Optical/IP Networks

Skype's Plastic Problems

While some VOIP companies have trouble signing up new customers, Luxembourg-based VOIP provider Skype Technologies SA has a different dilemma: It can't take credit card payments from its current customers.

The company told Light Reading yesterday that it has problems accepting credit card payments for its SkypeOut service, the company’s pay service that connects IP phone calls to non-IP networks.

Light Reading was alerted to the problem by would-be SkypeOut users, then found hundreds of posts on Skype’s own user forums bemoaning repeated credit card denials.

”There is a serious billing issue going on,” Skype spokesperson Kelly Larabee told Light Reading Monday. But she is quick to attribute the problems to ”a large anti-fraud measure.”

Direct credit card payments to Skype have now been removed as an option at the SkypeOut store, and the company is asking customers to use third-party billers Moneybookers and PayPal as an ”interim” solution.

SkypeOut customers buy ”credits” to make calls that terminate on non-IP networks around the world through contracted providers such as Level 3 Communications Inc. (Nasdaq: LVLT) in the U.S. and Colt Telecom Group plc (Nasdaq: COLT; London: CTM.L) and Tele2 AB (Nasdaq: TLTO) in Europe.

A 10 euro credit (or about $13 U.S. dollars) buys close to 10 hours of calling at the SkypeOut global rate.

When asked what events led to Skype’s ”anti-fraud” program, Larabee replied that the program has been going on since SkypeOut’s debut in July 2004. ”Fraud has always been a serious issue with us.”

While Skype’s billing issues continue, Larabee says PayPal (now owned by eBay) and Moneybookers work just fine. These services, however, require SkypeOut users to leave the Skype site and set up another, seperate user account.

Larabee says that when it comes to fraud protection, PayPal and Moneybookers are a safer bet than dealing directly with the credit card companies. ”We are just encouraging our customers to use them because they have a bit more experience dealing with fraud issues,” Larabee says.

Disgruntled SkypeOut users say Skype is merely trying to avoid transaction fees of credit card companies when its customers pay using PayPal or Moneybookers. But Moneybookers and PayPal charge transaction fees too, Larabee says, although she wouldn't say how much and on what terms.

”We are a VOIP company,” Larabee said. ”Credit card fraud protection is not our core business.”

It's worth noting, too, that many of the same message board posters who complain about billing methods sing the praises of the SkypeOut service itself.

Skype was invented by the same folks who brought us the peer-to-peer (P2P) file sharing service KaZaA, which is still popular, despite its troubles with users distributing viruses and spyware. Skype 1.0, the company's flagship P2P VOIP service, has more than 29 million registered users and is adding more than 155,000 new users per day (see LR Reveals Leading Lights Winners). On March 11, the SkypeOut service reached more than a million users.

— Mark Sullivan, Reporter, Light Reading

lightreceding 12/5/2012 | 3:22:22 AM
re: Skype's Plastic Problems for online services. It bought down a few dot coms even before the bubble burst. It doesn't make sense that Skype would tell customers to use Paypal just to avoid credit card fees since Paypal charges fees too. It takes resources to manage fraud. Skype may be focusing on it's core compentency and leaving the card management to others. However this payment situation seems to be causing a public relations situation. I hope Skype solves it. They provide a good service.
Opticsace 12/5/2012 | 3:22:18 AM
re: Skype's Plastic Problems In a consumer business, customer service has to be one of the core competencies. While CC fraud is indeed a problem, hundreds of online businesses manage to provide secure CC payment (Net2Phone being one). The inability to make available direct payment transactions seems to me to be the kiss of death for a company trying to displace other carriers offering seamless service.
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