Stripe updates policy: free refunds and chargebacks | Hacker News Reader

Stripe updates policy: free refunds and chargebacks

stripe.com

208 pointssas81 comments

This is great. I've never actually had a customer dispute a charge through Stripe, but if it happened, I wouldn't be able to challenge it before (I only charge $10 at a time, so it would have been cheaper to just accept it). This always concerned me because it left the possibility that a customer could go back and dispute the last year's worth of charges and there's nothing I could do. This happened once when I used Amazon FPS to process payments, and I was forced to just let the customer take $120 from me. I know it's not much money, but it's really discouraging when you do everything you can to be up-front about billing, (monthly payment notifications, no-question refunds, easy cancellations) and then you have to accept frivolous chargebacks which is basically admitting to the bank that you did something wrong.

Just FYI, with most CC processors, chargeback fees are in addition to reversing the original charge. So you would be out $25 if you were to get a chargeback. And if you won you would get the $10 back but still loose the $15 chargeback fee putting you at -$5 overall (that's not even including transaction fees that stack on top of everything).

Most CC companies have a 90 day limit on charges that can be contested. Amex is the only one that I know of that goes further back (1 year IIRC but it may be longer).

Stripe has decided to change that and will refund the $15 if you win. It's a nice change but in my experience the vendor rarely reverses chargebacks.

I've gotten Visa chargebacks as far back as 7 months after the fact. It was a surprise when it happened as I had thought 6 months was the limit, since 180 days appears quite often in merchant account agreements as a hold period for various issues.

Yeah, it's something like 270 days now.

ah the power to unilaterally change terms, knowing your customers have essentially zero alternative.

Ahh, news to me.

I did some brief searching and it seems like the time limit depends on several things (including type and amount of charge and physical location of the vendor). It could be as little as 45 days or as long as 540.

It's definitely become more common to get chargebacks over the years. Part of this is increased volume on our part and part of it is the CC companies becoming more consumer friendly.

I agree that this won't make much practical difference.

I think it depends on the chargeback reason code. If the chargeback was due to fraudulent reasons, merchants have very little chance of having it reversed. Now, they may be able to fight it and win based on procedural reasons relating to the chargeback dispute process. Not something worth doing though for most merchants.

Sometimes, its more costly in time to fight a chargeback than the fee that is imposed. Many merchants just let it go and eat the costs.

Stripe's old approach was quite direct: the CC companies charge us (and don't refund) for refunded payments and chargebacks, so we pass those on to you.

Quite reasonable, but the new policy is taking advantage of the fact that they have the rare ability to fix this broken interface instead of just passing it on.

Refunded fees for refunds encourage easy refunds to dissatisfied customers. Offering refunds without crazy hoops to jump through is generally just good customer service (especially for service-related businesses where you don't have to worry about lost inventory!) -- it can quickly put a problem into a realistic context (and customers can realize "well, it's not perfect... but it's actually still worth keeping"), which makes them less frustrated.

I offer a refund first to a lot of tech support questions (i.e., "this isn't working on my computer"), and hardly anyone actually wants one, but it comforts them. Knowing that my fees would be lost make it less pleasant for me to offer... this is psychological pain (the actual cost is minimal), but I always appreciated PayPal's policy for this reason.

Are customer standards increasing to accommodate this? Will it attract the wrong kind of customers, resulting in a need to change standards in the future?

Besides those questions I see this policy as assuring new ecommerce application builders who aren't used to the risk of chargebacks and refunds. I really appreciate it.

THANK YOU! We moved from Paypal to Stripe this year for the lower rates and better interface but were bummed to find out that refund fees weren't returned as they are in Paypal and other payment services.

This change makes Stripe a total win.

Don't get me wrong, I love Stripe and despise PayPal, but Stripe is definitely not cheaper. It is at best the same price, but with high volume of sales is a decent amount more expensive than PayPal.

The tough bit is still getting a chargeback in your favor as a merchant.

Refunded fees are nice, don't want to know how much money we have lost due to half fee refunds on PayPal.

We launched much improved dispute management recently as well, enabling you to better handle chargebacks: https://stripe.com/blog/better-dispute-management

Its rare to see an updated policy that isnt filled with dread let alone something that makes your customers happier.

