5 ms·

Indeed, Stripe’s rep just commented as follows: > “Edwin from Stripe here. Holding funds is like a buffer for your balance—it makes sure there's enough money t

by graeme 6y ago

Indeed, Stripe’s rep just commented as follows: > “Edwin from Stripe here. Holding funds is like a buffer for your balance—it makes sure there's enough money to cover any increase in refunds or disputes from customers. If there wasn't, customers may not get their money—and we only hold funds after we review a business and realize that it's at risk of this (like if disputes are growing). Stripe doesn't gain anything or do anything with this buffer. We don't earn interest. It's reserved just for your customers. We regularly re-review the need for the reserve, then remove it at the earliest opportunity. (It's in our interest to! We hate refunds and disputes, which are expensive for us, and would rather see your cashflow to your business grow.)” As for chargebacks, customers really win even if there are voice recordings etc? Or is it just too much hassle to go through the proof process for smaller transactions?

WrtCdEvrydy 6y ago
Right, but nothing in this post indicates they experienced a high chargeback or refund volume, just a sales decrease. I wonder if they had to refund a lot of travel that wouldn't happen in 2020... and that's what triggered it. If I had a partner pull a rug out from under me, I'd focus on replacing them, especially if their reasoning is bullshit.
- shash7 6y ago
  Also, note the lack of empathy. A good rep with social skills can turn a bad conversation into a good one. Seems like Stripe isn't investing in customer support, just aggressive expansion.
- graeme 6y ago
  The letter from stripe said there was an increase in chargebacks and refunds on the account. And if sales decline, that means refunds and chargebacks are an even higher proportion of total money in the account.
- stu2b50 6y ago
  To be fair, I'm pretty sure the author has a vested interest in not mentioning if they have increased chargeback or refund volume. It's not exactly an unbiased source.
  - WrtCdEvrydy 6y ago
    I mean, to be honest, if your sales decrease 87% and you have to refund a full year's worth of travel, I'd expect Stripe to say something. Seems like either they're burying the lede or Stripe is being a bag of a dicks.
8organicbits 6y ago
> We don't earn interest. I think it should be the other way, those funds should earn interest, but that interest should go to the business after the waiting period.
- edwinwee 6y ago
  This is a neat idea and something we've been thinking about.
  - eganist 6y ago
    What's the impediment to deploying it?
    - largbae 6y ago
      Where can Stripe earn reasonable amounts of short-term interest without risk to the principal?
      - eganist 6y ago
        > Where can Stripe earn reasonable amounts of short-term interest without risk to the principal? If investors had the answer to that question, all of wall street would be out of a job. There's always risk. It's just a question of whether or not offering that service brings in enough extra customers (or retains customers who may otherwise leave) to reasonably offset the risk.
  - nogabebop23 6y ago
    what's the point? risk free interest on a rolling 28-day buffer is less than a chequing account, which is essentially zero. I guess it's a good PR & signaling move but I think it's more important that you focus on reducing the % or length of the reserve.
  - issa 6y ago
    My company has processed just under $1 million on Stripe and honestly the only complaint I've ever had is the customer service. You send an email with a problem/question and you get a response from someone. But there is no ability to talk to that same person again...I've literally ended up in months-long email chains where I just have to explain my problem over and over to a new person each time. Edwin, since it sounds like you're reading this, it would be great if Stripe could address this generally (or my issue specifically!).
davismwfl 6y ago
Yea, that all makes sense, I don't think Stripe is trying to hurt your business it is just a standard process that they themselves are subject to terms of as well (mainly because of their fraud insurance and upstream banks). The part that sucks is usually when you are having chargebacks/refunds is the exact time cashflow is critical, so I totally respect the issue. Fighting chargebacks is a painful process for companies. Even with voice recordings where the consumer called in and requested the service and the transaction was confirmed through a secondary agent the company I was consulting for would lose a good percentage of the cases. I personally believe that is why the secondary confirmation agent (super common in the past) is rare now since companies found it was an expensive process and they still only won a small percentage of cases. If you look at each transaction on its own it is almost always too much hassle to fight over (barring multi-thousands of dollars), but if you have hundreds of smaller transactions a month it adds up quickly. I know of one company in the home security monitoring business who decided to stop allowing credit cards and requires ACH now because of the chargeback issue. You can buy their products via credit card but not pay for their monthly monitoring service via credit card.
graton 6y ago
> Stripe doesn't gain anything or do anything with this buffer. We don't earn interest. I find that hard to believe. Otherwise Stripe is leaving money on the table and I doubt their MBAs would allow that.
- stu2b50 6y ago
  I mean given that it's a buffer it can't exactly be held as an illiquid asset. How much interest can you realistically get on this, and is it worth the risk if a bunch start going under and you need the liquidity now rather than later?
  - graton 6y ago
    You can put the float into a money market fund. It is liquid and can earn maybe 1% interest. Which doesn't sound like a lot, but it is free money. And if you have millions of dollar in the reserves over a course of a year it can add up. $10 million at 1% is $100,000 in interest. I imagine they would have more than $10 million in reserves.
    - wolco 6y ago
      It would cost more for one new employee to run it than the savings.
- drunkpotato 6y ago
  Stripe could earn money on the float, which would be a tiny interest but create a perverse negative incentive for them to keep a higher reserve. So there's a pro and a con. Edwin stated they don't earn interest on the float, which is a reasonable stance for the business to take on both an incentive and customer service basis, and may be a more profitable position for the company.
Silhouette 6y ago
As for chargebacks, customers really win even if there are voice recordings etc? Quite possibly, yes. This is where all the apparently reasonable arguments about payment processors holding reserves to protect against chargebacks break down. With most payment schemes, including cards, there is absolutely nothing that requires the decision-making process for a chargeback or similar claim to be fair or evidence-based. The organisations making the decision are not independent, they are typically the bank, card issuer or other payment service that wants to keep its customer happy. Fortunately, my own businesses have extremely low chargeback rates, but of the few we've had over the years, it has been a 50/50 shot even in almost identical circumstances whether we'll win the dispute. That remains true even when we had a mountain of evidence showing that it was a legitimate charge and the customer themselves was happy to confirm that, for example if they'd had a card stolen and duly cancelled it, and their card company had then automatically charged back all the recent transactions, including genuine recurring subscription payments like ours. In all such cases, it cost us far more for the time to collect and submit the evidence than any money we got back even if we won the dispute, so we have since adopted a default policy of not even contesting chargebacks. For low-value transactions, it costs more to fight than to just take the punishment, which tells you how one-sided the system is. If anyone here from Stripe or any other payment service wants to argue that the reserve scheme is reasonable and necessary to protect their business, I invite them to also push for chargeback disputes to be decided independently by neutral parties, and to publish statistics on card issuers or other customer-side payment services they encounter showing how often each is a source of disputes and how often any such disputes are ruled in their customer's favour. Then at least merchants would have some chance to protect themselves against potentially abusive actors within the industry by not accepting those payments in the first place if they wish. If payment services like Stripe still saw unusually high rates of reversed transactions under those conditions and wanted to hold a reserve accordingly, at least it could then be done on a transparently reasonable basis, instead of based on arbitrary criteria and unilateral decision-making, inevitably prompting angry articles and subsequent discussions like this. And then since it would be transparently reasonable, the merchant-side payment services would have no reason not to publish statistics on any reserves they impose as well, allowing merchants to compare payment services and move away if the one they were using was unnecessarily aggressive in this area.

