Stripe is a multi-national SAAS company relied upon for its power-packed APIs and online payment processing solutions for e-commerce businesses. Its priorities are focused on enhancing the clients’ online sales and offering unique features to streamline credit and debit card transactions. Having multiple headquarters in the United States, Ireland, and South San Francisco, the company facilitates its payment processing services to local and international merchants.
Even though Stripe is a robust payment service provider popular among businesses of all sizes, now and then, a risk of chargeback hangs on customers’ heads. If you are a new Strip client worried about chargebacks, there are some tips to handle disputes and avoid chargebacks. Before diving right into the guidelines regarding managing a dispute, you need to understand what a chargeback is and how it can affect your business.
What is a Chargeback?
A chargeback is a demand to return the payment to the cardholder after the buyer has requested a dispute for a particular transaction. What happens in a chargeback is that a customer files a dispute for any specific reason. Then, the credit card provider, acting as the middleman, takes on the responsibility of retrieving the funds from the seller to the cardholder.
Stripe Chargeback Protection Program
Image source: Stripe
A Stipe chargeback is like any regular chargeback where a notification is sent to you via email with all the information about the dispute available on the Stripe dashboard. You, the seller, can accept or dispute the chargeback. Granted that you are at fault, funds will be permanently transferred to the customer’s account. Contrarily, you are expected to provide evidence proving the invalidity of the chargeback dispute.
Possible Reasons for a Chargeback Dispute
As a business owner, you may face chargebacks for the following reasons:
- Authorization error
- Fraud
- Processing error
- Order fulfillment issues
- Merchant error
- Shipping issues
Stripe will alert you directly when there is a risk of a potential chargeback. It will give you adequate time to resolve the complaint with the customer before they file the chargeback dispute with the credit card company. There is a high chance that the matter will be resolved without further proceedings. If the issue is not settled as you hoped, you can refund the payment or let the service provider take over.
How Does Stripe Chargeback Protection Work?
After a dispute is filed, you will be given the chance to prove your authenticity. Stripe will directly review the evidence to gather the facts. The service provider is bound to overturn the chargeback if the evidence is adequate to prove your legitimacy. On the contrary, if you are in the wrong, a refund will be demanded.
Stripe Chargeback Protection is a service by Stripe to help businesses protect their company against the damages of a chargeback. Every chargeback you face will cost you money. An alarmingly increasing number of disputes can even deprive you of the privilege to process credit card payments. Your company’s reputation can also be affected.
Stripe Chargeback Protection will cover the financial damages caused by the dispute and free you from evidence submission. It will safeguard your sales from fraudulent disputes and unjustified claims. Let’s discuss the details of Stripe Chargeback Protection to help you understand how it can impact your company’s growth.
How can Stripe Chargeback Protection Benefit Your Company?
Enrolling in the Stripe Chargeback Protection program will help you prevent potential losses. Here is how your business will benefit from this service:
Financial Security
As stated earlier, users eligible for chargeback protection will have their money reimbursed by Stripe, and the dispute fee will be waived. This is applicable regardless of the legitimacy or invalidity of the dispute. This way, you can avoid losing unpredicted amounts to unavoidable disputes.
No Evidence Required
Generally, when a customer files a dispute, a merchant has to provide evidence to challenge that dispute. With Stripe Chargeback Protection, you can skip the long hours of looking through your records to find the required evidence. Freeing you from all the grunt work of fighting fraudulent disputes, Stripe allows you to focus on more important things.
No Business Type Restrictions
Every business under the Stripe banner can avail of the Strip Chargeback Protection. There is no restriction for a specific business type. Businesses of all sizes can benefit from this program regardless of transaction volume.
Avoid Potential Loss
A chargeback settlement can take months, even when a business faces a fraudulent dispute. The process can drain your time and disable you from reaching your full potential. Stripe offers to take over the process and do everything on your behalf. Since Chargeback Protection will cover the chargeback amount, you can stop worrying about paying extra or losing revenue.
Reduce Chargeback Risk
In addition to fighting disputes on your behalf, Stripe Chargeback Protection detects and eliminates possible fraudulent chargebacks. The experienced specialists provide real-time updates regarding proceeding disputes and alert businesses to potential threats. This helps companies reduce the risk and percentage of chargebacks.
