Stripe chargebacks, disputes, and fraud cases have elevated in recent months, 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 to be a reliable partner in taking their businesses closer to customers.
But despite the fantastic features and tremendous benefits, Stripe chargebacks and customer disputes cause significant concern to merchants. Even to the extent that the payment giant have launched a separate program that supports merchants in dealing with the risks.
In line with our goal to provide exclusive, actionable insights and tools to help entrepreneurs actualize their business goals faster than they would’ve done 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 discussions on the concept of chargebacks 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 an instrument of consumer protection that guarantees 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 friendly fraud, rather than accountability. Banks can expressly facilitate the customer’s claim of chargeback without listening to the merchant's side of the story. Whether the chargeback is meritless or not is irrelevant; once a customer files a claim, processors and financial institutions are required by law 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 a revenue and merchandise loss, Stripe also charges a $15 fine for every customer dispute you get. 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. In turn, Stripe 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, though, 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 chargebacks policy, if your chargeback-to-transaction ratio exceeds 1%, you could lose your Stripe merchant account. That could also have other devastating after-effects. Your business will be classified as High Risk, and it’ll be incredibly difficult for you to find a new payment processor.
Again, it’s not all gloom and doom. You can take some simple steps to ensure your business does not breach the Stripe chargebacks threshold we referred to earlier. 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 that can help you win Stripe chargebacks with ease.
Sample of Stripe disputes and chargebacks notice
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, engineer on the planet has shared her best practices in a book, blog, keynote, or movie. 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:
First, 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, 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 a significant number of 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.”
When you consider these direct and indirect costs, it makes 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. You can avoid this by being available and helpful. Further, ensure you have descriptive billing information for your transactions to avoid incidents of doubt. Use adequate anti-fraud technology to thwart criminal attempts. Track all your shipping, and give transparent and reasonable shipping estimates to your customers. Also, have easily accessible, well-written product descriptions and refund policies 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.
Second, create a data-driven chargeback management process.
Research has established that fraudulent chargebacks are a significant threat to businesses of all sizes.
When Stripe chargebacks happen, and payments are reversed from a merchant’s account, they offset the vendors’ cash flow. For the dispute's timeline, the funds are removed from their bank account, which in some cases could last up to six months. And even if the entrepreneur eventually wins the Stripe chargeback, they don’t immediately regain access to their money.
Some merchants prefer not to take on the headache of even fighting Stripe chargebacks because of these complications. Unfortunately, this 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 the online shoplifters that you are not one to mess with, they’ll keep coming back. As statistics shows, 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!
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 that problem before they become chargebacks. You will equally 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’s 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!
E-commerce 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.