The idea of a flat charge back fee is weird[1]. If I think about a store where I sell things for $1, it means if I exceed a 7% chargeback rate, my business is no longer profitable. Is that really all there is to it?

Edit: [1] Not weird as in weird on Stripe's part, but weird as from the perspective of someone who does not sell online, just seems like this one-size-fits-all approach probably makes a lot of low-margin selling really hard.

If you sell 10 crappy $1 things a month it doesn't make sense. If you sell 10000 nice $1 things a month - it does.

The effort to handle a chargeback is not proportional to the amount of the charge, so I don't see why the fee would be.

If you read around on retail forums, you'll find that nobody would be able to get away with anything close to a 7% chargeback rate with traditional credit card processing, without getting their merchant account terminated with severe prejudice -- anything more than a percent or so raises alarm bells with the card companies.

Credit card companies charge at least $15 per chargeback, which makes dealing with small charges very unprofitable, especially with credit card thieves using small purchases as tests for valid credit card numbers.

A 7% chargeback rate is huge and would likely get you shutdown by your credit card processor.

Reading your edit -- yes, low-margin retail is -HARD-, for a lot of reasons that people don't really get until they try to do it.

7% chargeback rate?

Out of ~2500 orders I've had one chargeback and it was our fault for not processing the customer's refund sooner. I'm not open to disclose what we sell but I can promise you that I have some very angry customers.

Maybe you're confusing refunds with chargebacks?

I've experienced a lot of chargebacks, unfortunately. For some reason some gang of people from Vietnam keeps using my site to verify stolen credit cards work. Originally this all happened through a third-party service which I had no control over (I couldn't preemptively block suspicious transactions). I switched to Swipe and eventually saw the same fraudulent transactions coming through (one was 50 charges with the same card with a minute of each other).

Sick of it all I finally got minFraud setup and working with Braintree as the payment processor. So now, I use Braintree to authorize the card, then do a fraud check through minFraud. If the fraud level is low enough, I submit the payment for settlement, otherwise I void it.

Since putting minFraud in place I haven't had any chargebacks.

Why not do the minFraud check before auth? Won't that save you some auth fees?

minFraud is a very cost effective service. We have them as one of the solutions in our platform.

There's no fee for an authorization. That's just the check if the card is valid. The fee comes from submitting the charge for settlement.

Even "someone who does not sell online" (i.e. a low-margin retailer) has to pay a $15+ chargeback processing fee to the ISO/processor/networks.

7% chargeback rate is insanely high and I wouldn't be surprised if your merchant dropped you. Realistically anything over 0.5% and you're doing something wrong and that's even a magnitude higher than what I would shoot for.

Also, selling at $1 you're only going to make $0.67 or so per transaction (maybe less depending on how you get bilked in fees). You're going to have to do a lot of volume to make money selling at $1.

As others have pointed out, a 7% chargeback rate is pretty problematic -- the card brands (Visa and co) will intervene long before then.

It depends. Its not always just about the ratio of chargebacks but also volume.

So you might trigger some flags with the card associations if you say have the following

1) 1% chargeback ratio 2) 1% of revenue result in chargeback 3) Have like 50-100 (forget exact number) of chargebacks a month for like x consecutive months.

If you don't fix the problem, then bad things happen like additional fines....etc.

So for merchants with very low volume, a higher chargeback rate is sometimes permissible. Acquiring banks have their own risk assessment so they may allow it or may not.

I will continue to beat this drum whenever Stripe post anything about anything: Please launch in the UK soon.

Yes, I hope they launch in the UK so I can start beating the drum for Australia.

I'll have to rethink my Paypal vs. Stripe decision.

I'm actually setting up a store right now and I'm going with Paypal just because it's so much easier and cheaper.

With Paypal:

- After a sale I can buy and print out USPS labels and postage in 2 clicks and send the tracking and shipping info to my buyer in 1 click.

- I don't have to pay to integrate it into my site or buy a module ($27), the Paypal module is already included, and with Paypal I don't need SSL encryption (which can cost $50+ / year / domain).

1 way Stripe can remedy this is to make free Stripe Payment modules for major e-commerce stores.

