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by callmeed
4474 days ago
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The type of fraud that is endemic to many marketplaces is exactly what can be prevented by going with the Stripe Connect approach. In a nutshell, what happens is (a) fraudster creates a fake "store" in your marketplace, (b) they run purchases through that store with stolen credit cards, (c) they attempt to have the funds transferred to a bank account. Your own founder even talked about it [1] and I've had to deal with this quite a bit at http://nextproof.com Actual merchants in the marketplace are rarely affected other than the user experience. But when all the chargebacks come back to you, it severely affects the bottom-line. I also think the user-experience has improved quite a bit (with Stripe Connect, you can have users provision their own Stripe account during signup). I would also argue, given how how "lean" many startups and MVPs are, many marketplaces are actually smaller and more at risk than the sellers they serve. Most marketplaces don't have $200M in funding and data scientists like EventBrite ;) [1] http://techcrunch.com/2011/06/16/founder-stories-eventbrite-... |
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When you run a marketplace you are sensitive to risks both from the merchant and the buyer. The first kind would be what you are describing and you are right that Stripe Connect mitigates this. But the latter is not a threat to ignore either, especially with the increasing number of high profile credit card breaches. What happens is that fraudsters attack legitimate merchants by purchasing goods using stolen credentials and reselling them later for full profit.
I just saw your marketplace was a platform for photographers -- in this case you are right my point doesn't really apply to you, because photographs have little resell value so such platforms will indeed not be a big buyer fraud target. Hopefully though my advice will be relevant for other people. For some platforms losses due to buyer fraud are able to potentially dwarf those due to than merchant fraud, mostly because the latter tends to be much easier to detect: for a merchant, you have many data points to figure out if they're fraudulent; for a single purchase you only have one!