There is a significant problem in using Paypal for the sale of digital downloads. On the surface it seems handy and convenient for both parties, the buyer and the seller. Integration with Paypal’s IPN or PDT can allow the buyer immediate access to the download after a completed purchase without the seller doing anything. The problem is the buyer can request Paypal to reverse the transaction right after they download the software. Since Paypal will only accept the shipping tracking number as proof that the seller sent the goods to the buyer, the seller is left without recourse on purchase of digital downloads from a dishonest buyer. Any amount of data provided to Paypal in the case of digital downloads is not enough, not the IP address of the purchaser, the IP address used to download the software, the applicable dates/times, the software license code…. nothing.
In essence the buyer is a thief and the scenario equates to writing a check for goods then going to the bank to cancel the check and keeping the goods. With this scenario, the seller can at least take the case to court and win. However with Paypal, often all the seller has is the buyers name and email address.
Apparently Paypal is aware of this problem and is working on a new feature called Paypal dropbox. Currently I can see the only workaround would be to not allow digital downloads and instead mail the buyer a CD of the software so that a tracking number is available should the buyer decide to reverse the transaction. Then again, if the buyer reverses the transaction, the seller is out even more with the shipping fees and time involved. Hopefully, when implimented the Paypal dropbox feature will have Paypal as sort of an escrow company so that when the digital files in the dropbox are retrieved, Paypal can be assurred that the buyer received the goods and the seller will have some amount of recourse should the buyer reverse the transaction.