I want to move to Stripe eventually because they don't try to get my users to sign up for a paypal account by hiding the credit card payment form beneath the paypal login and registration form. And I don't like Paypal's "side with the buyer even if they're a scammer" policy, not to mention the whole "your account funds have been frozen for 180 days while we investigate".

5 years from now I really hope Stripe branches out to cover a lot more than just credit card processing. Once they master that area I'd really love to see them become a small business e-commerce solutions provider. I'm sticking with Paypal until I get screwed over and have my funds frozen because in the short term, I'm saving so much more time and every dollar counts.

Hey Stripe, one day if you work on a store for small businesses I'd love to chat. The current options (WP E-commerce, shopify, magento, ebay, Amazon, etc...) are a pain in the ass (I've tried them all) and no one, ==> NO.ONE. <== , has made a proper packaging backend and USPS shipping calculator that doesn't screw either the buyer or the seller. Ebay comes close but even they fail terribly at package dimension calculation for multiple quantities ordered.

Shopify integrates with stripe...

I think you'll be pleased with PayPal. Their APIs and IPN aren't a pleasure to work with but I've got nothing but good stories about working with PayPal's customer support.

Something to keep in mind: If you suddenly start doing volume through PayPal they will flag your account for closer inspection and that may involve them freezing your ability to do anything with existing and incoming funds. It'll likely last a few weeks and then it's over. (Though since it doesn't sound like you're selling digital goods this may be a problem for you.)

Other than having to deal with that issue -- which is usually the horror story that people love to tell or reference -- I've been perfectly happy with them. They're Johnny on the spot and I can call them any time to speak to someone. Because they keep such a close eye on things, I've come to expect their calls whenever anything out of the norm occurs. It's great.

I love PayPal.

By the way, have you tried Yahoo Merchant Solutions (formerly Yahoo Store)?

I sense sarcasm

I wasn't being sarcastic at all.

I'm CEO of Shopify. What's wrong with our USPS Calculator?

Many many many things, least of which is that it's not programmable. We can't set items that can go in flat rate boxes. We can't have "Free Shipping*" shipping, which is free shipping in the US and the equivalent discount in other countries, and other programmable shipping rates.

For that you don't even need their rate APIs. All your rates are flatrates which you can simply set?

APIs for building your own shipping system are actually coming some time next year but as you said, it's all about free shipping.

Why does Shopify charge a % off each transaction... when they are not the payment proccessor or gateway or issuing bank or aggregator??

we don't. It's capped at $169 a month which is nothing given what Shopify does. There is a transaction charge on the lower plans but this may change.

Hi Xal, I'm on your site right now and it says you charge a transaction fee. http://imgur.com/eXbZp - So essentially I'm getting dinged ~2.9% from Stripe and another 2% + software fees from Shopify... effective transaction fee ~5%.

Cant wait till internet tax + state tax takes effect. :)

That's what he said - there is a transaction fee on the lower plans, but when you reach $179 it'd be cheaper to upgrade to the unlimited plan which has no transaction fee.

His point is that you make it seem like there is no choice but to pay a fee. As your own screenshot shows, this is not the case, the premium plan offered for $179/mo charges no transaction fee. The cheaper ones do because, duh, they have to pay their bills one way or the other. The exercise is left to the reader as to which plan makes the most sense economically for your company based on the amount of business you're doing. But you're guaranteed to never be paying more than $179/mo in transaction fees unless you suck at picking the right plan (and I assume they're easy to switch between).

You're right in that I don't need a rate API, but Shopify needs a shipping API. Something where I can say "6 shirt or 4 shirts and a jacket is flat rate, but 2 shirts and a poster is not because of the tube"

I love it when a CEO participates in online discussions as it is the sign a company that cares. Just one thing about your post... It sounds really defensive. Maybe just me, but all the good will of participating in the conversation was lost. Maybe a "Hi, I'm CEO and love getting feedback. What's wrong with our USPS Calculator?". :)

FWIW, I didn't get any sense of defensiveness from the question - just a direct, succinct, and honest question.

Yes, I acknowledge it could be a cultural thing or just me that saw it that way.

Hehe, well I'm German. Terseness is somehow build in my firmware. Fair feedback though. Thank you!

Ha, I feel like I'm in a Reddit thread. Ask the man anything!

