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Stripe Chargeback Protection

341 points by shedside 7y ago

johnsmitty 7y ago
Why limit this to Checkout? Checkout seems limited and resides on Stripe's servers. Who wants to be redirected from a secure website to another domain??? Outside of web savvy people, nobody has ever heard of Stripe.com.
tomglynch 7y ago
In short: Pay extra and we'll include chargeback insurance.
- giancarlostoro 7y ago
  I mean if they have to do more than the usual on their end and the service ends up working out, why not?
- giarc 7y ago
  I don't get it? You want free insurance?
tomglynch 7y ago
What will Stripe do to prevent this being abused?
- rietta 7y ago
  You mean Stripe?
  - tomglynch 7y ago
    Yeah, what a brain fade. Thanks!
- Implicated 7y ago
  By telling you they would likely defeat the purpose of those actions.
- eeke 7y ago
  (I work at Stripe on Radar.) We see Chargeback Protection mostly as a way to prevent our users from burning too much founder attention doing chargeback management. Managing abusive use of the credit card rails, both by fraudulent businesses and by people attempting to defraud legitimate businesses, is something that we have substantial experience with. We have had years to tune our machine learning models; this both helps every user of Stripe (through blocking transactions likely to be fraud-y) and gives us the confidence we need to roll out a new product like Chargeback Protection widely. We will, of course, monitor it during the rollout and adjust as we go.
  - so_tired 7y ago
    > prevent our users from burning too much founder attention doing chargeback management Yikes. Yes. Thank you. I wish i had this 2 months ago.
shedside 7y ago
Don't know if anyone from Stripe is listening here but: it'd be amazing to be able to deploy chargeback protection selectively, as a Radar rule. So that for example we could say: charges from the US are protected (and subject to the extra fee) while charges from the UK are not.
- flibble 7y ago
  That’s exactly what we’d like. 95% of our transactions come from trusted customers which have ~0% chance of a chargeback. We’d like to apply this check and insurance on only the transactions that we are not sure about. Requiring it to be all or nothing makes the feature useless (not cost effective) for merchants with a low fraud rates.
  - StavrosK 7y ago
    Is it a 0% chance, or a 0.4% chance?
  - nulbyte 7y ago
    It may not be cost effective for you, but your proposal doesn't seem cost effective for Stripe, either.
  - shoo_pl 7y ago
    Is it not the point? If stripe allowed you to do that - insure only dangerous transactions - then it could not be 0.4% but rather a few %. The entire point behind insurance is to have enough volume so that the small % when they need to pay up won't affect the business.
    - flibble 7y ago
      I would imagine stripe will always block charges it thinks are likely to be disputed. They aren’t offering carte-blanche to accept transactions that are likely to be fraudulent. Perhaps it wouldn't work for stripe (to allow the merchant pick and choose which transactions use this service). But if it doesn’t it means that the service won’t be used by clients with low fraud rates.
eeke 7y ago
I’m the PM on Chargeback Protection. Startups told us they don’t want to deal with the hassle and unpredictability of chargebacks; that’s why we built this. Happy to answer any questions you have.
- larrysalibra 7y ago
  Great product! Will this be rolling out in Hong Kong at some point in the future?
  - eeke 7y ago
    (PM on Chargeback Protection here.) We’d like to extend Chargeback Protection to all Stripe countries eventually. Stay tuned!
- pancho111203 7y ago
  Completely unrelated, but please add an alternative fee structure more appropriate for microtransactions. Stripe has a vast amount of useful features from which my business could benefit, but its cost is prohibitive as all our transactions are for low amounts (1$ or less), which make your 30cent fee a 30% of the total. We are forced to use credit cards directly and Paypal, as both offer a much lower fixed fee (sometimes 0) in exchange for higher %.
  - icebraining 7y ago
    https://support.stripe.com/questions/microtransaction-support-and-pricing https://support.stripe.com/questions/microtransaction-suppor...
- czzarr 7y ago
  0.4% is an extremely steep price for a company like mine doing over $2.5m in annual turnover (saas) which has a very low fraud rate. I actually think currently we pay less than that by doing nothing (meaning letting Paypal handle it, and losing every case). However I'd gladly pay a few thousands per year for it, or be able to pay it on selected transactions (only US for instance).
jasonkester 7y ago
But this isn't the product I want. I don't want to ever fight chargebacks. Because my policy is to never take money from people who don't want to give it to me. I want to automatically refund every chargeback attempt without it affecting my ability to charge credit cards. One of my businesses targets consumers, who have this amazing ability to "forget to cancel" or to have "cancelled 3 months ago, but for some reason we're still billing them" or to just plain decide that the last six months of charges were fraudulent and that their bank should get them reversed. All of that is fine with me, and in fact every invoice I send out says as much: We'll happily refund every penny you ever paid us if you simply ask. But lots of people aren't comfortable asking for their money back. They are, however, plenty comfortable asking their bank to ask for their money back. I just want a way to streamline that process that doesn't involve me having to handle fighting disputes that I'd prefer to lose. And of course to not have those lost "disputes" count against me. Any ideas on how to do that, Stripe?
- Implicated 7y ago
  Why isn't this a feature of _every_ merchant account?
- tonyedgecombe 7y ago
  But lots of people aren't comfortable asking for their money back. They are, however, plenty comfortable asking their bank to ask for their money back. I think you are being generous in your interpretation. I don't get many chargebacks but looking at the ones I've had there has been a lot of deceit and fraudulent behaviour.
  - jasonkester 7y ago
    Do you mean it's your customers who are being deceitful by charging back a service after they've used it (as mine do). Or do you mean that you have customers using stolen credit cards to pay for your service and that the chargebacks are happening when the card owner discovers as much? I haven't seen any evidence of that second case happening with my users (apart from one incident where card thieves discovered my "update your credit card" workflow and used it to sanitize numbers for a few days before I fixed the loophole). But the first one happens all the time. It'd be adorable in a way, as I'm sure the people doing it think they're totally getting away with something. If, that is, it didn't jeopardize my ability to continue charging credit cards in the future.
Liron 7y ago
Any plans to offer this without requiring using Checkout specifically? We use Stripe Elements because it enables a more native seamless payment collection UX.
- eeke 7y ago
  (PM on Chargeback Protection here.) We are rolling out with our new Checkout first because it allows us to tweak the checkout flow and e.g. send a payment which we’re on the fence about to 3D Secure (3DS) but let obviously good payments go through without 3DS. We are also exploring ways to expand Chargeback Protection to other integration options!