Stripe Radar highlights suspicious payments and blocks predicted fraud. The risk assessment and machine learning technology will optimize your checkout flow. On the other hand, Dynamic 3D Secure demands risky shoppers to provide additional information. These solutions can dramatically reduce the risk of chargeback for your business.
How to Prevent Stripe Chargebacks
Even though it is impossible to avoid all chargebacks, your efficiency can help you prevent many. Stripe strictly enforces its dispute activity threshold. If you are a business facing a high risk of chargebacks, you are advised to focus on preventing disputes to avoid breaching Stripe’s chargeback policies. Here is something that might help;
Sell Quality Products
The first thing you can do to cover your bases is to provide exceptional service. You can create a trustworthy bond with your customers by meeting their expectations and delivering quality products. This will ensure their satisfaction and eliminate any need to file a dispute. Posting HD product photos and refusing to sell defective items are great ways to optimize your sales and avoid misunderstanding.
Provide Accurate Information
Occasionally, a customer might file a chargeback dispute when they cannot identify a transaction. You can avoid this by writing accurate billing disruptions. Using your trading name will help customers differentiate multiple businesses on their bank statements. This is a great way to minimize unintentional chargebacks due to confusion. Moreover, a business establishing clear billing, return, shipping, and warranty policies can avoid Stripe chargebacks. This will also enable you to provide evidence that a customer was well-informed in advance.
Enhance Order Fulfilment
Delayed shipments and missing orders are one of the biggest reasons for chargebacks. Optimizing your shipping and order fulfillment should not be a problem if you ship orders quickly and deliver your products on the agreed time. On occasions when an order cannot reach the buyer on time, being honest with the customer about the delay can eliminate many issues.
Track your inventory to ensure everything is in stock. This will eliminate the possibility of someone unknowingly placing an order for an unavailable item.
One last tip: demand proof of delivery on high-value orders.
Respect Your Service Agreement
Every service provider maintains some rules and regulations that are compulsory to follow for maintaining the account’s reputation. Understanding Strip’s service agreement can help you implement its policies. It will also enable you to manage Stripe chargebacks and keep you from breaching any rules.
Offer Reliable Customer Support
Your customer service team acts as your agent to create a long-lasting bond with clients. Consumer support is the first place they will go to when an issue arises. A sympathetic and well-responsive customer support agent can resolve the issue and prevent many Stripe chargebacks.
Make sure your website has an easily accessible helpline where customers can chat or call a representative to know more about the charge. Train your team to solve the issues as soon as they come up. Provide user-friendly return and refund policies and attach links to these policies on your website and in the customer service chat.
Utilize Chargeback Protection Tools
Incorporating Stripe Chargeback Protection into your company’s system is a reliable way to prevent fraudulent Stripe chargebacks. This program will monitor each transaction and flag suspicious behavior. It will also demand additional information before processing high-risk transactions.
A plus point of using Strip Chargeback Protection is that you will be compensated if an approved transaction leads to a chargeback. Chargeback prevention alerts will offer an added layer of insurance and give you enough time to review the threat. A timely warning can allow you to stop the problem from escalating.
Managing Strip Chargeback Disputes
You can reject/fight the dispute and recover your lost revenue once you have the confidence that the chargeback is invalid. All you need to do is head to the Stripe dashboard and follow the steps. You can also accept the dispute and follow the respective procedure to end it without losing too much money.
Here are some tips to remember when you are managing a Stripe Chargeback dispute:
Review the Reason of Dispute
A chargeback reason code will be visible on your Stripe dashboard after you are notified about the chargeback. It consists of an overview of your customer’s justification for the dispute. Once you know why a dispute is filed, you can start planning how to fight it.
The supporting documents will include copies of the receipt and order confirmation, the customer’s location and IP address, tracking information, and proof of order delivery. You will also have to provide evidence if you issued any refunds.
Accepting or Fighting the Chargeback
Fighting a chargeback dispute is not a child’s play. It can cost you a significant amount of time and money, and winning is not always guaranteed, even in cases of fraudulent claims by the customer. Determining when to fight and when to give in is the key to increasing your ROI.
