The Stripe Chargeback Process: How to Win Your Next Dispute
Stripe is one of the most popular platforms available for merchants to accept online and mobile payments. Merchants are attracted by the simple and straightforward functionality, allowing them to focus less on complex payments infrastructure and more on making their business successful.
Unfortunately, merchants using this service still can’t escape payment disputes. Here’s our quick overview of the Stripe chargeback process, as well as some tips to help you prevent customer disputes with this service.
Chargebacks: An Overview
By law, cardholders have the option to dispute any transaction charged to their credit or debit account if they suspect that the transaction involved fraud. This payment reversal process is referred to as a chargeback, and as a merchant, you have the option to either fight the chargeback or allow it to go unchallenged. If you are not able to fight, it will cost you the profits from the sale, the cost of any merchandise already shipped, and the associated shipping and processing fees.
Regardless of whether you fight or not, though, Stripe still charges a $15 fee for each customer dispute received. This is a standard practice; every payment processor charges a fee to cover the administrative costs of processing a chargeback.
Worst of all, excessive credit or debit card chargebacks—typically anything over the standard 1% chargeback-to-transaction ratio—can result in a canceled Stripe account. You can be placed on the MATCH List, effectively blacklisting you from receiving a standard merchant account with any other processor and putting your business in serious jeopardy.
The Stripe Chargeback Process Explained
We’ve discussed why you want to avoid chargebacks at all costs. So, how does the Stripe chargeback process work? What’s the process to fight back and recover your hard-earned revenue?
1. Receive the Dispute
Stripe will first be notified of a chargeback by the cardholder’s issuing bank. The dispute is then added to your merchant dashboard under the “Payments à Disputes” tab. From there, you can choose one of two options: “accept,” if you do not want to fight the chargeback, or “respond,” if you believe the chargeback is not legitimate and want to fight it.
2. Contact the Customer
Stripe suggests that you try reaching out to the customer at this phase; if you do so, be sure to make your response measured, calm, and polite. In some cases, the customer may have simply been unable to recognize the charge on their bank statement, and filed the dispute in error. If you manage to work out an arrangement, you can ask the customer to withdraw their dispute through their bank.
3. Respond to the Dispute
If you can’t work out an arrangement, the dashboard can help guide you through the Stripe chargeback process. The most important part is to collect compelling evidence, but you need to act fast. The window of time to respond to a merchant chargeback—a process known as representment—is brief.
Relevant evidence will vary based on the nature of the dispute, and can include web logs, communication records, tracking information, and delivery confirmation, just to name a few examples. This info must all be formatted properly, and submitted through Stripe, who then submits the case to the issuer for review.
Prevention is the Best Answer
As a merchant, it’s possible to fight and win your own transaction disputes. However, it will be a difficult, time-consuming, and expensive process. It could take up to six months to resolve some Stripe chargebacks, and the cost of assembling evidence and building your case will likely be much higher than the cost of the initial transaction by the time it’s over.
That’s why it’s best to prevent chargebacks whenever possible.
1. Use Clear Billing Descriptors
Customers sometimes file chargebacks when they are unable to identify a charge listed on their statement. They assume the transaction is fraud, but it’s often a valid sale listed under a misleading billing descriptor.
Use clear and descriptive billing information. Instead of your address, list the business’s name, along with a brief description of the item purchased. This will make it easier for customers to identify the purchase.
2. Provide Comprehensive Customer Service
It’s best to provide round-the-clock customer service whenever possible across all service channels, including phone, email, and social media. If you’re not able to provide this service in-house, consider a third-party answering service to handle overflow and after-hours calls on demand.
Ensure that your service providers know your customer policies and best practices inside and out. Strive to answer calls within three rings, and emails and direct messages within 30 minutes.
3. Use Fraud Detection Tools
One or two antifraud tools won’t be enough. You need a dynamic and multilayered strategy employing:
- CSC Verification
- Address Verification
- 3-D Secure Service
- Fraud Scoring
- Velocity Limits
These are just a few of the tools you can deploy to prevent eCommerce fraud (commonly known as card-not-present or CNP fraud). Each plays a different role to identify and intercept as many criminal fraud attempts as possible and prevent Stripe chargebacks resulting from criminal fraud.
4. Give Detailed Shipping Estimates
If delivery takes longer than a customer expects, that person may start to worry that they’ve been cheated by a fraudulent seller, then panic and file a merchant chargeback. You can prevent this by giving detailed information about standard shipping times, and providing your customer with an honest estimate for when to expect delivery.
Make your shipping policies easy to understand and accessible from every page of the website.
5. Provide Detailed Product Descriptions
Let your customer know exactly what they’re buying by offering a detailed, clear description of the product. With apparel, for example, you should clearly describe the size, color, and design or item, as well as how the item will fit (true to size, relaxed fit, etc.).
Your product description should include clear, high-resolution photos showing the product from multiple angles as well.
6. Use Delivery Confirmation
Delivery confirmation can be a very compelling tool in a Stripe chargeback dispute. Think about it: if a customer claims they never received their product, then official documentation showing that the item was delivered to the address listed can call such a claim into definite question.
It wouldn’t be a bad idea to include delivery confirmation on every shipment. However, it should at least be used on all transactions involving high-dollar value items.
You Don’t Need to Go it Alone
The above tools can give you an edge in preventing chargebacks. Unfortunately, there is only so much you can do as a merchant, because most chargebacks—as much as 86% according to research—are friendly fraud.
Friendly fraud could be the result of anything from a misunderstanding by the customer to a deliberate chargeback scam. From the merchant’s perspective, nearly impossible to tell; after all, your goal is to grow your business, not spend your time disputing chargebacks. Fortunately, we offer the solution.
Chargebacks911® offers the industry’s only effective and comprehensive solution. We address chargebacks based on their source, going directly to the reason behind the reason code.
Ready to learn more about how you can prevent the next Stripe chargeback? Click below to get started.