  - ijidak 7y ago
    Thank you so much for your work on this! Really hoping you expand this to elements. (See my comment at the root level.) This is a game-changer. We do all or nothing semi-annual educational events and fraudulent chargebacks are a HUGE source of anxiety. .4% seems to be a very fair percent as well to charge to make this problem just go away for businesses like ours. We happily refund customers that go through normal refund channels, but fraudulent chargebacks are a significant source of stress and revenue uncertainty. Just last night I was shaking my head as I stumbled across an email from a customer confirming that her friend referred her to our event and that she was coming. But then a couple months later she changed her mind. We told her it's way too late for us to give her a refund on her deposit (which was clearly stated to be non-refundable in the first place). So she told her credit card company that she doesn't recognize the charge. Even though we added her emails to our dispute evidence, and submitted evidence that she was aware of the non-refundable policy for ticket deposits, we still have no idea whether we'll actually win the dispute. Incidents like this are a major source of frustration, and your solution is going to help us operate with less uncertainty.
  - kweks 7y ago
    Hi Eeke. A few years back, we lost a merchant account with stripe due to an unfortunate combination: no chargeback insurance enabled, high average transaction value (~600EU) and low monthly volume (we were starting up). Got one charge back for 800EU that blew us out of the water. Would there be a mechanism to re-apply, with CB protection enabled ? We struggled to have this discussion with a Real Person at Stripe to discuss this .. would you have any leads ?
tacosx 7y ago
The chargeback is one of the few tools consumers still have with real power. Sure fraud is still a problem, but it's a really uncomfortable proposition to start making chargebacks an abstracted cost sink for the corporations. Of course the fact that this is an upsell line item means only big businesses will pay for it, the smallest businesses owned by the people just starting out will be the only ones who actually suffer punitively from chargebacks. Some things shouldn't be streamlined. Some pain is good. This is a really unfortunate choice by Stripe.
- Liron 7y ago
  But this product isn't taking away consumer protection via chargebacks, nor hurting small businesses in any way.
  - URSpider94 7y ago
    I think the Parent is upset that businesses will no longer be inconvenienced and pained by a chargeback.
kmfrk 7y ago
It'd be great to see Stripe adopted by donation platforms for livestreaming like Streamlabs and StreamElements, chargebacks remain an awful abuse vector there.
- judge2020 7y ago
  Didn't Paypal add a TOS clause (or something along those lines) that prevented donations from being valid for chargeback?
  - fyfy18 7y ago
    How does that even work? The chargeback is initiated and the fee levied by the card issuer (Visa, MasterCard, etc).
  - kmfrk 7y ago
    PayPal ran into some bad PR a while ago with people making "fake" donations to the tune of thousands of dollars and ended up refusing the chargebacks. But as far as structural change, things are still pretty bad. Streamlabs's tutorial on chargebacks was updated as recently as a month ago: https://support.streamlabs.com/hc/en-us/articles/115006017667-I-Just-Received-a-Chargeback-What-Now- https://support.streamlabs.com/hc/en-us/articles/11500601766....
  - gnopgnip 7y ago
    The chargeback originates with your bank, not with Paypal.
andrewbarba 7y ago
This appears to require the new Checkout product in order to enable it. What happens if we have a percentage of sales coming from a native iOS or Android app? Are we not allowed to enable protection? Or would just the web transactions be covered?
- eeke 7y ago
  (PM for Chargeback Protection.) Yep, Chargeback Protection only works with the new Checkout so we’ll only protect any transactions that are processed through the new Checkout. You can keep your existing integration for iOS and Android, but those charges will not be protected.
smoovb 7y ago
Does this mean Stripe will change its allowed merchants? We sell digital telecom products and Stripe does not accept our business. This would be a product we could use, but can't if they are still rigid about their accepted business.
- edubs25 7y ago
  Is stripe actually the one blocking you? Card brands regulate which MCCs are allowed to be signed on by acquirers. It could be Visa, Amex or Mastercard.
ssimoni 7y ago
Will this work with stripe elements not just stripe checkout? I'd like to upsell my connect accounts this feature.
globile 7y ago
Things like this are great for the average to small merchant, BUT if you're processing more than, say, 50,000 USD a month, relying heavily on the Stripe ecosystem can take its toll and can cost you big time. - Use Stripe as the only gateway for all your international traffic, and you will see alarming drops in acceptance rates, meaning the chance of successfully charging a Mexican customer in Mexico with a US Stripe account is much lower than if you have a local acquirer. By a lot! - Rely heavily and blindly on Stripe Radar for post-charge suspected fraud alerts charges, and you will be refunding many valid orders. - If you go all in with Stripe Checkout, you are getting a lot of good stuff at a price. If stripe dynamically uses 3DS to sift potential fraud users, you are going to hurt your conversion rates. Been a big fan of Stripe for a long time, but when order volume goes up, and you grow internationally you have to consider other alternatives and/or backup plans, such as smart routing, local merchants, alert networks (ethoca, verifi), pre-checking for pseudo 3DS charges (no auth need, but fully protected, etc) Not taking into account these 3 things, can drop your conversions by big double digit percentages. EDIT: spelling
- eeke 7y ago
  Thanks for your comment. We want our products to substantially decrease the barriers to international commerce, and they’re used by both businesses which are just getting started up to multinational companies with extremely sophisticated understanding of their payments needs. Auth rates are a deep topic, and one we’re experimenting on constantly. The topic of whether a particular business will get better auth rates going through a local gateway is a complicated one (that is probably true of many businesses and not true of many businesses); we’re working on making this sort of thing unnecessary for most businesses to think about. Philosophically, centralizing this sort of work at Stripe makes a lot of sense to us; we can deploy more engineers against auth rates than any Stripe customer could because we have a much larger surface area for improvement than any customer does. Many of our users want something which works out of the box, and they’re the target audience for Checkout. If you want to rigorously test the behavior against your sophisticated understanding of conversions in your own business, that’s awesome; you can see exactly which transactions we flagged for being on the fence using the API. It’s always a balancing act to make things which work out-of-the-box for someone’s first business on it’s first day and still have the power and configurability expected by extremely sophisticated operators. Getting this balance right is extremely important to us.