I'm a happy customer, a shopify partner, and a developer on your platform. Thank you for an excellent experience in every possible way.

I'm actually very lost regarding your reasons for preferring PayPal to Stripe (Except USPS integration, which is clear and I know nothing about).

"I'm going with Paypal just because it's so much easier and cheaper."

Really?

For me, integration w/ PayPal's IPN's took DAYS and still wasn't sturdy. Stripe? 3 hours the first time, 30 minutes the second.

Admittedly, PayPal is marginally cheaper with heavy volume. I'm not at that point and, quite frankly, it would probably never be worthwhile for me to switch due to cost of said dev time.

But this $27 module? I don't know what requires that but I've never needed it.

I tried PayPal on one project and switched that site to Stripe within a week of them launching in Canada. Zero regrets.

How does an IPN integration take days? It's just a webhook, which most every 3rd party processor has copied. You take a POST and send it back to validate it. It can't be more than a few dozen lines of code at most, and there is a decade of libraries available for every possible language, framework and cart that turn it into a single function call.

I've never found anything easier to integrate, and I've done PP Pro, Authnet SIM, Authnet AIM, Authnet CIM, Quantum Gateway, Google, Amazon, Recurly, Spreedly, Spreedly Core...

I'm not the OP, but PayPal is not only cheaper (that .7% adds up fast), but without it I'd lose more than 10% of my customer base, and that's very significant money. Credit cards with AVS are just not readily available, or socially common, everywhere in the world. Stripe is a way to accept credit cards. PayPal is a way to accept payments from 190 countries. That's not the same thing.

PayPal's "sandbox" environment is uniquely torturous to work with. It didn't take us days, but it did seem like someone had gone out of the way to make it annoying.

This is what I like least about PayPal. Coinbase, for example, makes it dead-simple to test their IPN-like callback. All you do is paste the URL into a text box and send away. If PayPal had that it would have made the integration much easier to accomplish.

This sandbox was definitely the pain point. There was no ability to test properly so it was effectively launch and then test live like mad. Just a mess really. A lot of documentation fell short as well.

I got the impression the OP isn't writing their own integration, but bolting together pieces.

There are many more products (CMSs etc.) out there which include PayPal integration (or have it readily available with free plugins) than those including Stripe -- for now, anyway.

Stripe has something similar to IPN? Many users have been asking us to build integration with Stripe so they can use have better fraud prevention but I didn't see an easy way to do this. If they have something like IPN, it might work.

How is paypal easier than Stripe? I just signed up for Stripe and was shocked at how easy it was. I thought surely there had to be more steps, more ID verification, etc. I've only done 3 transactions but it was very smooth. I will never go back to paypal for anything other than peer to peer transfers.

Try http://postmaster.io. Its like Stripe for postage.

WePay has had free refunds since the start. I'm also still on their 3.5% flat rate which is better for my business which generally has <$50 items for sale.

I'm a very very happy Stripe customer for some time now. We're operating a marketplace and Stripe made it really easy for us to charge our customers' credit cards.

Until then we had to rely on PayPal and that was quite a pain in the ass. The only thing that was really positive with using PayPal as our CC processor is that they always reimbursed you the fees in case you wanted to refund the payment.

We have a 14 day money back guarantee - what it means is that you can request your money back if you have a valid reason and we'll refund you. Since we want to really delight our customers (much like Amazon does) we always accept refund requests and that means we had to cover the costs of the fees paid to stripe. Granted this isn't much compared to our overall gross revenues but I can see how in certain cases for certain individual (selling high value products) that could mean losses.

What I'd like to see tho and I haven't seen it yet - is the ability to get the chargeback refunded in case I decide not to fight it. I know this usually involve some work on both sides, however I think this should be automated and the chargeback lifted if I decide to make Stripe's life easier.

I also understand this could be potentially abused by potentially allowing every "fraud" attempts to pass and not fighting back the chargeback would mean you don't have some skin in the game and not motivated to stop these fraud attempts. Which is why I think these chargebacks should be refunded only if they don't exceed a certain threshold.

The biggest problem is for marketplace who are selling intangible goods, whenever we get hit with a chargeback - it doesn't really matter and I usually don't fight it even if I know the customer really paid for it since I know they're doomed to fail. So winning a chargeback is out of question anyway, however I'd love to get my chargebacks covered by Stripe in the event the chargeback was made by either a legit customer (and for some reason didn't ask for a refund) or slipped through my fraud prevention tools but I decide not to fight it back.

