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Author Topic: Credit/Debit card to BTC problems  (Read 1909 times)
Denicen
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May 25, 2011, 05:11:17 AM
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I've been reading and doing some research on why there hasn't been a CC/debit card to bitcoin service yet. The big reason seems to be the threat of chargebacks/fraud, and that credit card companies consider buying currency a cash advance so additional fees would apply (although this isn't a problem for debit cards).
So I was just thinking, wouldn't it be extremely easy to prove that you actually delivered the bitcoins by having the agreement written out beforehand that you would send your bitcoins from your address to theirs, and that this would be verified using blockexplorer? Wouldn't it be extremely easy to then prove that you actually delivered what it is you said that you would deliver?
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May 25, 2011, 05:23:07 AM
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when you send a bitcoin to another person, all the Bitcoin network know it.
what more you want to prove?

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bitcoinewbie
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May 25, 2011, 05:25:08 AM
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I See nothing wrong with your logic, debit cards with proof of transfers seems fine, you still have the issue of "who goes first?" i think, but that problem is beat by an exchanger with a good reputation... Someone putting exactly that together is not only going to make themselves extremely wealthy through fees, but are also going to open up a floodgate of new buyers that are currently in that limbo where they would buy if it were easier to do so, and who knows how big that market is.  All the PR of late would be so much more usefully if people could easily buy BTCs.
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May 25, 2011, 06:00:08 AM
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I See nothing wrong with your logic, debit cards with proof of transfers seems fine, you still have the issue of "who goes first?" i think, but that problem is beat by an exchanger with a good reputation... Someone putting exactly that together is not only going to make themselves extremely wealthy through fees, but are also going to open up a floodgate of new buyers that are currently in that limbo where they would buy if it were easier to do so, and who knows how big that market is.  All the PR of late would be so much more usefully if people could easily buy BTCs.

It was "easier" to buy bitcoins months ago, before PayPal decided they didn't want people buying and selling bitcoins with their service. Interestingly, the demand for (and price of) bitcoins has risen even faster since then.

Of course, buying with a credit/debit card is very risky for the seller (of bitcoins) so even if someone did offer the service, it would likely carry a high premium.

In the meantime there are plenty of ways to buy bitcoins. You should try one or more of them. Smiley

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shackra
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May 25, 2011, 06:03:46 AM
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It was "easier" to buy bitcoins months ago, before PayPal decided they didn't want people buying and selling bitcoins with their service.

and you know why they don't want that? :O

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error
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May 25, 2011, 06:11:27 AM
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It was "easier" to buy bitcoins months ago, before PayPal decided they didn't want people buying and selling bitcoins with their service.

and you know why they don't want that? :O

Because bitcoins will put them out of business.

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Denicen
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May 25, 2011, 06:14:59 AM
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error, what I'm trying to say is that it shouldn't be that risky in terms of chargeback fraud, since you can document the transaction through the blockchain. If I understand correctly then the biggest threat is people using stolen credit cards to buy it (which is a risk with most any online business, no?). With debit cards couldn't you require their PIN number, therefore making it extremely difficult to commit fraud?
I guess I'm confused as to where the seller is taking a big risk.
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May 25, 2011, 06:20:18 AM
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error, what I'm trying to say is that it shouldn't be that risky in terms of chargeback fraud, since you can document the transaction through the blockchain. If I understand correctly then the biggest threat is people using stolen credit cards to buy it (which is a risk with most any online business, no?). With debit cards couldn't you require their PIN number, therefore making it extremely difficult to commit fraud?
I guess I'm confused as to where the seller is taking a big risk.

With credit (and debit) cards, merchants have almost no protection from fraud. This is the dirty little secret of that industry. Even if a merchant can prove they shipped a product to someone, a fraudulent buyer can still get their money back and without even returning the item. And merchants are forced to eat the cost if they ship anything and the card turns out to be stolen. (Which is why the largest ones have their own fraud prevention departments.)