Gluten 7y ago
Used to run an online game, where lots of fraud was going on. People would buy ingame coins or whatever, move them elsewhere and then chargeback. Full protection at just 0.4% would have been a dream for me if I still operated that game.
- jliptzin 7y ago
  Stripe are not idiots, if they’re losing a significant amount of money on this offering to a specific merchant, they’re going to close your account.
  - slips 7y ago
    Is that stated anywhere by Stripe or is it theoretical?
    - ceejayoz 7y ago
      > We may terminate this Agreement or close your Stripe Account at any time for any reason (including, without limitation, for any activity that may create harm or loss to the goodwill of a Payment Method) by providing you Notice.
ijidak 7y ago
This is huge! Our business sales registrations to educational events for a specific industry. We use Stripe to process. We have a strict non-refundable policy on ticket deposits because, otherwise, we can't determine how many seats are left for each event and we lose the revenue on that empty seat. We often get unscrupulous customers who claim they don't recognize the charge because they decided not to attend in the 11th hour! We also have the rare individual who completes the entire 3-day training and then claims they never got the service! Because it's in-person training, it's hard to prove they received the service. For example, there are no postal records we might show as proof that we shipped a physical item and it was received. Now, we have them sign a document affirming they got the training prior to receiving their certificates. But, still, Chargebacks are stressful, because they create revenue and profit uncertainty for each event. The dollar value of our fraud rate is about .3-.7% per event. But we always fear the outlier event, where that number spikes. For example, we set aside 2% of revenue from our most recent event (which is thousands of dollars now tied up) to prepare for any unanticipated spike in chargebacks. And... the stress and frustration of fraudulent chargebacks is a non-zero intangible cost. I will gladly pay .4% to get revenue certainty! At this time we don't use checkout though. So will need to look into what we need to do to change to that. I believe we're using Stripe Elements. (I'm the business owner and a programmer, but I didn't code our original stripe integration.) Will be looking at this today!!! Thank you so much for your work on this feature! This is a real game changer for businesses like mine!
- Meekro 7y ago
  Have you looked into 3D secure? Stripe already offers it[1], no fees, and it mitigates liability quite a bit. Lots of business owners here probably can't use it because they do recurring billing, but it sounds like it'd be perfect for you. "Should a 3D Secure payment be disputed as fraudulent by the cardholder, the liability shifts from you to the card issuer. These types of disputes are handled internally, do not appear in the Dashboard, and do not result in funds being withdrawn from your Stripe account." [1] https://stripe.com/docs/payments/3d-secure https://stripe.com/docs/payments/3d-secure
  - ijidak 7y ago
docker_up 7y ago
0.4% seems high when a sustained rate of 1% will get you kicked off VISA and Mastercard anyway.
dulse 7y ago
Congratulations!! Love the philosophy around the product and the dynamic treatment of higher risk transactions with Checkout routing to 3DS. It must feel great to be able to support such a "simple" product, as I know there must be a ton of complexity under the hood enabling the simple form factor.
jliptzin 7y ago
Has anyone done the math on this? You’re paying an extra 0.4% fees per txn which is a lot. So your dispute loss rate would have to be > 0.4% for this to make sense. That seems pretty high. That probably means your overall dispute rate is above 0.6%. In my experience you can get your dispute rate well below 0.1% (effectively a non-issue) by making sure your support channels are working and not clogged, and you have a generous refund policy (and of course being honest about pricing and billing, especially for subscriptions). To me this seems like knowing about a small leak in your basement, but instead of fixing it, you buy a basement water damage insurance policy.
- xpose2000 7y ago
  So, .4% fee for $10,000 in sales amounts to $40. And losing one chargeback dispute costs you $15, plus time and effort to fill it in and submit it. Not to sound cynical, but odds are you will probably lose it anyways because the customer didn't feel like paying anymore. Am I missing something? The chargeback protection fee doesn't sound terrible
  - jliptzin 7y ago
    Yes I do lose most disputes regardless of what the situation is, and I did forget about the $15 fee. I guess it really depends on the type of business, will probably make sense for some, but as a consumer I do see a lot of small businesses out there that should be looking first at how to get their chargeback rate low enough that they don’t need something like this in the first place.
    - penagwin 7y ago
      I believe it's happened before where people have setup bot accounts to buy game licenses from indie developers, just to resell the keys on G2A/Kinguin. However they do it with stolen credit cards, so the indie developers get hit with a 15$ charge PER order. If there's 1,000 keys, that's 15,000$ in chargeback fees. So it might be reverse, it might be a no brainer to accept this extra protection because like you said, 40$ fee @10,000 isn't that big of a deal, given only 3 chargeback fees are necessary to break even. Unless you can REALLY manage your chargebacks. If your product costs 20$, so 500 people buy it, you only need a .6% chargeback rate before you should've taken the extra protection.
sfmike 7y ago
hmm if your chargeback rate is 1% or less, this costs more then a 15 dollar chargeback anyways. at 100 AOV at 1% cback that's 40 dollars to cover what would have been 15 dollar chargeback. also if your description photos and tracking are on point there should be no chargeback you can't win, unless your processes are off. Big agreement on the just refund vs chargeback and effect possible merchant rate increase or suspension. Would rather cut into profits a bit then have headaches of upset merchant.
crazygringo 7y ago
Genuine question: how can this make financial sense for Stripe? If Stripe charges 0.4% for it... then presumably any business with chargebacks of <0.4% value won't bother to use it (except for rare cases of needing to reduce risk on extreme low volume of high value items), so mostly only businesses with chargebacks of >0.4% value will use it... ...so almost by definition the mean cost will be greater than what Stripe is charging, and Stripe will lose money. Since Stripe is full of smart people... what am I missing here? How is this a viable product?
- dexterdog 7y ago
  Many business <.4% will use it because it takes a job off of somebody's plate and these will tend to be larger customers. Small places that deal with a chargeback or two per week are not going to bother.
deleted 7y ago
[deleted]
temp129038 7y ago
Interesting - I've been following bolt.com, which seems to guarantee zero chargebacks as well. Given Stripe's scale I now wonder why the value add for Bolt over Stripe is supposed to be now.
