Stripe launches Chargeback Protection to insulate businesses from the cost of fraudulent disputes
AMSTERDAM—Stripe today unveiled Chargeback Protection, a new service built on the company’s machine learning-based fraud tooling, Radar, that prevents fraud and protects sales against future chargebacks.
A chargeback happens when a cardholder makes a claim to their bank or credit card company that a payment made on their card was fraudulent. When a chargeback occurs, the business to which the payment was originally made is required to repay the full purchase amount, plus a chargeback fee.
With Chargeback Protection, businesses on Stripe are not only safeguarded against fraudulent charges, but are also automatically reimbursed for the cost of a disputed charge and any associated fees—saving them time, money, and resources.
Fraudulent disputes represent a painful and growing issue for companies of all sizes. These disputes often have a material impact on a business’s cash flow, as funds are pulled from their account while the dispute is assessed. This can take up to 3 months, during which time the disputed funds remain unavailable to the business, even if they ultimately win the dispute.
For small and medium-sized businesses (SMBs) and startups, responding to chargebacks can be particularly time-consuming, as they must identify, collect and submit detailed evidence that a payment was not fraud in order to win a dispute. Between lost revenue, penalty fees, and evidence collection, chargebacks usually cost companies more than double the original disputed amount.
Now, businesses on Stripe can stop worrying about the unpredictability and cost of disputes. Chargeback Protection helps businesses:
- Protect sales against chargebacks: Stripe uses Radar’s machine learning technology to prevent fraud. If a charge is later disputed, Stripe will reimburse the disputed amount plus any chargeback fees.
- Skip evidence collection: Previously, companies had to identify and submit the right evidence to fight a chargeback. But with Chargeback Protection, there’s no need to submit any evidence in the case of a dispute; the reimbursement from Stripe is automatic.
- Maximize revenue while minimizing fraud: Chargeback prevention can often come at the expense of blocking legitimate revenue. Stripe avoids that by using machine learning to dynamically update the checkout process in real-time to minimize friction for legitimate purchases while adding steps for likely fraudulent ones.
- Improve cash flow: Cash flow is often a problem for businesses dealing with chargebacks (whose disputed amounts are held aside for the weeks or months that the dispute process is ongoing). Chargeback Protection means businesses can have smoother, more predictable cash flow.
- Streamline setup: For businesses using the latest version of Stripe Checkout, Chargeback Protection requires only a single click to turn on.
“Over the last few years, a top request from Stripe’s users—no surprise—has been for help with fraudulent chargebacks,” said Eeke de Milliano, Product Manager for Stripe Radar and Chargeback Protection. “Chargebacks beleaguer internet businesses: they’re unpredictable, hard to win, and hurt cash flow since disputes can lock up legitimate funds for months while the process plays out. Stripe Chargeback Protection removes that burden entirely, so companies can focus on everything else they need to do to grow their business.”
Chargeback Protection leverages Stripe Radar’s machine learning infrastructure to assess charges in real time, allowing fraud to be detected on the spot, asking for additional authentication from suspicious looking buyers, and ensuring the checkout flow for trustworthy transactions remains frictionless.
“Chargebacks are a significant operational and cash flow pain point for internet companies,” said Jordan McKee, research director at 451 Research. “Being hit with an unexpected chargeback for a massive dollar amount (sometimes months after the initial transaction) and then losing access to that revenue as the dispute process proceeds to an uncertain conclusion places a huge burden on the business. Therefore, the ability to offload both the operational overhead and the financial uncertainty associated with chargebacks is a valuable proposition for many businesses. Solutions such as Stripe’s advanced machine learning infrastructure and dynamic Checkout purchase flow help businesses minimize the impact of fraud and chargebacks while maximizing legitimate revenue.”
Chargeback Protection will be available to companies in the US and Europe using the latest version of Stripe Checkout. Chargeback Protection costs just 0.4% per transaction.