Thursday, January 11, 2007

Will competition make it harder to write off fraud costs on auction sites?

Perhaps market forces will be what it takes to better protect buyers and sellers from fraud on auction sites? Competition dictates that the auction providers will have to offer a "better deal" to attract and maintain their customer base.

Internet auctions have become a "very" popular way to buy and sell goods, but they've also attracted a lot of fraud. And fraud seems to be motivating some changes at the most popular auction site, eBay.

eBay is limiting what types of transactions they protect and is banning Google's Checkout on it's site. In addition to this, they are increasing the dollar amount protected with PayPal.

Ina Steiner of AuctionBytes wrote:

eBay will double PayPal Buyer Protection on its site, offering up to $2,000 of coverage for qualified transactions on, but is eliminating buyer-protection for non-PayPal transactions. The move is a dramatic effort by eBay to push buyers to use its PayPal online-payment service at a time when it faces increasing competition from Google Checkout, a method it prohibits sellers from accepting on its site.
AuctionBytes story, here.

The story also mentions that eBay no longer protects transactions with financial instruments, such as wire transfers, money orders and checks. Scams using these now "unprotected" financial instruments have been well documented in the auction world.

The message is that if you don't use PayPal, or a credit-card - you aren't protected on eBay.

Not sure if eBay is trying to limit it's own fraud exposure, or if they are marketing fraud protection?

Even though buyers might be getting "slightly" more protection - sellers seem to be more at risk of losing money from fraud than they were before. They are either going to have to limit their "accepted payment methods," or take the chance of losing more money.

And so far as credit cards - "sellers" still are and "always have been" at risk of receiving chargebacks from the financial institution involved.

It will be interesting to see how this progresses and how auction users react.

The auction business is getting more "competitive," and writing off the cost of fraud is going to become "increasingly more difficult."

Here are some previous posts, I've written on auction fraud:

Romanian Second-Chance eBay Scammers Busted

California Issues Alert on Emerging eBay Fraud Trend

How to Spot a Counterfeit on eBay

Bid Reaper, "TELLING IT LIKE IT IS" on eBay

Auction Fraud and the Romanian Connection

How to Protect Yourself on eBay

BBB Worker Takes Job Processing Fraudulent eBay Transactions

1 comment:

prying1 said...

Gosh Ed - Reading this make me glad i quit selling on ebay. -


I would like to start up again one of these days.

I'd like to think the scammers would not bother with penny ante items I would be dealing with but I know that they would take a dollar 100 times as well as go for $100 once.

I'll think some more about getting into eBay sales...