nickjj 7y ago
How did you arrive at 0.4%? That seems like a lot to pay for insurance. If they take 2.9% normally, 0.4% is about 14% extra in fees for every transaction you make, but disputes on a legitimate product are probably 1 in 5,000 (and Stripe will charge you a $15 flat fee if you lose the dispute which you will if it was related due to credit card fraud). If you sell 5,000 products at $50 that's $250,000 in revenue. Stripe would normally take 2.9% which is $7,250 but now with "fraud production" they would take 3.3% for $8,250. So you've just spent an extra $1,000 out of pocket to save yourself $15 in a dispute fee that Stripe charges you. That's really steep. If you had 66 fraud charges within 5,000x $50 transactions (to break even on fees), I would really look into why you're getting so many disputes. That's astronomically high.
- forrestthewoods 7y ago
  0.4% is an insane rake. The whole chargeback system is broken.
- ripberge 7y ago
  Most disputes have nothing to do with the quality of your product, they're because it's a card number has been stolen and being used illegally and the merchant has no way of knowing this. You're not just out the $15, if you've delivered given the customer merchandise, you'll have to absorb that loss. Most times you won't know a charge has been disputed for around 30 days, so your merchandise is very likely to be gone. The $15 is nothing for many businesses...
- amirhirsch 7y ago
  The value is there is you have greater than 1 in 250 transactions charged-backed and lose. This is high, but certainly within the range -- consider that Signifyd has business for their chargeback protection at a 1% rate. Of course Stripe has more data for better risk modeling....so perhaps Stripe should not be allowed to charge for additional charge-back protection services since it implies they now have a dis-incentive to prevent charge-backs for customers who aren't paying extra.
  - nickjj 7y ago
necubi 7y ago
Chargeback insurance/protection is not new in the industry. And despite how nice it sounds to not have to worry about chargebacks, I think it's a bad deal for almost everybody. The basic problem is that your incentives are not aligned with Stripe's: you make money when a good sale goes through, but that's when Stripe might lose money (if the transaction ends up being fraudulent). So they have an incentive to block any marginal orders, which means you lose revenue and suffer reputational harm of blocking good users. Then there's the price: companies with a good fraud protection system / process typically keep chargebacks <0.1%. (For large companies, this means using something like Sift or Accertify along with a fraud review team, for smaller businesses it might just mean manually reviewing every order). So you're paying a lot for the convenience. [Disclaimer: Used to work on fraud protection at Sift]
- amirhirsch 7y ago
  I agree with you. Incentive alignment is a major issue--I asked the PM in this comment thread and hope for a response, because I think this issue needs to be discussed.
- maratc 7y ago
  That's why anti-fraud-as-a-service companies only charge the commission when they approve the transaction, while the declines are free. If everything is declined, they are not making any money. [Disclaimer: Used to work at anti-fraud-as-a-service company, acquired by a payment behemoth long since]
donniefitz2 7y ago
Would this cover a marketplace scenario? For instance, we use Connect and transfer a purchase balance to our Connect account users after a purchase is made. If we encounter a chargeback, we also have to come up with the full cost of the item sold to cover the loss because the seller has already been paid. I'm wondering if this new service would cover that scenario.
thom801 7y ago
I just have to point out this little page of caveats: https://support.stripe.com/questions/payments-that-qualify-for-chargeback-protection https://support.stripe.com/questions/payments-that-qualify-f... Biggest thing for our company: "The payment must be submitted to Stripe by your customer via Stripe Checkout. This means that recurring charges are not eligible for Chargeback Protection" Meaning this does not protect our B2C subscription company from any recurring charges which is a huge percentage of our charges if not all of them. Also: "The dispute must be one of the following types of reason codes (as identified by the relevant Card Network) listed in Appendix 1 of the Terms of Service: Visa: 10.4 Other Fraud - Card Absent Environment Mastercard: 4837 No Cardholder Authorization Mastercard: 4840 Fraudulent Processing of Transactions Discover, Diners Club, JCB: UA01 Fraud Card Not Present Transaction American Express: FR2 Fraud Full Recourse Program American Express: FR4 Fraud Full Recourse Agreement American Express: F29 Fraudulent Transaction - Card Not Present American Express: 4534 Multiple Records of Charge (ROCs); Card Member denies participation in Charge American Express: 4540 Card Not Present; Card Member denies participation in Charge" Many of our chargebacks fall outside of these chargeback reasons so it would likely not be worth it for us to use this feature, as I'm sure is the case for many other subscription based companies.
- tyrree612yyuh 7y ago
  > The payment must be submitted to Stripe by your customer via Stripe Checkout. This means that recurring charges are not eligible for Chargeback Protection What's going on here? I thought Checkout specifically supported setting up subscriptions: https://stripe.com/docs/payments/checkout/migration#client-subscriptions https://stripe.com/docs/payments/checkout/migration#client-s... If recurring charges are not covered that's fine I guess but I don't get what it has to do with Checkout.
  - patio11 7y ago
    You’re right that wasn’t very clear. If the subscription is started using Stripe Checkout and charged at sign up, the initial payment is protected by Chargeback Protection. Trials that are charged at a later time and future recurring payments are not protected. We want to broaden the scope of use cases for Chargeback Protection over time.
joelrunyon 7y ago
Is this only if you're using checkout?
tarsinge 7y ago
In France to my knowledge we don’t have a right to chargebacks, the only case when we can be reimbursed is when a fraudulent use of our card is made and we then declare a credit card number theft and the card is blocked. How is the situation in other European countries?
- bjonathan 7y ago
  I run an ecommerce website in France, and I use Stripe (french account), and I get a couple of chargebacks per year. Usually, it's the customer who gets his CC stolen, blocks it and declares all the transactions in the timeframe as fraudulent. FWIW, I have had 10 chargebacks and lost the dispute for each of them even with the delivery address matching the CC name and the proof of delivery... But I will pass on this protection, the price is way too high for us.
ricberw 7y ago
Gosh, I’d love to use this for accepting cards for our $29k device, but the limit in the US is $25k in protection for the entire year. We offer a hardware product with SAAS after purchase, and we have dozens of customers insist on paying for that hardware with a credit card (albeit we won’t accept one now because of the inherent risks of accepting a card). If the limit was much higher, I’d be sold, and our volume with Stripe could go up by $1m/year.

