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The madness of SaaS chargebacks

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Re: The madness of SaaS chargebacks

#81

Post by greyb »

demarq wrote: post #80

Controversial take here. Sue your customer. No really. Banks operate on risk, make chargebacks risky. Some of these chargebacks sound like straight up fraud. Three months of usage and using their bank to reverse a payment. Make Fraud Spicy Again

Suing for $43 would absolutely be frivolous and would be thrown out by all but the most bored small claims courts.

The best you could do is send your client to collections, though if you try and mess with their credit report, that incurs liability on your part. Funny enough, German companies do send SaaS/IaaS clients with small bills owing to collections, even for amounts as small as 15-20 EUR.

Re: The madness of SaaS chargebacks

#82

Post by evermike »

greyb wrote: post #81
demarq wrote: post #80

Controversial take here. Sue your customer. No really. Banks operate on risk, make chargebacks risky. Some of these chargebacks sound like straight up fraud. Three months of usage and using their bank to reverse a payment. Make Fraud Spicy Again

Suing for $43 would absolutely be frivolous and would be thrown out by all but the most bored small claims courts. The best you could do is send your client to collections, though if you try and mess with their credit report, that incurs liability on your part. Funny enough, German companies do send SaaS/IaaS clients with small bills owing to collections, even for amounts as small as 15-20 EUR.

Of course we would never do anything like that. In the post I just shared two different cases to give some perspective to the community.

From everything discussed in the article, there are a 2 major takeaways:

1) You need to avoid chargebacks as much as possible.

2) If a chargeback does happen, the chances of winning are basically zero — unless you can convince the customer to withdraw it.

Re: The madness of SaaS chargebacks

#83

Post by skwee357 »

I’ve been recently hit with my first chargeback. The first thing I learned, you pay the chargeback fee no matter what.

The second thing I learned, you pay a fee if you intend to respond.

Basically, from what I understood, a chargeback is a lose-lose situations for the business. If the cost of the transaction is less than the two fees, it’s better to let chargeback settle in customers favor. Otherwise, you risk losing both fees, as the chance for winning a chargeback is very small (from what I learned).

I had a customer who used a “wrong credit card” (read: a corporate card that they had access to). I reached out to the customer asking them why they filed a chargeback, they told me “sorry, used the wrong card, the owner filed for chargeback”.

I didn’t bother to file the counter argument. Just blocked the customer, and ate the fee.

Enable 3D secure, this _might_ help with chargeback protection. And as someone said, enable Radar, it costs extra. There are also service that automatically refund the customer when they “intend” to file. Basically, stripe sends you a webhook when chargeback is about to arrive, so you can refund, this avoiding the chargeback fee.

Re: The madness of SaaS chargebacks

#84

Post by ryandrake »

giveita wrote: post #30
evermike wrote: post #24

Earlier quoted context omitted.

To be honest, I’ve never personally filed a chargeback, so I don’t really know how difficult the process actually is ))

Yes for me it is last resort. Email chains go nowhere. Mentioned consumer protection laws but nothing. It's the next step before small claims court. Not having a fun day if doing a chargeback. It's very rare.

I’ve always considered the chargeback the last resort “burning the bridge” action. Problem is that merchants lately are getting way worse about customer support.

I’ve been a credit card user for 30 years, and in the first 25 of those years, I only had to resort to chargeback once. In the most recent 5 years, I’ve had to do it about 3 times. Companies in general are just way less responsive now and take their customers for granted way more than in the past.

Re: The madness of SaaS chargebacks

#85

Post by lotsofpulp »

parliament32 wrote: post #72
evermike wrote: post #15

Earlier quoted context omitted.

I know for sure that if users start filing complaints against you with Apple, they can simply ban your account entirely and for long. Some companies never recover from that and end up shutting down.

AMEX was/is the old-school equivalent of this. They would unapologetically ban merchants from accepting AMEX (forever!) after even a handful of complaints/chargebacks. This is also a key part of why you see some shops/restaurants with the "no AMEX" signs on their terminals -- don't be fooled by the "AMEX is too expensive to accept" red-herring, the actual difference for AMEX vs Visa/MC is ~1%[1], really not enough to…

AmEx also does not pay the merchant as quick as Visa and MC. And 1% is a significant cut for most retail businesses, as they have low single digit profit margins.

Re: The madness of SaaS chargebacks

#86

Post by greyb »

shkkmo wrote: post #41

Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error? If I try to cancel and it doesn't work, I'm not gonna waste time trying to figure out how to work around it or filing a bug report. I'm gonna go…

>Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error?