by graeme 6y ago

WrtCdEvrydy 6y ago

Right, but nothing in this post indicates they experienced a high chargeback or refund volume, just a sales decrease. I wonder if they had to refund a lot of travel that wouldn't happen in 2020... and that's what triggered it. If I had a partner pull a rug out from under me, I'd focus on replacing them, especially if their reasoning is bullshit.

shash7 6y ago
Also, note the lack of empathy. A good rep with social skills can turn a bad conversation into a good one. Seems like Stripe isn't investing in customer support, just aggressive expansion.
graeme 6y ago
The letter from stripe said there was an increase in chargebacks and refunds on the account. And if sales decline, that means refunds and chargebacks are an even higher proportion of total money in the account.
stu2b50 6y ago
To be fair, I'm pretty sure the author has a vested interest in not mentioning if they have increased chargeback or refund volume. It's not exactly an unbiased source.
- WrtCdEvrydy 6y ago
  I mean, to be honest, if your sales decrease 87% and you have to refund a full year's worth of travel, I'd expect Stripe to say something. Seems like either they're burying the lede or Stripe is being a bag of a dicks.

8organicbits 6y ago

> We don't earn interest. I think it should be the other way, those funds should earn interest, but that interest should go to the business after the waiting period.

edwinwee 6y ago
This is a neat idea and something we've been thinking about.
- eganist 6y ago
  What's the impediment to deploying it?
  - largbae 6y ago
    Where can Stripe earn reasonable amounts of short-term interest without risk to the principal?
    - eganist 6y ago
      > Where can Stripe earn reasonable amounts of short-term interest without risk to the principal? If investors had the answer to that question, all of wall street would be out of a job. There's always risk. It's just a question of whether or not offering that service brings in enough extra customers (or retains customers who may otherwise leave) to reasonably offset the risk.
- nogabebop23 6y ago
  what's the point? risk free interest on a rolling 28-day buffer is less than a chequing account, which is essentially zero. I guess it's a good PR & signaling move but I think it's more important that you focus on reducing the % or length of the reserve.
- issa 6y ago
  My company has processed just under $1 million on Stripe and honestly the only complaint I've ever had is the customer service. You send an email with a problem/question and you get a response from someone. But there is no ability to talk to that same person again...I've literally ended up in months-long email chains where I just have to explain my problem over and over to a new person each time. Edwin, since it sounds like you're reading this, it would be great if Stripe could address this generally (or my issue specifically!).