341 points by shedside 7y ago

Why limit this to Checkout? Checkout seems limited and resides on Stripe's servers. Who wants to be redirected from a secure website to another domain??? Outside of web savvy people, nobody has ever heard of Stripe.com.

tomglynch 7y ago

In short: Pay extra and we'll include chargeback insurance.

giancarlostoro 7y ago
I mean if they have to do more than the usual on their end and the service ends up working out, why not?
giarc 7y ago
I don't get it? You want free insurance?

tomglynch 7y ago

What will Stripe do to prevent this being abused?

rietta 7y ago
You mean Stripe?
- tomglynch 7y ago
  Yeah, what a brain fade. Thanks!
Implicated 7y ago
By telling you they would likely defeat the purpose of those actions.
eeke 7y ago
(I work at Stripe on Radar.) We see Chargeback Protection mostly as a way to prevent our users from burning too much founder attention doing chargeback management. Managing abusive use of the credit card rails, both by fraudulent businesses and by people attempting to defraud legitimate businesses, is something that we have substantial experience with. We have had years to tune our machine learning models; this both helps every user of Stripe (through blocking transactions likely to be fraud-y) and gives us the confidence we need to roll out a new product like Chargeback Protection widely. We will, of course, monitor it during the rollout and adjust as we go.
- so_tired 7y ago
  > prevent our users from burning too much founder attention doing chargeback management Yikes. Yes. Thank you. I wish i had this 2 months ago.

shedside 7y ago

Don't know if anyone from Stripe is listening here but: it'd be amazing to be able to deploy chargeback protection selectively, as a Radar rule. So that for example we could say: charges from the US are protected (and subject to the extra fee) while charges from the UK are not.

flibble 7y ago
That’s exactly what we’d like. 95% of our transactions come from trusted customers which have ~0% chance of a chargeback. We’d like to apply this check and insurance on only the transactions that we are not sure about. Requiring it to be all or nothing makes the feature useless (not cost effective) for merchants with a low fraud rates.
- StavrosK 7y ago
  Is it a 0% chance, or a 0.4% chance?
- nulbyte 7y ago
  It may not be cost effective for you, but your proposal doesn't seem cost effective for Stripe, either.
- shoo_pl 7y ago
  Is it not the point? If stripe allowed you to do that - insure only dangerous transactions - then it could not be 0.4% but rather a few %. The entire point behind insurance is to have enough volume so that the small % when they need to pay up won't affect the business.
  - flibble 7y ago
    I would imagine stripe will always block charges it thinks are likely to be disputed. They aren’t offering carte-blanche to accept transactions that are likely to be fraudulent. Perhaps it wouldn't work for stripe (to allow the merchant pick and choose which transactions use this service). But if it doesn’t it means that the service won’t be used by clients with low fraud rates.

eeke 7y ago

I’m the PM on Chargeback Protection. Startups told us they don’t want to deal with the hassle and unpredictability of chargebacks; that’s why we built this. Happy to answer any questions you have.

larrysalibra 7y ago
Great product! Will this be rolling out in Hong Kong at some point in the future?
- eeke 7y ago
  (PM on Chargeback Protection here.) We’d like to extend Chargeback Protection to all Stripe countries eventually. Stay tuned!
pancho111203 7y ago
Completely unrelated, but please add an alternative fee structure more appropriate for microtransactions. Stripe has a vast amount of useful features from which my business could benefit, but its cost is prohibitive as all our transactions are for low amounts (1$ or less), which make your 30cent fee a 30% of the total. We are forced to use credit cards directly and Paypal, as both offer a much lower fixed fee (sometimes 0) in exchange for higher %.
- icebraining 7y ago
  https://support.stripe.com/questions/microtransaction-support-and-pricing https://support.stripe.com/questions/microtransaction-suppor...
czzarr 7y ago
0.4% is an extremely steep price for a company like mine doing over $2.5m in annual turnover (saas) which has a very low fraud rate. I actually think currently we pay less than that by doing nothing (meaning letting Paypal handle it, and losing every case). However I'd gladly pay a few thousands per year for it, or be able to pay it on selected transactions (only US for instance).

jasonkester 7y ago

But this isn't the product I want. I don't want to ever fight chargebacks. Because my policy is to never take money from people who don't want to give it to me. I want to automatically refund every chargeback attempt without it affecting my ability to charge credit cards. One of my businesses targets consumers, who have this amazing ability to "forget to cancel" or to have "cancelled 3 months ago, but for some reason we're still billing them" or to just plain decide that the last six months of charges were fraudulent and that their bank should get them reversed. All of that is fine with me, and in fact every invoice I send out says as much: We'll happily refund every penny you ever paid us if you simply ask. But lots of people aren't comfortable asking for their money back. They are, however, plenty comfortable asking their bank to ask for their money back. I just want a way to streamline that process that doesn't involve me having to handle fighting disputes that I'd prefer to lose. And of course to not have those lost "disputes" count against me. Any ideas on how to do that, Stripe?

Implicated 7y ago
Why isn't this a feature of _every_ merchant account?
tonyedgecombe 7y ago
But lots of people aren't comfortable asking for their money back. They are, however, plenty comfortable asking their bank to ask for their money back. I think you are being generous in your interpretation. I don't get many chargebacks but looking at the ones I've had there has been a lot of deceit and fraudulent behaviour.
- jasonkester 7y ago
  Do you mean it's your customers who are being deceitful by charging back a service after they've used it (as mine do). Or do you mean that you have customers using stolen credit cards to pay for your service and that the chargebacks are happening when the card owner discovers as much? I haven't seen any evidence of that second case happening with my users (apart from one incident where card thieves discovered my "update your credit card" workflow and used it to sanitize numbers for a few days before I fixed the loophole). But the first one happens all the time. It'd be adorable in a way, as I'm sure the people doing it think they're totally getting away with something. If, that is, it didn't jeopardize my ability to continue charging credit cards in the future.