With a product like Bitcoin, it's a very unattractive proposition. They're just way too risky.

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Mike Hearn
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May 25, 2011, 07:27:26 AM
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Good luck finding a credit card processor who will accept the block chain as proof of purchase.

CoinPal had very low fraud rates before it got shut down. The problem is manageable. The next step is for someone to find a processing firm that will accept currency exchange, get a merchant account with them (after verifying it's all OK) and start selling again.

I'm sure it will happen. It's just a matter of time. It's not that long ago that CoinPal got switched off, and it's the summer so people are busy with vacations, family, etc.
malditonuke
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May 25, 2011, 08:11:52 AM
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I've been reading and doing some research on why there hasn't been a CC/debit card to bitcoin service yet. The big reason seems to be the threat of chargebacks/fraud, and that credit card companies consider buying currency a cash advance so additional fees would apply (although this isn't a problem for debit cards).
So I was just thinking, wouldn't it be extremely easy to prove that you actually delivered the bitcoins by having the agreement written out beforehand that you would send your bitcoins from your address to theirs, and that this would be verified using blockexplorer? Wouldn't it be extremely easy to then prove that you actually delivered what it is you said that you would deliver?

It is being worked on.  I, for one, am working on it.  I've been turned down by two major credit card processors so far.  The problem isn't that the underwriters see this as a high risk model - it's that the underwriters see this as a high-as-a-college-dropout risk model.

Their two primary fears are chargebacks and regulations.  For instance, will regulators call it a money-transfer business?  If so, then prepare to kiss your business goodbye, because the Established Ones have bribed lobbied too much to suffer the pains of competition.  And if it's technically a currency, another processor told me no can do.

As for chargebacks, well, let's just say it is going to take an AMAZING customer service agreement and a full year of solid credit card receipts (presumably through a less risk-averse processor) before these guys will be willing to then consider bitcoin as a "high-risk model".


I still plan to go ahead with a higher premium processor, but will customers be willing to pay for it?  Who knows?
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May 25, 2011, 09:55:46 AM
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Wouldn´t the easiest way around that be to just treat bitcoins like a customer loyalty program. Don´t sell the bitcoins, but rather sell some other product or service( an ebook on bitcoins for example) and hand out some bitcoins as a reward, very much in the same way that frequent-flyer miles or reward points are used nowadays, even across several merchants. It might make more sense to position and market bitcoins as a reward/customer loyalty program(at the very least in the short run) as that gets around the whole issue of it being banned due to it being considered a currency. It would have the nice side effect of giving merchants who dont feel comfortable accepting bitcoins yet the option of getting involved by distributing them in form of a reward program.

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malditonuke
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May 25, 2011, 10:57:44 AM
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Wouldn´t the easiest way around that be to just treat bitcoins like a customer loyalty program. Don´t sell the bitcoins, but rather sell some other product or service( an ebook on bitcoins for example) and hand out some bitcoins as a reward, very much in the same way that frequent-flyer miles or reward points are used nowadays, even across several merchants. It might make more sense to position and market bitcoins as a reward/customer loyalty program(at the very least in the short run) as that gets around the whole issue of it being banned due to it being considered a currency. It would have the nice side effect of giving merchants who dont feel comfortable accepting bitcoins yet the option of getting involved by distributing them in form of a reward program.

I've thought about selling something else and giving bitcoins as a "bonus".  That may solve the 'What the hell is bitcoin?! I'm so startled!!' problem.

Whatever is sold instead, it can't require physical delivery (sales tax), so it either has to be a digital good or a service.  Here's a problem with the ebook angle:  You buy a genuine ebook that includes 5 bitcoins.  But you want more bitcoins, so you.... keep buying the same ebook?  Damnit, now I'm writing ebooks every day!  Tongue

And whatever it is, it has to pass muster as far as the underwriter is concerned.
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