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Author Topic: How are Virwox et al able to accept credit cards for Linden dollars?  (Read 3494 times)
barbarousrelic
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April 23, 2012, 01:48:03 PM
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How do they not have the same problems with chargeback fraud that Bitcoin sellers have?

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paci
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April 23, 2012, 02:33:42 PM
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How do they not have the same problems with chargeback fraud that Bitcoin sellers have?

My guess is that they probably have problems with chargebacks. But they probably have high fees
(3.9% in trading?) in order to offset chargebacks?

/paci

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April 23, 2012, 02:48:01 PM
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How do they not have the same problems with chargeback fraud that Bitcoin sellers have?

My guess is that they probably have problems with chargebacks. But they probably have high fees
(3.9% in trading?) in order to offset chargebacks?

/paci
With the deposit fee, needing to do two separate trades to turn USD to BTC, and another withdrawal fee, the total fee comes to ~10%.

They also have extremely (!) low limits (I think it's something like $48) on how much you can withdraw at a time.

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April 23, 2012, 02:55:20 PM
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To add to the other factors:
a) they are an established business with their own merchant account that gives them at least a fighting chance
b) Bitcoin is only a portion of their business.

If they were to switch to Bitcoin only sales with a $5000 maximum I would imagine they would be bankrupt within a month.
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April 23, 2012, 02:58:59 PM
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How do they not have the same problems with chargeback fraud that Bitcoin sellers have?

My guess is that they probably have problems with chargebacks. But they probably have high fees
(3.9% in trading?) in order to offset chargebacks?

/paci
With the deposit fee, needing to do two separate trades to turn USD to BTC, and another withdrawal fee, the total fee comes to ~10%.

They also have extremely (!) low limits (I think it's something like $48) on how much you can withdraw at a time.
The withdraw and deposit limits are dependent on the volume you have traded and how long you have been a member, so yes in the beginning they have low limits to keep people from depositing tons and converting it into BTC, to then reverse the transaction. Though their fees are really heavy, still one of the cheapest way to get BTC via paypal or CC.
//DeaDTerra
hazek
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April 23, 2012, 03:19:39 PM
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A better question is how are poker sites like pokerstars able to accept credit cards..

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Gerald Davis


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April 23, 2012, 03:21:34 PM
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A better question is how are poker sites like pokerstars able to accept credit cards..

The rake.  Roughly 50% of all funds deposited get converted into rake (the other half gets transferred from fish -> regs Smiley ).  CC fraud cuts into that but enough that they still remain profitable.  Gambling sites in generally lose a ton to CC fraud.

For player vs house gambling Bitcoin as an option alongside reversible deposit methods can reduce that fraud but for player vs player the only way to combat CC fraud is to ONLY accept Bitcoins which so far no poker operation of significant size is willing to do.
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April 24, 2012, 01:39:23 AM
 #8

How do they not have the same problems with chargeback fraud that Bitcoin sellers have?

The difference is that for some reason PayPal gives purchases of Linden Labs different treatment than purchases of Bitcoins.  Maybe it is because when VirWoX first started trading, purchases for Lindens (SLLs) occurred to be able to use them in-game.  Now there is a certain amount of SLLs that are purchased, and immediately turned around sold for bitcoins.

VirWoX probably gets fair treatment by PayPal as well.  If the customer claims to not have received the SLLs, VirWoX can prove that the SLLs were truly delivered to the account and their disposition from there.   So the only fraud that remains is the cardholder claiming the card was stolen / pruchase was not authorized which is probably more manageable.

Alos, VirWoX probably has enough volume by legitimate purchases for Second Life users that the fraudulent charges for Bitcoin pruchases is not enough to derail their ability to accept PayPal (e.g, chargeback ratio stays below certain levels.)

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