Stripe Radar and Disputes

What is a dispute?

A genuine Dispute or Chargeback is normally raised when the payee believes-

• The goods or services provided didn't match those detailed to them before making the transaction
• The transaction was processed without the consent of the cardholder
• They were charged the incorrect amount/ possibly double charged in error

How does a disputed transaction affect you, the Stripe account owner, and how do you deal with it?

When a guest files a chargeback they have contested the payment for such reasons as mentioned above. When this occurs, card networks commonly initiate withdrawals of both funds and fees from Stripe at the time the dispute is raised, and only return funds once the dispute is won. American Express, commonly known as Amex, operates in a manner that does not involve the withdrawal of funds or fees until the dispute is lost.

Timeline of Disputed Transactions:

• The dispute is initiated by the cardholder with their bank
• Funds removed from your Stripe account for the amount disputed plus a dispute fee of $15
• If you think a dispute isn’t an honest dispute you can submit evidence to fight the charge (usually within 14 - 21 days).
• Once you've submitted your evidence the issuing bank reviews this information, Stripe does not get involved in the dispute
• The timeline for the final decision to be made by the issuing bank is 60-75 days
• If you win the dispute, the funds are returned to your Stripe account minus the $15 dispute fee.
• If you lose the dispute the funds are permanently removed from your Stripe account

A loss percentage of 70% isn't bad as it can be quite difficult to get below this without clear evidence being provided

Best practices for responding to disputes-

When it comes to responding to disputes, there are certain best practices that are widely recommended. These practices are designed to help individuals and organisations navigate disagreements with clarity and professionalism. By following these practices, you can help to ensure that all parties involved feel heard and respected throughout the process.

Should the Customer decide to retract the Dispute, it will still be taken into account when calculating the count or rate of disputes per month. This figure must be below 0.75%

Providing as much proof within each category is a great advantage to winning a dispute

When providing the terms and conditions as evidence, it is important to focus on specific sections rather than sending through the entire document. By breaking down the document into smaller, more manageable parts, it becomes easier to understand where the reviewer can see the important information set out in front of them.

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Note on Evidence

Most issuing banks print out the dispute evidence so make sure to send clear screenshots, text excerpts or highlighted written information.

URL Links will, likely, be ignored!

Provide information to guests on a check out message explaining when the deposit will be returned to them.

"Thanks for staying with us, Just a quick note that the deposit payment will be automatically returned to you within 3-5 days of check out, If you'd like this returned sooner reply to this message and we can speed the process up for you or if haven't received the funds within this timeline reach out."

The best thing you can do to prevent disputes and issues with guests is to be super clear in any communication, this is what each charge is for, when this charge will be returned, you are being charged part of the deposit for this reason for example.

Strong communication will be your key to not only winning disputes but also reducing them

What is Stripe RADAR and how to use it to protect your business from different types of fraud?

Using machine learning, Stripe's standard regulations can anticipate and prevent a significant amount of fraudulent transactions. However, for companies that require greater command over which payments necessitate scrutiny, approval, or prohibition, regulations provide a potent mechanism to personalise their defenses against fraudulent activity.

Radar for Fraud teams can be useful if there are specific trends that you’re seeing on disputes e.g. location, time on the website, type of card, or amounts for example.

Collect a Zipcode and/or CVC which increases the acceptance rate and also helps reduce fraud - we can set a custom rule to block anything that fails CVC. 

Stripe's Early Fraud warning is 67% accurate and feeds from other payment providers via webhook. If you see this, it's likely that a dispute may be coming through for that customer.

Radar can also push 3DS verification if an early fraud warning is received.

Radar can push a guest through 3DS verification if they’re considered higher risk. 

It also pushes liability on Fraudulent, Lost, or Stolen cards. Although, not for "Product not received" complaints

Radar Rule order matters

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Once a rule is triggered the ones below are not evaluated.

Stripe are releasing a new Radar AI which is due to be released in early 2024 and won't be chargeable. It will be included in the Radar feature as standard.

If you're seeing a lot of disputes coming in for a particular location, amount, etc then you can look into enabling a Manual review queue. This would require someone to physically check the payment information and verify it's not fraudulent before accepting. Not an ideal scenario but could drastically reduce dispute counts, if you have the team or time available.

For the most part, any Allow rules are a bad idea unless you have a specific list of people who you know can pay. For example, if you consistently rent out to a company or companies then this may be worthwhile.

Adding an IP block list could also be beneficial for repeat offenders.

Stripe Radar Rules 101:

Here's some information on Stripe Radar and some handy rules to put in place immediately-

https://stripe.com/en-gb-es/guides/radar-rules-101

How Stripe measures dispute metrics:

The Stripe Dashboard will display two different calculations to measure your disputes: dispute activity and dispute rate.

Dispute activity represents the percentage of disputes on successful payments by dispute date.

The dispute rate represents the percentage of disputes on successful payments by charge date.

To explain these better we can take an example:

In 1 week you processed 100 transactions but also received 5 disputed payments, but only 2 of those disputes were from the 100 transactions for the week and the other 3 were from later dates (Disputes can take a little time to come in so some delays are common)

The dispute activity for this week would be 5% (5 disputes on 100 payments). The dispute rate for this week would be 2% (2 disputes on 100 payments).

If a User’s chargeback rate reaches 0.75% this is then when Stripe has to get involved. They are required to protect their own business from potentially very large fines from Visa and Mastercard and this is Stripe's upper limit.

If it reaches 1%, then Visa/Mastercard will start to issue fines to Stripe and deny access to the network for users. 

Chargeback Rates

Chargeback Rates are based on total transactions in that month

Over 75 disputes in the month for Visa and for Mastercard, 100 disputes over the month. 

Don't Ignore Disputes

If you aren't responding to disputes then that looks bad from Stripe's side. It also means Stripe may see your account as a risk. This can start to cause issues with how Stripe perceives you using their system to process payments.

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Points to take away regarding disputes-

Communicate any charges in writing with guests, this allows a paper trail for you to provide as evidence should a dispute occur

Use Stripe Radar to prevent certain IP addresses, Countries, Cards with disputed transactions previously from being able to complete payment

A loss rate of 70% isn't the worst, but definitely work on ways to reduce disputes being raised