Stripe chargebacks, disputes, and fraud cases have elevated recently, prompting merchants to seek actionable insights and strategies to prevent this canker from sinking their businesses.
With a $36 billion market valuation, Stripe is among the world's most preferred digital payment platforms. And due to a slew of Stripe's ready-to-use payment processing functionality, e-commerce merchants find the platform a reliable partner in taking their businesses closer to customers.
Despite the fantastic features and tremendous benefits, Stripe chargebacks and customer disputes cause significant concern to merchants. The rapidly rising dispute rates and fraudulent transactions forced the payment giant to launch a separate program supporting merchants in dealing with fraudulent disputes.
In line with our goal to provide exclusive, actionable insights and tools to help entrepreneurs actualize their business goals faster than without our help, we shall flood beams of light on the Stripe chargeback process in this article. But more importantly, we shall give you easy-to-apply keys to help you win all Stripe chargebacks.
Are you stoked? Let's dig in!
How Do Stripe Chargebacks Work?
By now, you would’ve understood from our chargeback discussions that a Federal Law empowers customers to demand payment reversal from their bank or card issuer when transactions go wrong. But suppose you are not well-acquainted with the idea; here’s a brief insight:
Chargebacks are consumer protection instruments that guarantee accountability and fair play from merchants. It helps consumers to rescind unauthorized usage of their credit or debit cards.
In principle, chargebacks are a wonderful invention.
However, the administrative method of fulfilling chargebacks has given consumers greater leeway to use it as an instrument of fraud. Banks can expressly facilitate the customer’s chargeback claim without listening to the merchant's story. Whether the chargeback is meritless is irrelevant. Once a customer files a claim, processors and financial institutions are legally required to grant it.
The merchant will then have to fight and prove they are not guilty and deserving of the penalty.
And with Stripe chargebacks, the ancillary costs also bite. Apart from the double tragedy of revenue and merchandise loss, Stripe also charges a $15 fine for every customer dispute you get, as dispute processing fee. That fine is non-negotiable; it's their fee for helping you clean the mess.
So first, the customer’s bank will notify Stripe about each chargeback. Stripe, in turn, will convey the message to you via the Payment Disputes tab in your merchant portal. You will then have the option to accept. Or reject the chargeback by clicking “Respond” if you want to fight it.
The good news is that if you succeed in presenting enough compelling evidence to show the disputed transaction's legitimacy, you will recover the transaction value.
However, according to Stripe's chargebacks policy, you could lose your Stripe merchant account if your chargeback-to-transaction ratio exceeds 1%. That could also have other devastating after-effects.
They'll classify your business as High Risk, and finding a new payment processor will be incredibly difficult. Your reputation and trust score will be damaged as well.
The good news? It’s not all gloom and doom.
You can take some simple steps to ensure your business does not breach the Stripe chargebacks threshold. Plus, even when Stripe chargebacks happen, as they often do, there are best practices you can use to put screws on all fraudulent claimants and win back your money!
It would’ve been wonderful to tell you that you can easily pick one random recommendation from the best practices we’re about to share with you, and you'd be okay. But that won’t be true. Making the most of these tips requires you to sieve through the following recommendations and excavate relevant insights to help you easily win Stripe chargebacks.
How to Win Stripe Chargebacks Without Damaging Your Corporate Image
There’s a popular and probably overused rhetoric in the startup community that "if you do what successful people do, you will get the results they get.” And to a large extent, it’s true.
Success leaves clues. The best marketer, athlete, designer, and engineer on the planet has shared her best practices in a book, blog, or keynote. In one way or another, they’ve shown the trails that led them to their desired goals.
For Elon Musk, one of the greatest inventors of our time, it’s by employing the principle of integrative complexity in his learning journey. Anna Wintour, popularly known as “the most powerful woman in media,” created her career dynasty by building an excellent team and practicing intuitive leadership.
Now you say, what about Stripe chargeback management strategies?
Here are the hacks:
#1, The Best Way to Win Stripe Chargebacks is By Not Fighting Them At All
In the celebrated book on the art of combat, Sun Tzü says, "the greatest victory is that which requires no battle." The quote's wisdom applies perfectly to managing Stripe chargebacks: prevention is how you fight the best.
To be clear, if you have enough compelling evidence in your representment (like delivery confirmation or screenshot of customer communications showing satisfaction with the order), you could win. But as many vendors have come to realize, fighting chargebacks is time-consuming and expensive.
In some cases, you could spend months dealing with one issue. Think of how long it’ll take if you have many Stripe chargebacks. And as Stripe stated in one piece of literature, “Between lost revenue, penalty fees, and evidence collection, chargebacks usually cost companies more than double the original disputed amount.”
Considering these direct and indirect costs makes it more sense to avoid chargebacks, if you can.
Here are some best practices to help you minimize Stripe chargebacks:
- Provide commensurate customer services to your clients.