If a publisher would see too many of these chargebacks (and thus showing he's making no effort to prevent fraudulent charges), I think the chargeback protection should be cancelled and maybe Stripe should charge for these chargebacks retrospectively.

Anyway - great news Stripe!

Sorry, maybe I'm not understanding you correctly, but if you accept a chargeback why would you get that money back? Isn't that essentially Stripe refunding a customer because that customer says you shouldn't have charged them in the first place?

I'm not asking for my money back but I'm asking for the fee charged for the chargeback.

> The only thing that was really positive with using PayPal as our CC processor is that they always reimbursed you the fees in case you wanted to refund the payment.

Paypal's policy is to reverse the percentage fee, but to keep the flat fee, in the event of refunds. So generally a refunded transaction costs you about 30 cents.

> What I'd like to see tho and I haven't seen it yet - is the ability to get the chargeback refunded in case I decide not to fight it. I know this usually involve some work on both sides, however I think this should be automated and the chargeback lifted if I decide to make Stripe's life easier.

This is unlikely to happen. The chargeback fee is levied on the acquiring bank (merchant processor) by the card associations which is then passed onto the merchant.

Best way to avoid chargeback fines is to have better fraud prevention process in place. Companies like Stripe are really just passing on costs that are imposed on them. Stripe offering to refund the fee if you win the case is a great gesture but only solves part of the issue with chargebacks in particular friendly fraud chargebacks.

Stripe is awesome, I build a SaaS service where Stripe is the only payment gateway I support. When convincing my customers(who are all non-tech savvy) to use Stripe. The biggest push back they bring up is the 7 day wait period for transfers.

Does anyone know if there is a plan for this 7 day transfer wait period to be reduced just a bit?

This is the sole reason, why I am eventually planning to integrate with another option like Braintree even though Stripe has all my use cases well covered.

Some companies just keep doing the damn right thing! Competitors, dodge this!

Sweet! That was one of my main gripes with the old policy: I should not be charged $15 for a chargeback ruled in my favor. Stripe has finally won me over fully. Keep up the great work.

You know what I would like to see? Better fees for Micro Payments. Amazon Payments has exactly the same fees for transactions >= $10 of 2.9% + $0.30 (and has always refunded fees for refunded payments), but adds a much more reasonable micro payment fee of 5% + $0.05 per transaction < $10.

Check out:

https://payments.amazon.com/sdui/sdui/helpTab/Checkout-by-Am...

Oh, and the volume discount schedule is MUCH more reasonable on Amazon Payments (starting at $3k per month vs. Stripe's $1m per year).

Thats great, but I'm a bit doubtful that the chargeback is going to be that great for any user. Granted the sample size on my side project is small, but I've never had a chargeback go my way even with logs of ip addresses, email exchanges, phone numbers, etc.

Absolutely love Stripe though, makes figuring out payment stuff a no brainer.

How often can you actually successfully challenge a chargeback for an online purchase? From what I've seen, the bank usually wants to see a copy of a receipt signed by the customer. As an online seller of a downloadable product, we never have anything physical signed by the customer.

It's really up to whoever reviews the case at the bank. They know there's no signature for card-not-present transactions, and enough evidence can convince them to close the chargeback in your favor. I've supplied copies of e-mails and phone call records from an automated order verification service showing that the phone # registered to the customer was called and answered after ordering and had quite a few wins that way.

And the best game in town just got better. Score!

Nice to see a company updates policy, which actually helps the users. I haven't seen this kind of policy updates in a long time.

Great job guys - really impressed with where you are and where you are going.

Does a good stripe-like service exist for Europe today?

Hell yeah!! Time to move to stripe.

Stripe:Paypal :: Firefox:IE.

Stripe FTW!

You guys are doing amazing!! Just wish your % cost on transactions was competitive with some of the big guys.. At a certain processing level I am forced to work with dinosaurs that take weeks to integrate but in the long run save me allot of money.. I am sure your high % is temporary cant wait to one day use your service on all my projects

Super! :)

Reply on news.ycombinator.com