If you are confused about whether fighting a chargeback claim is worth your time, do this:
- Understand the authenticity of the chargeback. This will help you differentiate between a valid chargeback and an invalid chargeback. A valid chargeback is legally binding and has a legitimate reason. It cannot be fought. Whereas an invalid chargeback lacks substance and can be fought.
- Examine the evidence that can be used to support you in challenging the chargeback dispute.
- There is a response deadline for every chargeback. Make sure to bring forward your case before the deadline expires.
- Think wisely if the dispute amount is more than what you will pay to fight the dispute. Don’t waste your money and resources fighting a dispute that will cost you more than the amount you will recover if you win.
Build a Strong Response
Once you have chosen to fight the Strip chargeback dispute, gather enough evidence and build a case that can eradicate the customer’s claims. Write an impressive chargeback response that can help you win the case.
Submit the Case
Once you have gathered all the information and built a response argument, submit your case to Stripe. The official website has a ‘counter dispute’ section with a step-by-step guide that you can follow.
Monitor Your Chargeback Status
After you have submitted the case, there is nothing much left to do but to wait. The credit card bank or issuer will review your response and pass a judgment based on the evidence. If the issuer overturns the dispute, your chargeback fee and transaction amount will be sent to your account. If you lose, the credit will be permanently transferred to the cardholder.
It should be noted that the credit card issuer will automatically deduct the original purchase amount from your account at the initial stage. The amount will be permanently transferred to you or the cardholder based on the result of the chargeback claim.
Limitations of The Stripe Chargeback Protection Program
Even though Strip offers unique tools and high-level features to fight chargebacks, its protection program is not unaffected by some drawbacks and limitations. To ensure that it is in your favor to fight chargeback disputes through Stripe, you must know and understand the following factors;
Chargeback Fee
It is true that instead of depending on another service provider, it is more convenient for its users to fight chargeback disputes with Stripe. However, the fee may not be so suitable for many businesses. The Stripe Chargeback Dispute Program costs a $15 fee for each chargeback. The transaction amount and the chargeback fee are deducted when a customer files a chargeback. Even if you win the claim, the initial chargeback fee is rarely refunded to the seller’s account.
Submission Deadline
After a customer has filed a dispute, you will have 7 to 21 days to respond. The time limit can change depending on the card issuer. If you have decided to fight the dispute, the issuer will take 60 to 75 days to review the evidence and pass a verdict. Overall, the dispute process can take 2 to 3 months, and there is very little that you can do to expedite it.
Time Limit for the Customers
Generally, customers are allowed to claim a chargeback within 120 days after placing an order. This means that even after you have made a successful sale, there is a high chance of a Stripe dispute coming your way.
Chargeback Threshold
Like every service provider, Strip has set a threshold that your business should not exceed. This threshold is calculated by your company’s dispute activity and dispute-to-success ratio. Every chargeback is added to your dispute activity. If your company’s dispute activity exceeds 0.9%, Stripe will refuse to offer chargeback protection or close your account without warning.
Another Way to Fight Stripe Chargeback Dispute
Instead of relying on the Stripe Chargeback Protection Program, you also have the option to fight the chargeback dispute on your own. If you are sure the chargeback is fraudulent, you can argue your case by gathering evidence and attaching all the necessary documentation. Write an authentic rebuttal letter and submit it with everything else.
If you are unassertive about fighting a Stripe chargeback dispute yourself, you can utilize the expertise of a chargeback management solutions provider. Several reliable service providers with exceptional chargeback protection tools are available in the marketplace.
Final Words on Managing a Stripe Chargeback Dispute
Stripe Chargeback Protection offers efficient features to help businesses safeguard revenue and eliminate excessive chargeback issues. However, its tools are incompatible if you are running a high-risk business. As discussed earlier, Stripe is strict about its policies, and a high-risk merchant account is bound to reach the chargeback threshold. You can either avoid chargebacks, which is impossible or can ensure never hitting the threshold, which is equally impossible for a high-risk business.
Stripe Chargeback Protection is only suitable for standard-risk companies that can maintain a minimal dispute activity and efficiently avoid risk factors. To utilize Stripe Chargeback protection to its full potential, you are encouraged to be vigilant in keeping up with the deadlines and providing accurate evidence.