This happened to me once with a meal planning app (Eat This Much). I did validly cancel and get a cancellation email, but Stripe had errored out (I didn't realize this) and I ended up disputing the charge with my credit card because I couldn't get a hold of them (they had just done some UI changes that unfortunately broke their in-app contact function).

In the exit survey, I mentioned I was disappointed that they chose not to honor my cancellation request. Their support person reached out to me to let me know that they couldn't refund me without me dropping my dispute, but my dispute was already marked as resolved by my bank. I guess they issued a courtesy credit and didn't want to deal with the back-and-forth internally.

I sent them the cancellation email that I had received proving my cancellation. I'm pretty sure if I hadn't received that email, they would've cursed me up and down as one of these "anti-social chargebackers", because it confused them enough that their CEO personally emailed me to apologize; they found the Stripe error in their logs, it had only happened one other time in recent history, and they wouldn't appeal my dispute as a result. They did offer me a free month, but I really did want to cancel - it just wasn't working for me, but at least they were nice about it.

I'm sure without that added context, the story would've been the same as this post - yet another person charging back and not reaching out first to explain. I was pretty angry about the situation at first (having no knowledge it errored out or that they would be more willing to refund me than deal with my chargeback), but they were a small team, they were nice about it, and I dropped my interest in posting a public complaint about it.

Re: The madness of SaaS chargebacks

#87

Post by evermike »

skwee357 wrote: post #83

I’ve been recently hit with my first chargeback. The first thing I learned, you pay the chargeback fee no matter what. The second thing I learned, you pay a fee if you intend to respond. Basically, from what I understood, a chargeback is a lose-lose situations for the business. If the cost of the transaction is less than the two fees, it’s better to let chargeback settle in customers favor. Otherwise, you risk losing…

I’d say if a chargeback does happen, the chances of winning =0, unless you can convince the customer to withdraw it. I realized this especially after my last dispute, where I was 100% sure I would win. But that’s it. I have no faith in the process anymore. What’s left is just the internal struggle, I always want to respond to something unfair and try to prove my case. But here it’s not worth doing.

Re: The madness of SaaS chargebacks

#88

Post by robertlagrant »

amelius wrote: post #35
evermike wrote: post #31

Earlier quoted context omitted.

Neobanks definitely have this feature. For example Revolut. There’s a “Block future payments” button, and once you click it, no more charges from that merchant will go through.

Yes, but this is not a correct way to unsubscribe. They might for instance still send a bailiff to collect their money. What I'm talking about is an official way to unsubscribe. One that the user fully controls, and is free of dark patterns.

What if you want to change your subscription level, rather than unsubscribe?

Re: The madness of SaaS chargebacks

#89

Post by papa_bear »

greyb wrote: post #86
shkkmo wrote: post #41

Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error? If I try to cancel and it doesn't work, I'm not gonna waste time trying to figure out how to work around it or filing a bug report. I'm gonna go…

>Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error? This happened to me once with a meal planning app (Eat This Much). I did validly cancel and get a cancellation email, but Stripe had errored ou…

I remember this! Sorry again for the frustration >_We do get a fair number of disputes like the author where customers will cancel after getting billed, and then dispute it, even though we always give refunds to people who email and ask for one. It also feels like there's been a significant up-tick in recent months of disputes like these, maybe a reflection of the current economic climate. Hard to blame the customer though, for all the reasons listed by the top comment -- sometimes it's just easier to do it through the bank than figure out how to cancel through an app you forgot you even subscribed to.

Re: The madness of SaaS chargebacks

#90

Post by bwb »

amelius wrote: post #25
ilamont wrote: post #16

> What I don’t understand is why some people can’t just reach out and request it — instead of going straight to a chargeback. Customers don't want to "reach out" if it means hunting deep in their account settings to find the cancel button, or calling a number which may or may not lead them through an endless phone tree to waste 5 minutes talking with someone on the retention team reading from a script. People don't r…

What I don't understand is why my banking app does not show a "cancel subscription" button with the payment. When I click that button, the recurring payment is automatically canceled, and the SaaS company can check that and know that I unsubscribed. Or something along these lines. There is already a power-asymmetry between consumers and companies. This should not extend to unsubscribing. Here, the consumer should hav…

I love love love this comment.

Banks are barely running on a modern stack, let alone doing anything userful within banking, and you want them to build an api to cancel an outside service? :)?

Love this so much, most HN comment ever :)

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