Hack 26 Avoid Chargebacks on Digital Goods

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Make purchases of digital goods eligible for PayPal's Seller Protection by mailing physical goods.

PayPal's Seller Protection Policy [Hack #25] limits your exposure to fraud, provided that you follow its guidelines to the letter. The problem is that the policy applies "only to the sale of physical goods, and not to any services, intangible goods or sales or licenses of digital content." So what's a digital-goods merchant to do?

3.14.1 Shipping a Physical Version

The solution is to sell physical goods. Ship media, such as a CD-ROM, containing your software or e-book. You can still grant your customers immediate download privileges for the material they will be receiving on CD or floppy, but ship a physical product as well. Be sure to offer tracking of the package.

3.14.2 Thinking Outside the Disk

If you want to avoid the cost of a disk, mailer, and added postage every time you ship a CD, use paper instead. Encode your digital item with base64,[1] and then print it with a small font on both sides of plain letter-sized paper. Half a megabyte of data can easily be stored on 15 pages, which should weigh no more than three ounces.

[1] Go to http://www.fourmilab.ch/webtools/base64/ for one of many publicly available base64 encoder/decoder utilities.

Your customer can then scan the sheets with a scanner, convert them back into digital data with OCR software, and then decode the base64 code to recreate the original product. Obviously, it's unlikely that any customer will bother doing this, but since it's technically possible, your shipment will qualify for the Seller Protection Policy.

Be careful what you end up shipping. For instance, the User Agreement specifically states that "this protection applies only to the sale of physical goods, and not to any services, intangible goods or sales or licenses of digital content." This means that sending only a paper license or certificate of ownership would be insufficient for eligibility.