For anyone familiar with sites such as ebay, you may never consider this a high risk website.  After all it has extreme notoriety, and PayPal helps to secure your purchases, right?  This is actually this best example of a high risk merchant account.

Ebay as an entity is very high risk.  You have many people with or without references promising strangers products for a price that was not determined before selling.  You have a few ways to protect the sellers in this instance.  That can start their bidding higher, for an added cost, or they can set a reserve price that the auction must get to in order for their item to be sold, again for an extra cost.  The buyer has to pay the seller before the item is even shipped.  Now here is where things start to get risky.  What is to stop someone from selling one million dollars worth of goods, but not having them to send?  Or selling a genuine artifact that is actually nothing but a dollar store item?  This is where PayPal comes in.  PayPal is ebay’s high risk merchant account provider.  They have decided to guarantee any purchase up to $2,000.  This only applies to items paid for via PayPal.  How can they afford to that?  With each of the millions of transactions that ebay does, not only is the site charged a fee, but so is the receiver of the money.  By adding this security to potential buyers, why would they complete a transaction outside of PayPal?  Even if the seller has an excellent rating?  To make sure they have some recourse against the seller if needed.  A buyer doesn’t mind, why would he or she want to risk a bad check or fake money order.  By keeping a “mediator” or “guarantor” it takes a site like ebay that should be ultra high risk and makes it one that actually has minimal risks.  There are obvious issues that cannot be avoided, such as customer dissatisfaction, shipping delays, etc.

Ultimately, you are buying an item sight unseen.  Going by the sellers perception of the item, and your only recourse is to hope the seller is cooperative or file a complaint.  PayPal does guarantee up to $2,000 if certain requirements are met.  However, there are many items that sell for well over this price because the are collectors items or one of a kind.  At that point if a person uses a credit card, which can be used through PayPal as well, this gives an added security where there wasn’t any.  This is what keeps an auction high risk, if there is a chargeback, it is probably going to be a high dollar amount.

There are a few smaller sites that are trying to build up to the powerhouse that ebay is, but it will take some drastic measures.  After all why would you go through an unknown auction site, when there is one of reputation that has taken itself from high risk to lower risk by advertising their merchant provider.