Liron 7y ago

Any plans to offer this without requiring using Checkout specifically? We use Stripe Elements because it enables a more native seamless payment collection UX.

eeke 7y ago
(PM on Chargeback Protection here.) We are rolling out with our new Checkout first because it allows us to tweak the checkout flow and e.g. send a payment which we’re on the fence about to 3D Secure (3DS) but let obviously good payments go through without 3DS. We are also exploring ways to expand Chargeback Protection to other integration options!
- ijidak 7y ago
  Thank you so much for your work on this! Really hoping you expand this to elements. (See my comment at the root level.) This is a game-changer. We do all or nothing semi-annual educational events and fraudulent chargebacks are a HUGE source of anxiety. .4% seems to be a very fair percent as well to charge to make this problem just go away for businesses like ours. We happily refund customers that go through normal refund channels, but fraudulent chargebacks are a significant source of stress and revenue uncertainty. Just last night I was shaking my head as I stumbled across an email from a customer confirming that her friend referred her to our event and that she was coming. But then a couple months later she changed her mind. We told her it's way too late for us to give her a refund on her deposit (which was clearly stated to be non-refundable in the first place). So she told her credit card company that she doesn't recognize the charge. Even though we added her emails to our dispute evidence, and submitted evidence that she was aware of the non-refundable policy for ticket deposits, we still have no idea whether we'll actually win the dispute. Incidents like this are a major source of frustration, and your solution is going to help us operate with less uncertainty.
- kweks 7y ago
  Hi Eeke. A few years back, we lost a merchant account with stripe due to an unfortunate combination: no chargeback insurance enabled, high average transaction value (~600EU) and low monthly volume (we were starting up). Got one charge back for 800EU that blew us out of the water. Would there be a mechanism to re-apply, with CB protection enabled ? We struggled to have this discussion with a Real Person at Stripe to discuss this .. would you have any leads ?

tacosx 7y ago

The chargeback is one of the few tools consumers still have with real power. Sure fraud is still a problem, but it's a really uncomfortable proposition to start making chargebacks an abstracted cost sink for the corporations. Of course the fact that this is an upsell line item means only big businesses will pay for it, the smallest businesses owned by the people just starting out will be the only ones who actually suffer punitively from chargebacks. Some things shouldn't be streamlined. Some pain is good. This is a really unfortunate choice by Stripe.

Liron 7y ago
But this product isn't taking away consumer protection via chargebacks, nor hurting small businesses in any way.
- URSpider94 7y ago
  I think the Parent is upset that businesses will no longer be inconvenienced and pained by a chargeback.

kmfrk 7y ago

It'd be great to see Stripe adopted by donation platforms for livestreaming like Streamlabs and StreamElements, chargebacks remain an awful abuse vector there.

judge2020 7y ago
Didn't Paypal add a TOS clause (or something along those lines) that prevented donations from being valid for chargeback?
- fyfy18 7y ago
  How does that even work? The chargeback is initiated and the fee levied by the card issuer (Visa, MasterCard, etc).
- kmfrk 7y ago
  PayPal ran into some bad PR a while ago with people making "fake" donations to the tune of thousands of dollars and ended up refusing the chargebacks. But as far as structural change, things are still pretty bad. Streamlabs's tutorial on chargebacks was updated as recently as a month ago: https://support.streamlabs.com/hc/en-us/articles/115006017667-I-Just-Received-a-Chargeback-What-Now- https://support.streamlabs.com/hc/en-us/articles/11500601766....
- gnopgnip 7y ago
  The chargeback originates with your bank, not with Paypal.

andrewbarba 7y ago

This appears to require the new Checkout product in order to enable it. What happens if we have a percentage of sales coming from a native iOS or Android app? Are we not allowed to enable protection? Or would just the web transactions be covered?

eeke 7y ago
(PM for Chargeback Protection.) Yep, Chargeback Protection only works with the new Checkout so we’ll only protect any transactions that are processed through the new Checkout. You can keep your existing integration for iOS and Android, but those charges will not be protected.

smoovb 7y ago

Does this mean Stripe will change its allowed merchants? We sell digital telecom products and Stripe does not accept our business. This would be a product we could use, but can't if they are still rigid about their accepted business.

edubs25 7y ago
Is stripe actually the one blocking you? Card brands regulate which MCCs are allowed to be signed on by acquirers. It could be Visa, Amex or Mastercard.

ssimoni 7y ago

Will this work with stripe elements not just stripe checkout? I'd like to upsell my connect accounts this feature.

globile 7y ago

Things like this are great for the average to small merchant, BUT if you're processing more than, say, 50,000 USD a month, relying heavily on the Stripe ecosystem can take its toll and can cost you big time. - Use Stripe as the only gateway for all your international traffic, and you will see alarming drops in acceptance rates, meaning the chance of successfully charging a Mexican customer in Mexico with a US Stripe account is much lower than if you have a local acquirer. By a lot! - Rely heavily and blindly on Stripe Radar for post-charge suspected fraud alerts charges, and you will be refunding many valid orders. - If you go all in with Stripe Checkout, you are getting a lot of good stuff at a price. If stripe dynamically uses 3DS to sift potential fraud users, you are going to hurt your conversion rates. Been a big fan of Stripe for a long time, but when order volume goes up, and you grow internationally you have to consider other alternatives and/or backup plans, such as smart routing, local merchants, alert networks (ethoca, verifi), pre-checking for pseudo 3DS charges (no auth need, but fully protected, etc) Not taking into account these 3 things, can drop your conversions by big double digit percentages. EDIT: spelling

eeke 7y ago
Thanks for your comment. We want our products to substantially decrease the barriers to international commerce, and they’re used by both businesses which are just getting started up to multinational companies with extremely sophisticated understanding of their payments needs. Auth rates are a deep topic, and one we’re experimenting on constantly. The topic of whether a particular business will get better auth rates going through a local gateway is a complicated one (that is probably true of many businesses and not true of many businesses); we’re working on making this sort of thing unnecessary for most businesses to think about. Philosophically, centralizing this sort of work at Stripe makes a lot of sense to us; we can deploy more engineers against auth rates than any Stripe customer could because we have a much larger surface area for improvement than any customer does. Many of our users want something which works out of the box, and they’re the target audience for Checkout. If you want to rigorously test the behavior against your sophisticated understanding of conversions in your own business, that’s awesome; you can see exactly which transactions we flagged for being on the fence using the API. It’s always a balancing act to make things which work out-of-the-box for someone’s first business on it’s first day and still have the power and configurability expected by extremely sophisticated operators. Getting this balance right is extremely important to us.

