Why do barter exchanges have such bad security?

Does this open vault remind you of your barter exchange account?  Is it just me or does it seem totally insane the way barter exchanges handle (or should I say DON’T handle) security?  As of right now I belong to two exchanges.  Both have the same general idea about security.  Anyone with an account that has my ID number can charge my account without my permission through the exchange’s website.  OK.  That’s wierd enough, but the real punch line is that I need the other party’s permission (or my broker’s blessing) to remove a charge from my account.  I can’t do that through the exchange website on my own without approval.  That totally blows my mind.   This is like saying that anyone can write a check out of my bank account on their signature (not mine) and I have to beg “pretty please” if someone charges me incorrectly.

Shouldn’t it work exactly the opposite of that?  Shouldn’t someone have to request my permission to charge my account (including my broker) and shouldn’t I be able to remove an erronious charge without outside approval?  When I’ve asked my brokers about this I’ve gotten two responses:

  1. This is a left over vestige from when all barter transactions were processed manually.  That may very well be true, but it in no way satisfies my desire for security.
  2. This is the way we always do and it is extremely rare for there to be any problems because of it.  Well, I have to admit that I’ve never had a problem either so maybe I’m worried about nothing.  That being said the whole premise of vendor being able to charge my account without my specific permission doesn’t sit well with me.

I should probably point out that as strange as this system might sound to someone outside the “barter community” this is a TOTALLY NORMAL and accepted practice for barter exchanges.  It’s not just my two barter exchanges that do this.  As far as I can tell this lack of security is a common thread across the majority of barter exchanges.

4 thoughts on “Why do barter exchanges have such bad security?

  1. Interesting post. Although you may be looking at it from the wrong perspective. I can’t speak to any barter software provider but my own, but there are safeguards in place in a barter transaction that don’t exist in the cash world.

    In the cash world, if a vendor has your credit card number they can post a charge to that number. You’ll only find out about it on your next statement, or if you happen to look at your online account. You then have to call the credit card company to get it reversed. They put in an inquiry to the vendor and make the appropriate corrections. Sound familiar? It is the exact scenario you played out in your post.

    If the same thing happened using your barter account, 4 emails will immediately go out with a record of that transaction – one to the buyer, one to the seller, and one to each broker. So if a mistake or inappropriate charge was made, it is known long before the same situation in the cash world. You still need to call your broker. But you are not begging, as you put it.

    Can you imagine what would happen if the buyer in a barter transaction was permitted to reverse sales without broker intervention? Every vendor has their own return policy, whether it is in barter or cash. If a buyer didn’t agree with the policy, they would reverse the sale anyway. Buyer’s remorse could run rampant.

    Security in a barter exchange, using the proper software, is actually greater than in the cash world. In a good barter exchange, your broker knows you, calls you, and take care of you. In the cash world, you probably have to call India for any sort of assistance.

    Just my 2 cents.

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  2. Barry-

    Thanks so much for your post! I like your analogy with credit cards and there are a lot of similarities, however there are (in my opinion) two major differences between my barter account and my credit card account:

    1) My credit card account is just that: a credit card account. With credit cards my bank is loaning me money for a purchase, not taking it out of my bank account (like a barter transaction does). The difference is significant to me. If there is a bogus charge on my credit card account and the bank still wants me to pay, it may ruin my credit but I have the final say about if I want to pay the charge.

    2) There are a bunch of legal controls on how credit card transactions are handled that are not in place for barter transactions. The most obvious example is that most transactions require my signature on a credit card. There are also many rules about how merchants are required to safe-guard my credit card info.

    Bottom line: Your point is well taken regarding the credit card comparison, however there are more security controls in place for credit card transactions than barter exchange transactions.

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  3. Hi Brian – You’re getting the other half because I just read your blog and Barry’s response. Actually, many of the newer exchanges (and those that I train as the trainer of our software) will ask both members what happened. And sometimes the barter exchange will just “eat it.” Meaning they will pay the vendor and refund the buyer from a bad debt account.

    I cannot say if credit cards will pay the vendor and refund the buyer. But almost everything you say only happens in a barter exchange happens in the cash world. Since we also own an exchange for 7 years I have seen family members use another family member’s account because that person didn’t have barter in their account. One brother used the account number of the other brother. This happens all the time in the cash world. Your credit card is in your wallet but magically someone half way around the world just purchased something on eBay with your credit card.

    In this case, when the owner of the account saw the transaction receipt immediately (which doesn’t usually happen in credit cards because your transactions are not emailed) we corrected the situation and dealt with it.

    You mention in the credit card world you can “go online and reverse a charge.” Which card does that? You can go online and request an inquiry. Sometimes the card company will remove the charge during the inquiry, sometimes it won’t. We – and most barter exchanges, do the same thing. When the request is found to be legitimate, the reversal stays on credit cards or in barter. Credit cards or barter exchanges will charge you right back if they find the reversal request was bogus. So they both work exactly the same.

    Finally in the barter world security, I believe, is better and remedy is swifter than the cash world. A barter exchange should deal with members constantly. So picking up the phone and getting to the bottom of something is so much easier. With a credit card improper transaction it can take months to resolve.

    In the barter industry we have our own lingo and everything I read in you post is a bad answer in “our lingo.” In fact your exchanges do exactly what your credit card company does but with swifter results.

    I like your blog and you bring up good points for me to train with…so thank you.

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  4. Catherine-

    Thanks for the comment. I think you have a great point about the ease of working with your broker to straighten out any problems if they do pop up. I know my brokers and they know me. I speak with them all the time. If there is a problem they fix it. With a credit card I have to call an 800 number in who-knows-where and get a different person each time. That is so frustrating!

    You still haven’t convinced me that barter transactions are as secure as credit card transactions but as I said, I haven’t had a problem yet so maybe that should be proof enough. Time will tell.

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