Jul 28, 2019 6:57 pm

If it's more 99% victim will complaint,i think taking the cash as soon as possible is logical, either bitcoin, and before people just ordered stuff on the internet or magazines and sold them. ( That could be one of the source of the chargebacks ).

Considering what happened to Silk Road, we can guess that USA's three-letter agencies have the means (if there's a will) to identify even those bitcoin transactions that went through a "blender".

I disagree, it's like saying because Al Capone was caught USA had the mean to identify every bootlegger.

BlueTemplar wrote: ↑

Sun Jul 28, 2019 1:19 pm

But that still doesn't give the thief the code on the back on the card ?

No, but these are only required for certain transaction types (mostly online, and not every online transaction requires it. I just booked a hotel for this next weekend that did not ask for it, for example). If someone had the ability to reprogram a "blank" card, this would allow them to use it physically. That also assumes that the code on the back isn't programed into the swipe/rfid normally, either. I'm not familiar enough with them to know. There may be other ways of using the card number, too, that I'm not thinking of.