Gluten 7y ago

Used to run an online game, where lots of fraud was going on. People would buy ingame coins or whatever, move them elsewhere and then chargeback. Full protection at just 0.4% would have been a dream for me if I still operated that game.

jliptzin 7y ago
Stripe are not idiots, if they’re losing a significant amount of money on this offering to a specific merchant, they’re going to close your account.
- slips 7y ago
  Is that stated anywhere by Stripe or is it theoretical?
  - ceejayoz 7y ago
    > We may terminate this Agreement or close your Stripe Account at any time for any reason (including, without limitation, for any activity that may create harm or loss to the goodwill of a Payment Method) by providing you Notice.

ijidak 7y ago

This is huge! Our business sales registrations to educational events for a specific industry. We use Stripe to process. We have a strict non-refundable policy on ticket deposits because, otherwise, we can't determine how many seats are left for each event and we lose the revenue on that empty seat. We often get unscrupulous customers who claim they don't recognize the charge because they decided not to attend in the 11th hour! We also have the rare individual who completes the entire 3-day training and then claims they never got the service! Because it's in-person training, it's hard to prove they received the service. For example, there are no postal records we might show as proof that we shipped a physical item and it was received. Now, we have them sign a document affirming they got the training prior to receiving their certificates. But, still, Chargebacks are stressful, because they create revenue and profit uncertainty for each event. The dollar value of our fraud rate is about .3-.7% per event. But we always fear the outlier event, where that number spikes. For example, we set aside 2% of revenue from our most recent event (which is thousands of dollars now tied up) to prepare for any unanticipated spike in chargebacks. And... the stress and frustration of fraudulent chargebacks is a non-zero intangible cost. I will gladly pay .4% to get revenue certainty! At this time we don't use checkout though. So will need to look into what we need to do to change to that. I believe we're using Stripe Elements. (I'm the business owner and a programmer, but I didn't code our original stripe integration.) Will be looking at this today!!! Thank you so much for your work on this feature! This is a real game changer for businesses like mine!

Meekro 7y ago
Have you looked into 3D secure? Stripe already offers it[1], no fees, and it mitigates liability quite a bit. Lots of business owners here probably can't use it because they do recurring billing, but it sounds like it'd be perfect for you. "Should a 3D Secure payment be disputed as fraudulent by the cardholder, the liability shifts from you to the card issuer. These types of disputes are handled internally, do not appear in the Dashboard, and do not result in funds being withdrawn from your Stripe account." [1] https://stripe.com/docs/payments/3d-secure https://stripe.com/docs/payments/3d-secure
- ijidak 7y ago

docker_up 7y ago

0.4% seems high when a sustained rate of 1% will get you kicked off VISA and Mastercard anyway.

dulse 7y ago

Congratulations!! Love the philosophy around the product and the dynamic treatment of higher risk transactions with Checkout routing to 3DS. It must feel great to be able to support such a "simple" product, as I know there must be a ton of complexity under the hood enabling the simple form factor.

jliptzin 7y ago

Has anyone done the math on this? You’re paying an extra 0.4% fees per txn which is a lot. So your dispute loss rate would have to be > 0.4% for this to make sense. That seems pretty high. That probably means your overall dispute rate is above 0.6%. In my experience you can get your dispute rate well below 0.1% (effectively a non-issue) by making sure your support channels are working and not clogged, and you have a generous refund policy (and of course being honest about pricing and billing, especially for subscriptions). To me this seems like knowing about a small leak in your basement, but instead of fixing it, you buy a basement water damage insurance policy.

xpose2000 7y ago
So, .4% fee for $10,000 in sales amounts to $40. And losing one chargeback dispute costs you $15, plus time and effort to fill it in and submit it. Not to sound cynical, but odds are you will probably lose it anyways because the customer didn't feel like paying anymore. Am I missing something? The chargeback protection fee doesn't sound terrible
- jliptzin 7y ago
  Yes I do lose most disputes regardless of what the situation is, and I did forget about the $15 fee. I guess it really depends on the type of business, will probably make sense for some, but as a consumer I do see a lot of small businesses out there that should be looking first at how to get their chargeback rate low enough that they don’t need something like this in the first place.
  - penagwin 7y ago
    I believe it's happened before where people have setup bot accounts to buy game licenses from indie developers, just to resell the keys on G2A/Kinguin. However they do it with stolen credit cards, so the indie developers get hit with a 15$ charge PER order. If there's 1,000 keys, that's 15,000$ in chargeback fees. So it might be reverse, it might be a no brainer to accept this extra protection because like you said, 40$ fee @10,000 isn't that big of a deal, given only 3 chargeback fees are necessary to break even. Unless you can REALLY manage your chargebacks. If your product costs 20$, so 500 people buy it, you only need a .6% chargeback rate before you should've taken the extra protection.

sfmike 7y ago

hmm if your chargeback rate is 1% or less, this costs more then a 15 dollar chargeback anyways. at 100 AOV at 1% cback that's 40 dollars to cover what would have been 15 dollar chargeback. also if your description photos and tracking are on point there should be no chargeback you can't win, unless your processes are off. Big agreement on the just refund vs chargeback and effect possible merchant rate increase or suspension. Would rather cut into profits a bit then have headaches of upset merchant.

crazygringo 7y ago

Genuine question: how can this make financial sense for Stripe? If Stripe charges 0.4% for it... then presumably any business with chargebacks of <0.4% value won't bother to use it (except for rare cases of needing to reduce risk on extreme low volume of high value items), so mostly only businesses with chargebacks of >0.4% value will use it... ...so almost by definition the mean cost will be greater than what Stripe is charging, and Stripe will lose money. Since Stripe is full of smart people... what am I missing here? How is this a viable product?

dexterdog 7y ago
Many business <.4% will use it because it takes a job off of somebody's plate and these will tend to be larger customers. Small places that deal with a chargeback or two per week are not going to bother.

deleted 7y ago

[deleted]

temp129038 7y ago

Interesting - I've been following bolt.com, which seems to guarantee zero chargebacks as well. Given Stripe's scale I now wonder why the value add for Bolt over Stripe is supposed to be now.

