The Stripe Chargeback Process: How to Win Your Next Dispute
Stripe is one of the most popular platforms available for 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. But, even with a simplified platform like Stripe, you still can’t escape payment disputes. So, let's take a look at the Stripe chargeback process, plus some tips to help you prevent customer disputes with this service.
Chargebacks: An Overview
Cardholders have the legal right 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.
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 users in the UK 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 cancelled 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. 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 recognise 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 through the chargeback representment process 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.
Fight Chargebacks. Recover Revenue.
The most important part of the representment process is the chargeback rebuttal letter, the written document you submit with the necessary compelling evidence. It is the crucial component of your defense.
Learn how to create a winning debit or credit card chargeback rebuttal letter. Download our rebuttal letter template and writing checklist today.
3. Use Fraud Detection Tools
One or two anti-fraud 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 with a detailed, clear description of the product. With apparel, for example, you should describe the size, colour, and design of the 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 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 a misunderstanding by the customer, a deliberate chargeback scam, or anything in between. From your perspective, it's nearly impossible to tell; after all, your goal is to grow your business, not spend your time disputing chargebacks. Fortunately, we have the solution.
The Chargeback Company ® 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.