Stripe Chargeback Protection • Hacker News Board

Re: Stripe Chargeback Protection

#161

Post by jacquesm » Mon, Jun 03, 2019, 5:03 PM UTC

eeke wrote: post #44

jasonkester wrote: post #31

Earlier quoted context omitted.

How does that work? When I'm notified of a dispute, the first thing I do is go in and refund the charge. I still have to watch the whole dispute resolution process play out and have it be ruled against me. How would I go about stopping it before it starts, as you seem to imply is possible? Edit to add: Does it even make a difference if I go in and refund the disputed payments? It sounds like I get dinged either way a…

Card issuers are often able to detect that a transaction is fraudulent before it is disputed, and when this happens, they will send us a notification. These notifications are commonly called TC40s (Visa) or SAFE reports (MasterCard). On average ~60% of early fraud warnings end up being disputed, and most disputes have an early fraud warning (though there’s a wide range depending on your business). If you refund these…

It's telling for the industry as a whole that the card companies failure to do their work properly still can result in extra charges to the merchant.

After all card companies have a tremendous amount of data at their disposal and are apparently able to detect a large percentage of fraud before a dispute is raised and yet do not pre-emptively block the charges or reverse the transaction.

I've been on the receiving end of these kind of dispute resolution processes and in spite of doing everything by the book we still ate quite a few chargeback fees on charges that to us looked just as legit as every other charge that passed through. (Not with Stripe though.)

Re: Stripe Chargeback Protection

#162

Post by jacquesm » Mon, Jun 03, 2019, 5:05 PM UTC

patio11 wrote: post #80

PatrolX wrote: post #77

Earlier quoted context omitted.

But wait, what about Stripe Radar? If card issuers are "often able to detect that a transaction is fraudulent before it is disputed" (presumably because of transaction history) then why can't Radar block the transaction from ever taking place? Maybe there's more to it than transaction history? Can you clarify?

Here's a stylized example which may help: Monday: credit card does a transaction at a particular business. Thursday: user calls bank to report card stolen as of previous Sunday. This kicks off a TC40 on all transactions on or after Sunday. Friday: bank staff and/or user walk through the transactions which were post-theft, figure out which ones were still authorized (e.g. the recurring Netflix bill), and file disputes…

> But there is, in this stylized example, a window between the TC40 and the dispute for the business to proactively investigate and possibly refund.

There is also a perfect opportunity for the IPSP to flag the transaction and reverse the transaction before it becomes a problem for the merchant.

Re: Stripe Chargeback Protection

#163

Post by jacquesm » Mon, Jun 03, 2019, 5:07 PM UTC

michaelt wrote: post #62

eeke wrote: post #44

Earlier quoted context omitted.

Card issuers are often able to detect that a transaction is fraudulent before it is disputed, and when this happens, they will send us a notification. These notifications are commonly called TC40s (Visa) or SAFE reports (MasterCard). On average ~60% of early fraud warnings end up being disputed, and most disputes have an early fraud warning (though there’s a wide range depending on your business). If you refund these…

Card issuers are often able to detect that a transaction is fraudulent before it is disputed, and when this happens, they will send us a notification. Is there a mechanism like that but in the reverse direction? i.e. if a seller detects someone testing stolen cards, and wants to alert the card issuer all those cards are stolen?

Too much abuse potential, for instance, a software error could flag 'good' cards as 'bad' and cause a lot of headaches for other merchants.

Re: Stripe Chargeback Protection

#164

Post by forrestthewoods » Mon, Jun 03, 2019, 5:08 PM UTC

nickjj wrote: post #156

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…

0.4% is an insane rake. The whole chargeback system is broken.

Re: Stripe Chargeback Protection

#165

Post by ben509 » Mon, Jun 03, 2019, 5:14 PM UTC

shoo_pl wrote: post #26

flibble wrote: post #11

Earlier quoted context omitted.

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.

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.

