5 ms·
What are effective ways of fighting chargeback fraud?
tl;dr I got a bunch of fraudulent chargebacks -- and lost disputes even where people acknowledged they made the chargeback by accident. What should I do differently to prevent / reduce this in the future?
Context: I'm one of the bunch of people for whom Prepfully is a weekend project. The primary paid service is a 1-1 mock interviews / coaching service.
The problem:
Over the last 3 months, I received a bunch of "Transaction marked as fraudulent" chargebacks, from candidates who used the service. My volumes are small enough that I emailed each one of these users to check -- and they gave a range of reasons, from forgetting they used Prepfully, to having a credit card stolen, to just filing this chargeback accidentally. They also all promised to withdraw this chargeback.
However - I lost 2 / 4 such chargeback disputes. This is inspite of submitting the email thread (including where they acknowledged their mistake), as part of the evidence to dispute this chargeback. Naturally Stripe advises there is nothing they can do in this situation (I understand it is in the hands of the banks which issue these cards - Citi, JPM etc), rather than Stripe's.
What I already do:
1. If anyone cancels a session, they receive a refund. There are charges for last minute cancellations to avoid leaving coaches hanging out to dry -- but I have never received a chargeback in such a situation (I did receive two threats of chargebacks and just ate the cost myself rather than risk one, but by and large people are understanding)
2. If someone is unhappy either explicitly (eg. requests a refund) or implicitly (eg. gives a review of less than 3/5) - I email them to check what went wrong, and issue a refund 95% of the time.
3. When I do get a chargeback, I upload pretty much all evidence, including reviews the candidate / user has left, IP logs, emails they've sent me confirming the dispute was accidental or mistaken etc etc.
What I'm afraid of:
1. I sometimes lose disputes even where the user acknowledges their mistake
2. It seems even the disputes I win against the "I made a mistaken chargeback" category from credit card users, count against my chargeback rates. At my volumes even a small increase in chargeback volumes would basically get me suspended from Stripe.
Question to the community:
What should I be doing differently? I will already be raising prices by about 3-5% to cover the risk of chargeback fraud (sadly this will be borne by legitimate customers, but I operate at break-even so paying this out of pocket is pretty painful). But is there any advice from the community on defending against this sort of friendly fraud?
- smca 3y agoSome top-of-mind tips regardless of who you use for payments but I'm glad you're using Stripe! Is it for prepfully.com? Tactical examples below, but the high level takeaway is communication prevents chargebacks. Say what you're going to charge, remind people when a charge is due, and ensure people can self-manage their subscriptions (or make it easier to request a refund than it is to dispute a charge with their credit card company). You seem to have a good handle on the post-chargeback process and are using the right evidence submission processes to at least counter some of them. You could consider adding an explicit agreement to your T&Cs to bolster any claims: stripe.com/docs/payments/checkout/customization#collect-a-terms-of-service-agreement. --- 1. On "accidental" chargebacks: Use a service that lets your customers self-manage their subscriptions. Unfortunately, particularly in the US, it seems some customers opt to dispute payments as it's easier than talking to a business. (https://stripe.com/docs/customer-management https://stripe.com/docs/customer-management) 2. On forgetting: Configure emails to send renewal reminders and receipts if you're using subscription payments and include a link to a hosted page that lets your customers unsubscribe or change their plan if applicable. Especially if you have subscriptions over time frames longer than ~a month. 3. On fraudulent charges: You can dial up your fraud risk tolerance on dashboard.stripe.com/settings/radar/risk-controls. [Bonus] 4. SEO: Is it easy for Prepfully customers to find out how to get a refund by searching for it? I'd recommend having a dedicated FAQ page with direct links so it takes as few steps as possible to get there. (https://www.google.com/search?q=prepfully+refund https://www.google.com/search?q=prepfully+refund) 5. Is your statement descriptor up to date? Your customers might not recognize charges if the statement descriptor is vague. I've seen folks get good results by displaying a hosted refund page (like "prepfully.com/r") that explains the charge, what a customer has signed up for, and how to manage their subscription. Tricky to manage as statement descriptors are short but something to explore.
- thereisnotry 3y agoThanks for the very helpful response! Yep, it's for prepfully.com. On 1 -- we don't have any subscriptions at the moment - everything is a transaction. We're planning to roll out a subscription/course module at some point next year, so definitely something to incorporate upfront when we do. On 2 -- we actually send a "you've booked a session" email, 1 email reminder + 1 (opt-in only) whatsapp reminder pre-session, and 1 email 7-days post-session for feedback at the moment. I'm a bit worried about coming across as spammy if we send anything more. However, I don't send a "payment receipt" email at the moment, so that is perhaps something to explore. On 3 -- all the chargebacks came from quite honest-seeming customers. After talking to them, it did feel like they made an honest mistake. I have a suspicion that some US banks make it incredibly easy to do a chargeback without asking for much evidence (I'm based in the Netherlands, where for instance you need to provide proof that you directly interacted with a merchant), so suggestion (5) in particular might be very relevant here. On 4 -- super relevant, thanks! If I look at the first result at the moment it's quite misleading (we definitely allow for refunds), whereas what Google has indexed is the piece where we say "we won't issue a refund if you forget to join a session". On 5 -- good idea too, and very actionable. We don't put anything beyond "PREPFULLY" at the moment. And our transaction IDs are hashes so they don't communicate much information. So maybe even putting something like "interview coaching" -- will have to see what I can fit, could help people remember. Will also see how we can bolster our T&C. I'm guessing you meant this in context of winning a potential chargeback dispute? I'm not sure if this would actually reduce the total number of chargebacks.