nickjj 7y ago

How did you arrive at 0.4%? That seems like a lot to pay for insurance. If they take 2.9% normally, 0.4% is about 14% extra in fees for every transaction you make, but disputes on a legitimate product are probably 1 in 5,000 (and Stripe will charge you a $15 flat fee if you lose the dispute which you will if it was related due to credit card fraud). If you sell 5,000 products at $50 that's $250,000 in revenue. Stripe would normally take 2.9% which is $7,250 but now with "fraud production" they would take 3.3% for $8,250. So you've just spent an extra $1,000 out of pocket to save yourself $15 in a dispute fee that Stripe charges you. That's really steep. If you had 66 fraud charges within 5,000x $50 transactions (to break even on fees), I would really look into why you're getting so many disputes. That's astronomically high.

forrestthewoods 7y ago
0.4% is an insane rake. The whole chargeback system is broken.
ripberge 7y ago
Most disputes have nothing to do with the quality of your product, they're because it's a card number has been stolen and being used illegally and the merchant has no way of knowing this. You're not just out the $15, if you've delivered given the customer merchandise, you'll have to absorb that loss. Most times you won't know a charge has been disputed for around 30 days, so your merchandise is very likely to be gone. The $15 is nothing for many businesses...
amirhirsch 7y ago
The value is there is you have greater than 1 in 250 transactions charged-backed and lose. This is high, but certainly within the range -- consider that Signifyd has business for their chargeback protection at a 1% rate. Of course Stripe has more data for better risk modeling....so perhaps Stripe should not be allowed to charge for additional charge-back protection services since it implies they now have a dis-incentive to prevent charge-backs for customers who aren't paying extra.
- nickjj 7y ago

necubi 7y ago

Chargeback insurance/protection is not new in the industry. And despite how nice it sounds to not have to worry about chargebacks, I think it's a bad deal for almost everybody. The basic problem is that your incentives are not aligned with Stripe's: you make money when a good sale goes through, but that's when Stripe might lose money (if the transaction ends up being fraudulent). So they have an incentive to block any marginal orders, which means you lose revenue and suffer reputational harm of blocking good users. Then there's the price: companies with a good fraud protection system / process typically keep chargebacks <0.1%. (For large companies, this means using something like Sift or Accertify along with a fraud review team, for smaller businesses it might just mean manually reviewing every order). So you're paying a lot for the convenience. [Disclaimer: Used to work on fraud protection at Sift]

amirhirsch 7y ago
I agree with you. Incentive alignment is a major issue--I asked the PM in this comment thread and hope for a response, because I think this issue needs to be discussed.
maratc 7y ago
That's why anti-fraud-as-a-service companies only charge the commission when they approve the transaction, while the declines are free. If everything is declined, they are not making any money. [Disclaimer: Used to work at anti-fraud-as-a-service company, acquired by a payment behemoth long since]

donniefitz2 7y ago

Would this cover a marketplace scenario? For instance, we use Connect and transfer a purchase balance to our Connect account users after a purchase is made. If we encounter a chargeback, we also have to come up with the full cost of the item sold to cover the loss because the seller has already been paid. I'm wondering if this new service would cover that scenario.

thom801 7y ago

I just have to point out this little page of caveats: https://support.stripe.com/questions/payments-that-qualify-for-chargeback-protection https://support.stripe.com/questions/payments-that-qualify-f... Biggest thing for our company: "The payment must be submitted to Stripe by your customer via Stripe Checkout. This means that recurring charges are not eligible for Chargeback Protection" Meaning this does not protect our B2C subscription company from any recurring charges which is a huge percentage of our charges if not all of them. Also: "The dispute must be one of the following types of reason codes (as identified by the relevant Card Network) listed in Appendix 1 of the Terms of Service: Visa: 10.4 Other Fraud - Card Absent Environment Mastercard: 4837 No Cardholder Authorization Mastercard: 4840 Fraudulent Processing of Transactions Discover, Diners Club, JCB: UA01 Fraud Card Not Present Transaction American Express: FR2 Fraud Full Recourse Program American Express: FR4 Fraud Full Recourse Agreement American Express: F29 Fraudulent Transaction - Card Not Present American Express: 4534 Multiple Records of Charge (ROCs); Card Member denies participation in Charge American Express: 4540 Card Not Present; Card Member denies participation in Charge" Many of our chargebacks fall outside of these chargeback reasons so it would likely not be worth it for us to use this feature, as I'm sure is the case for many other subscription based companies.

tyrree612yyuh 7y ago
> The payment must be submitted to Stripe by your customer via Stripe Checkout. This means that recurring charges are not eligible for Chargeback Protection What's going on here? I thought Checkout specifically supported setting up subscriptions: https://stripe.com/docs/payments/checkout/migration#client-subscriptions https://stripe.com/docs/payments/checkout/migration#client-s... If recurring charges are not covered that's fine I guess but I don't get what it has to do with Checkout.
- patio11 7y ago
  You’re right that wasn’t very clear. If the subscription is started using Stripe Checkout and charged at sign up, the initial payment is protected by Chargeback Protection. Trials that are charged at a later time and future recurring payments are not protected. We want to broaden the scope of use cases for Chargeback Protection over time.

joelrunyon 7y ago

Is this only if you're using checkout?

tarsinge 7y ago

In France to my knowledge we don’t have a right to chargebacks, the only case when we can be reimbursed is when a fraudulent use of our card is made and we then declare a credit card number theft and the card is blocked. How is the situation in other European countries?

bjonathan 7y ago
I run an ecommerce website in France, and I use Stripe (french account), and I get a couple of chargebacks per year. Usually, it's the customer who gets his CC stolen, blocks it and declares all the transactions in the timeframe as fraudulent. FWIW, I have had 10 chargebacks and lost the dispute for each of them even with the delivery address matching the CC name and the proof of delivery... But I will pass on this protection, the price is way too high for us.

ricberw 7y ago

Gosh, I’d love to use this for accepting cards for our $29k device, but the limit in the US is $25k in protection for the entire year. We offer a hardware product with SAAS after purchase, and we have dozens of customers insist on paying for that hardware with a credit card (albeit we won’t accept one now because of the inherent risks of accepting a card). If the limit was much higher, I’d be sold, and our volume with Stripe could go up by $1m/year.