Customers feel sucker-punched when they don’t get the help they need from merchants, which results in many Stripe chargebacks. To avoid this, consider proactively reaching out to customers to resolve any issues they may have. This approach may convince them to withdraw any disputes they've filed.
- Ensure you have descriptive billing information for your transactions to avoid incidents of doubt.
If the buyer does not recognize your details in the billing statement, they may be inclined to seek remediation with a Stripe chargeback.
- Use adequate anti-fraud technology to thwart criminal attempts.
There are various anti-fraud tools available to ensure secure transactions, including fraud detection systems that analyze transaction patterns, Address Verification Services (AVS) for checking billing addresses, Card Verification Code (CVC/CVV) for an extra security layer, 3D Secure for additional authentication, Geolocation for verifying customer's IP address, and Device Fingerprinting for unique device identification.
- Apply order delivery best practices.
Track all your shipping, and give your customers transparent and reasonable shipping estimates. Some buyers file Order Not Delivered disputes when they feel their order hasn't arrived after a reasonable period.
- Communicate policies and product features intentionally.
Have easily-accessible, well-written refund policies and product descriptions to avoid Stripe chargebacks due to an expectation gap.
Again, we can’t say enough how important it is for you to implement these recommendations with absolute discipline. They could save you a whole lot of trouble.
#2, Create a Data-driven Chargeback Management Process
Research has established that fraudulent chargebacks are a significant threat to businesses of all sizes.
When a Stripe chargeback happens, and payment is reversed from a merchant's account, they offset the vendors' cash flow. The painful part is that the chargeback is often unmerited because you fulfilled ALL obligations.
For the dispute's timeline, the funds are removed from your bank account, which in some cases could last up to six months. And even if you eventually win the Stripe chargeback, you don't immediately regain access to your money.
Some merchants prefer not to take on the headache of even fighting Stripe chargebacks because of these complications.
Unfortunately, that is a lose-lose strategy because, for one, such merchants are indirectly encouraging potential bad customer habits. And two, if you don't send a clear message to online shoplifters that you are not one to mess with, they'll keep coming back.
As statistics show, 40% of consumers who file chargebacks will do so again within 60 days. And 50% of those people will file another one within 90 days. That pattern could land your business in hot waters sooner or later.
But you don't have to struggle with managing Stripe chargebacks. You don't have to allow Stripe chargebacks to sink your business.
With Charegflow, the world's first Chargeback and Dispute automation service, you can stay on top of your game with proper chargeback protection!
What will Chargeflow do for you, you ask?
Chargeflow can help you circumvent potential Stripe chargebacks. With our SMS and email alert services, you can quickly get notices on transactions that have issues and mitigate those problems before they become chargebacks.
You will get proper and insightful analytics that helps you keep up with what matters, Money!
Chargeflow helps you collect compelling evidence. Instead of the manual, time-wasting processes of collecting and submitting evidence to fight Stripe chargebacks, Chargeflow pulls from over 50 data points to analyze and build a formidable case for you.
This process is automated and spontaneous to ensure you have zero liabilities. And if you need more evidence to win the case, we review the entire transaction process, human-proof it, and double-check that your response is in a position to win.
Accelerate your business scale with proven metrics. Merchants that rely exclusively on fraud prevention tools to manage potential Stripe chargebacks often run the risk of blocking legitimate transactions due to errors those technology tools interpreted as fraudulent.
With Chargeflow AI and Machine Learning algorithms, you can have high accuracy on transactions with the likelihood of resulting in Stripe chargebacks and plan your security wireframes accordingly.
And guess what? More safe transactions mean fewer Stripe chargebacks, which ultimately means more cash flow and revenue to boost and scale operations!
eCommerce businesses might have 99 problems, but I promise you, our 100% Completely Done-For-You Dispute Automation Service ensures that Stripe chargebacks do not become one of them!
Fancy enjoying more free time to focus on building your brand, serving your customers, and building better products? Join the best and brightest e-commerce entrepreneurs who use Chargeflow to do just that! Start here.
What are the fees for chargebacks on Stripe and how are they calculated?
Stripe charges a fee for each chargeback that occurs on an account. The fee is typically $15 per chargeback, but it may vary depending on the country in which the business is based.
What happens if a chargeback is successful on Stripe?
If a chargeback is successful, the funds for the transaction will be returned to the customer's account. The business will also be charged a chargeback fee, and this chargeback may negatively affect the business's chargeback rate.
What are the consequences of having a high chargeback rate on Stripe?
Having a high chargeback rate on Stripe can result in increased fees, a higher risk of account suspension, and a higher risk of losing the ability to accept credit card payments. Additionally, a high chargeback rate may indicate a problem with the business's practices or policies, and steps should be taken to address the underlying issue.
How to win Stripe disputes as a seller?
To win Stripe disputes as a seller, make sure to respond promptly to the dispute, provide detailed evidence to support your case, and communicate clearly with the customer and Stripe throughout the process. You should also ensure that your products and services meet the customer's expectations, have clear refund and cancellation policies, and accurately describe the product or service offered.