davismwfl 6y ago

Yea, that all makes sense, I don't think Stripe is trying to hurt your business it is just a standard process that they themselves are subject to terms of as well (mainly because of their fraud insurance and upstream banks). The part that sucks is usually when you are having chargebacks/refunds is the exact time cashflow is critical, so I totally respect the issue. Fighting chargebacks is a painful process for companies. Even with voice recordings where the consumer called in and requested the service and the transaction was confirmed through a secondary agent the company I was consulting for would lose a good percentage of the cases. I personally believe that is why the secondary confirmation agent (super common in the past) is rare now since companies found it was an expensive process and they still only won a small percentage of cases. If you look at each transaction on its own it is almost always too much hassle to fight over (barring multi-thousands of dollars), but if you have hundreds of smaller transactions a month it adds up quickly. I know of one company in the home security monitoring business who decided to stop allowing credit cards and requires ACH now because of the chargeback issue. You can buy their products via credit card but not pay for their monthly monitoring service via credit card.

graton 6y ago

> Stripe doesn't gain anything or do anything with this buffer. We don't earn interest. I find that hard to believe. Otherwise Stripe is leaving money on the table and I doubt their MBAs would allow that.

stu2b50 6y ago
I mean given that it's a buffer it can't exactly be held as an illiquid asset. How much interest can you realistically get on this, and is it worth the risk if a bunch start going under and you need the liquidity now rather than later?
- graton 6y ago
  You can put the float into a money market fund. It is liquid and can earn maybe 1% interest. Which doesn't sound like a lot, but it is free money. And if you have millions of dollar in the reserves over a course of a year it can add up. $10 million at 1% is $100,000 in interest. I imagine they would have more than $10 million in reserves.
  - wolco 6y ago
    It would cost more for one new employee to run it than the savings.
drunkpotato 6y ago
Stripe could earn money on the float, which would be a tiny interest but create a perverse negative incentive for them to keep a higher reserve. So there's a pro and a con. Edwin stated they don't earn interest on the float, which is a reasonable stance for the business to take on both an incentive and customer service basis, and may be a more profitable position for the company.

Silhouette 6y ago

As for chargebacks, customers really win even if there are voice recordings etc? Quite possibly, yes. This is where all the apparently reasonable arguments about payment processors holding reserves to protect against chargebacks break down. With most payment schemes, including cards, there is absolutely nothing that requires the decision-making process for a chargeback or similar claim to be fair or evidence-based. The organisations making the decision are not independent, they are typically the bank, card issuer or other payment service that wants to keep its customer happy. Fortunately, my own businesses have extremely low chargeback rates, but of the few we've had over the years, it has been a 50/50 shot even in almost identical circumstances whether we'll win the dispute. That remains true even when we had a mountain of evidence showing that it was a legitimate charge and the customer themselves was happy to confirm that, for example if they'd had a card stolen and duly cancelled it, and their card company had then automatically charged back all the recent transactions, including genuine recurring subscription payments like ours. In all such cases, it cost us far more for the time to collect and submit the evidence than any money we got back even if we won the dispute, so we have since adopted a default policy of not even contesting chargebacks. For low-value transactions, it costs more to fight than to just take the punishment, which tells you how one-sided the system is. If anyone here from Stripe or any other payment service wants to argue that the reserve scheme is reasonable and necessary to protect their business, I invite them to also push for chargeback disputes to be decided independently by neutral parties, and to publish statistics on card issuers or other customer-side payment services they encounter showing how often each is a source of disputes and how often any such disputes are ruled in their customer's favour. Then at least merchants would have some chance to protect themselves against potentially abusive actors within the industry by not accepting those payments in the first place if they wish. If payment services like Stripe still saw unusually high rates of reversed transactions under those conditions and wanted to hold a reserve accordingly, at least it could then be done on a transparently reasonable basis, instead of based on arbitrary criteria and unilateral decision-making, inevitably prompting angry articles and subsequent discussions like this. And then since it would be transparently reasonable, the merchant-side payment services would have no reason not to publish statistics on any reserves they impose as well, allowing merchants to compare payment services and move away if the one they were using was unnecessarily aggressive in this area.