Massively recently ran an interview with SOE CEO John Smedley, which you can find here.The part that caught my attention was where he talked about the high number of credit card chargebacks gold farmers were generating for his company :
Massively: Earlier you mentioned the problem of farmers with regards to Station Access. I know that’s something the company feels very strongly about?
John Smedley: I think the issue of farming is higher on the radar now than it ever has been. The behinds the scenes things are really frustrating. A lot of these farmers are essentially stealing from us. What they do is they charge us back all the time. They use a credit card –sometimes stolen, sometimes not – to buy an account key. They use the account for a month, and then they call the credit card company and charge it back. We have suffered nearly a million dollars just in fines over the past six months; it’s getting extremely expensivefor us.What’s happening is that when they do this all the time, the credit card companies come back to us and say “You have a higher than normal chargeback rate, therefore we’ll charge you fines on top of that.”
This bit really caught my attention because I just finished a 16 month contract working in the chargeback department of a small bank here in Montreal and I can readily attest that MMO games companies do indeed suffer a lot from this kind of situation. Smed is not exaggerating the amount of money this can cost a company in losses from transaction reversals and penalties.
Other industries that do a high volume of their sales via on-line credit-card transactions, like MMO companies, do also suffer a very high profit loss from this kind of fraud. Examples that immediately come to my mind are long-distance phone service providers and airlines which sell tickets via the Internet. This is an inherent risk of doing business via the World Wide Web.
What Smed didn’t mention though is that these chargebacks can also cost banks a lot of money, mainly in operating costs. Indeed, processing these reversed transactions forces banks to allocate significant amounts of resources to what is essentially a loss generating activity. Chargebacks generate a significant amount of incoming calls that have to be processed by a Customer Service agent and also force banks to maintain large anti-fraud / Security departments in hopes of minimising losses from this kind of activity. In addition, they can often generate significant extra work for Merchant Services departments who have to explain to companies like Smed’s why they have been debited money and why they have been have been imposed monetary penalties.
So gold-farmers are not only a plague for MMO game companies but also a real nuisance for the banks who issue the credit cards used to defraud them as well as those who count the defrauded company as one of their merchants.
MMOs and the credit card chargeback
February 8, 2008
Massively recently ran an interview with SOE CEO John Smedley, which you can find here.The part that caught my attention was where he talked about the high number of credit card chargebacks gold farmers were generating for his company :
This bit really caught my attention because I just finished a 16 month contract working in the chargeback department of a small bank here in Montreal and I can readily attest that MMO games companies do indeed suffer a lot from this kind of situation. Smed is not exaggerating the amount of money this can cost a company in losses from transaction reversals and penalties.
Other industries that do a high volume of their sales via on-line credit-card transactions, like MMO companies, do also suffer a very high profit loss from this kind of fraud. Examples that immediately come to my mind are long-distance phone service providers and airlines which sell tickets via the Internet. This is an inherent risk of doing business via the World Wide Web.
What Smed didn’t mention though is that these chargebacks can also cost banks a lot of money, mainly in operating costs. Indeed, processing these reversed transactions forces banks to allocate significant amounts of resources to what is essentially a loss generating activity. Chargebacks generate a significant amount of incoming calls that have to be processed by a Customer Service agent and also force banks to maintain large anti-fraud / Security departments in hopes of minimising losses from this kind of activity. In addition, they can often generate significant extra work for Merchant Services departments who have to explain to companies like Smed’s why they have been debited money and why they have been have been imposed monetary penalties.
So gold-farmers are not only a plague for MMO game companies but also a real nuisance for the banks who issue the credit cards used to defraud them as well as those who count the defrauded company as one of their merchants.
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