Adverse selection inflates premiums, simply because people who need insurance are the ones who buy it.

The point of insurance is to transfer* risk to the insurer. The insurer does that by identifying a group that is homogenous enough that their premiums are just slightly over the payouts.

So an insurer can improve competitiveness by selling multiple products that cover different risk groups. I imagine that for Stripe, the risk variance falls in a fairy narrow band: bounded at the low end by not being worth insuring, and bounded at the high end by merchants losing their account.

* As opposed to say retaining risk, e.g. you don't buy collision on a beater.

Re: Stripe Chargeback Protection

#166

Post by eeke » Mon, Jun 03, 2019, 5:19 PM UTC

xpose2000 wrote: post #136

eeke wrote: post #8

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.

Any ETA on when chargeback protection will be available for Stripe.js?

No ETA just yet, but we are exploring ways to bring Chargeback Protection to other integration options!

Re: Stripe Chargeback Protection

#167

Post by eeke » Mon, Jun 03, 2019, 5:21 PM UTC

nickjj wrote: post #159

eeke wrote: post #8

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.

Before this, if a customer opened a dispute and you won, you (the business owner) didn't have to pay any dispute fees without having to pay for anything extra. It was just a part of the standard Stripe offering. You even wrote this on your site's documentation[0]. Here's what it says as of right now: > There is a dispute resolution process through which you can respond and submit evidence to make your case that the p…

I work at Stripe. That’s right! Nothing changes in the way we handle disputes for businesses that are not on Chargeback Protection. Your dispute fees are still waived if you win the dispute.

Re: Stripe Chargeback Protection

#168

Post by necubi » Mon, Jun 03, 2019, 5:27 PM UTC

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 [Disclaimer: Used to work on fraud protection at Sift]

Re: Stripe Chargeback Protection

#169

Post by donniefitz2 » Mon, Jun 03, 2019, 5:36 PM UTC

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.

Re: Stripe Chargeback Protection

#170

Post by Silhouette » Mon, Jun 03, 2019, 5:41 PM UTC

scrollaway wrote: post #144

eeke wrote: post #44

Earlier quoted context omitted.

Card issuers are often able to detect that a transaction is fraudulent before it is disputed, and when this happens, they will send us a notification. These notifications are commonly called TC40s (Visa) or SAFE reports (MasterCard). On average ~60% of early fraud warnings end up being disputed, and most disputes have an early fraud warning (though there’s a wide range depending on your business). If you refund these…

60%… I've had some of my customers' cards get reported as stolen, and a recurring charge pop up (on a customer who had subscribed months ago) and get flagged. I do not act on it, a dispute gets filed, and the customer wins the dispute despite me providing evidence that this was clearly an intended charge (and clearing that up with the customer afterwards!). Winning a dispute on Stripe has always felt impossible to me…

We're about 50/50 on the relatively few chargebacks we've had. In 100% of the cases, it was a genuine charge for a real customer, the customer openly acknowledged that when contacted, and this evidence was supplied as part of the dispute.

Our customers have generally been responsive when asked about a chargeback. It seems like in many of the cases there really had been a problem with their card being stolen or the like, but often all subsequent transactions had been disputed by the card issuer, even long-standing recurring charges. It wasn't clear in many of these cases that the customer had requested this, or even knew that it was happening.

Even when customers assured us that they had personally contacted their card issuer to tell them a charge was legitimate, that was no guarantee that the chargeback would be cancelled. Unless we have customers who are spending considerable time writing apologetic emails to us and offering to pay us some other way and yet for some reason lying about that contact, the card issuers aren't keeping up their side of the bargain here.

In 0% of cases was it worth the time we spent putting together comprehensive evidence to dispute a chargeback, even when we won. Like scrollaway, we just don't bother now.

If you have a system where a charge can just be arbitrarily reversed and it's not worth fighting it as the merchant even if you have overwhelming evidence of its legitimacy, that tells you how legitimate the whole system is, doesn't it?