In response to the elevated disputes faced by many merchants in the travel and entertainment industries due to COVID-19, Visa and Mastercard have issued guidelines for resolving them. These guidlines relate specifically to goods and services canceled directly due to a government order or prohibition. If your business is receiving disputes that fall into this category and you need to submit dispute evidence before the submission date, please proceed to this guide.
For all industries, the best actions you can take are to proactively communicate with your customers and issue refunds where appropriate, especially when requested.
The Stripe Dashboard displays 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.
Dispute rate represents the percentage of disputes on successful payments by charge date.
The two calculations are best understood with an example. Let’s say you processed 1,000 payments in a given week. In that same week, you also received 10 disputes.
Only 3 of those disputes were from the 1,000 payments processed that week. The other 7 disputes were from payments that were processed at an earlier date. (Because disputes take a while to come in, this delay is very common.)
The dispute activity for this week would be 1% (10 disputes on 1,000 payments). The dispute rate for this week would be 0.3% (3 disputes on 1,000 payments).
Dispute activity and dispute rate serve different purposes. Dispute and card fraud monitoring programs use the dispute activity calculation. If the dispute activity for your business exceeds the thresholds set by the card brands, you might be subject to fines. You can find the dispute activity for your account in the Dashboard’s Analytics section.
The dispute rate is a more accurate representation of fraud and disputes for your business, because it shows which actual payments were disputed. For example, you could use the dispute rate to see a particular sale that resulted in more disputes than usual, or to pick out fraud attack patterns.
Because cardholders can dispute a charge up to 90 days after a payment was made (and sometimes even later), the dispute rate is accurate only for payments that are 90 days or older. We show this calculation on the Radar for Fraud Teams overview page.
Excessive dispute activity
Each card network (e.g., Visa, Mastercard, American Express) maintains a series of dispute and card fraud monitoring programs that apply to businesses operating with high dispute activity. Dispute activity above 0.75% is generally considered excessive, although this varies by card network. Excessive dispute activity not only affects your ability to process with Stripe, but with other processors as well—and can even result in fines from the card networks.
Should we ever see higher dispute activity or a significant increase in potentially fraudulent activity on your account, we’ll proactively reach out to see how we can help.
Predicted dispute activity
In some cases, our machine learning models can predict if your account might be in danger of excessive dispute activity at a point in the future. If that happens, we’ll alert you so that you can take proactive steps to identify and prevent disputes and fraud.
Though we can predict dispute trends with some confidence, we cannot predict which particular payments will be disputed. Keep in mind that we cannot be certain of the predicted rate—your actual dispute activity depends upon any further disputes received.
Early fraud warnings
Early fraud warnings (EFWs) such as Visa TC40 reports and Mastercard SAFE (System to Avoid Fraud Effectively) reports are notices generated by card issuers to flag payments that are suspected to be fraudulent. An EFW is created when a cardholder lodges a claim of fraud with their issuing bank and occurs before an official chargeback.
EFWs do not officially require any action or response from you as a merchant. However, they are good indicators of impending disputes—82% of payments that receive EFWs eventually get disputed. Since there’s a fee for disputes (15 USD) and disputes can count for certain chargeback monitoring programs you may want to proactively prevent disputes by immediately refunding payments that receive an EFW. You can listen for EFW webhooks using our API.