Quote:
Originally posted by rowan
I don't think your interest rate analogy really works, since Verotel is not providing credit... it would be more like a bank charging mortgage insurance, you have to pay (say) 2% of the loan amount as an additional fee. The bank has figured out that a 2% overhead will cover all of their losses from borrowers who default.
Along the same line, part of the 15% that we typically pay third party processors helps to cover processing losses due to fraud and other billing issues.
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The analogy works fine. They may not be giving credit, but they're giving something similar to credit.
A surfer signs up for a site. The affiliate gets paid a week later with the hopes that the surfer won't chargeback. If the surfer charges back, they processor ends up in the hole.
Part of the 15% is not meant to offset losses. Losses come from profit. You can never accurately (or even semi-accurately) predict your potential losses.
Merchant fees are typically 1-4% plus a fixed amount per transaction. The processor has to pay those, plus the cost of their employees (programmers, webmaster support, customer support, tech support, etc). They have to pay for their offices, their utilities, their servers, etc. And on top of that, they want to make a profit.
As for this dude, why would they let him send more signups to cover his negative balance? Based on his history, chances are the new signups would bounce, chargeback or refund as well.