How to Win PayPal & Stripe Disputes in 6 Simple Steps
Regarding payment processing, PayPal and Stripe are two big names every eCommerce merchant knows.
Let’s look at some numbers behind them.
PayPal processed around 5.34 billion payments in the fourth quarter of 2021; that’s about 21% more than the same period in 2020.
And Stripe has stated that businesses on the platform processed more than $640 billion in payments in 2021, up 60% from the previous year.
Despite the massive traction, merchants still have far too much trouble when customer disputes come in.
In this post, you’ll learn how to fight those disputes and come out on top.
So sit tight and stay tuned. Let’s get right into it.
How are Stripe Chargebacks & Disputes Used Against Merchants?
Before we dive deeply into how you can secure your hard-earned bag, it's helpful to go back in time and shed some light on the origin of chargebacks.
We’ll also touch on how fraudsters try to “game” the system and win over online merchants.
What are Stripe Chargebacks?
A Stripe chargeback happens when a customer forces a transaction to be reversed from their card.
It’s different from a refund because chargebacks happen when a customer directly contacts their bank instead of the merchant.
Generally, when a customer wins a dispute on Stripe, the transaction in question will be refunded, or charged back, to their card.
The History of Chargebacks
In the early 1970s, consumers often had to deal with incorrect and unjust billings on their cards.
Cardholders would often have to pay huge bills that someone racked up on their card.
There were also fears of fraudulent merchants taking advantage of the system for their own gain. These concerns prompted the consumer protection agency to take action.
As a result, Federal Lawmakers passed The Fair Credit Billing Act (FCBA) of 1974 to address the issues. FCBA protects consumers from meritless billing practices.
It also provides a tool for mediating billing errors on credit accounts – through what we know as a chargeback today.
When a cardholder has a transaction issue, they can demand a chargeback from their bank instead of requesting a refund from the merchant.
Problem solved, right?
Merchants are accountable to buyers, and credit card confidence improves, which equals more CNP transactions.
Except that merchants now get the short end of the stick.
How Scammers Take Advantage of Online Merchants through Chargebacks
On the surface, chargebacks are a great protection tool.
But the problem is that merchants face a guilty-until-proven-innocent system.
In fact, only 12% of merchants win the battle of disputing a chargeback.
Nowadays, plenty of cardholders file chargebacks even when they receive their products in
Industry records show that friendly fraud will represent 61% of all chargebacks by 2023.
And every $1 in chargeback fraud costs the average eCommerce merchant at least $3.
So with all of that said, how can you turn the tables and fight fraud in your own store efficiently?
How You Can Win PayPal and Stripe Disputes:
Now that we’ve clarified the basics, let’s talk action.
Step #1: Get the Basics Down for Disputing Chargebacks
Here are a few guidelines for responding to chargebacks on Stripe and PayPal.
First things first:
- Be sure to respond within the card network's specific dispute response time limit (between 7 and 21 days)
- Respond within PayPal or Stripe dashboard
- Make your response letter straightforward
Use the following guideline to submit documents or images as evidence:
- Font: 12 points or larger.
- Use bold text, callouts, or arrows to highlight crucial details.
- Avoid using color highlighting.
- Crop your screenshot to the portion of interest and highlight any essential information (e.g., delivery confirmation or signature)
- Use the text fields in the dispute evidence form to describe the image and how it supports your response.
With those rules in mind, you’ll have a much easier time getting your point across in disputes.
Step #2: Only Include Relevant Details in Your Dispute
PayPal and Stripe receive tons of disputes on a daily basis.
It’s their job to make sure that the correct party wins, but that doesn’t mean you shouldn’t make it easier for them.
When sending a dispute, gather every piece of relevant evidence you can find.
Google Map and Street View of your delivery location. Email communications, tracking information, texts, and any communications between you and the customer.
👉Quick Tip: The representative who receives your dispute won’t follow any links within it. If you plan to send any information via a link, take a screencap of the info instead.
Again, always make your evidence factual, professional, and straight to the point.
While having a lack of evidence is problematic, overwhelming the card issuer with info can have the same effect.
Step #3: Demonstrate Customer Authorization to Raise the Chance of Success
Fraudulent disputes make up the majority of all PayPal and Stripe chargebacks.
If you can show the issuer that the actual cardholder made or was aware of the transaction, the odds of winning the dispute will immediately swing in your favor.
To do that, you’ll want to find any available data that pierces through to the buyer's identity.
That can include the following:
- Address Verification System match
- Card Verification Code confirmations at checkout
- Signed receipts or customer contracts
- The purchase IP address that matches the cardholder’s legitimate billing address
If your site doesn’t include any of these within its purchase flow, it may be time to include them.
Even something as simple as requiring a digital signature for each purchase can help greatly increase your odds of winning disputes.
Step #4: Add your proof of product or service delivery
Aside from fraudulent disputes, 26% of all disputes happen when an item isn’t received.
Assuming the product or service is in good standing and delivered before the dispute date, you must include proof of delivery or use.
Shipping your orders with tracking helps provide insurance for these disputes.
Always include shipment and delivery proof. This means the exact address too, not just the city and ZIP code.
If your customer gave a “Ship To” name different from their address (e.g., for gift purchase), ensure that you have a note explaining the variance.
Although it’s standard practice to purchase and ship to an address that doesn’t match the card’s verified billing address, fraudsters also use that tactic to win dispute cases.
If the product in question is digital, add documentation like an IP address or system log to establish whether the customer downloaded the content, activated the program, or accessed your software or service.
Step #5: Provide a Copy of Your Service Terms & Refund Policy
Bottom line: Fine prints win PayPal and Stripe disputes.
But you can't use fine print to your advantage if the groundwork isn’t laid out first.
The first step to that is to craft strong service terms and return policies.
Also, make sure that every customer has to view those policies during the checkout. Oftentimes, merchants will include a small disclaimer with links to the relevant policies to avoid being intrusive.
Including the relevant policies will help legitimate customers seek remediation and give you tools to fend off online shoplifters at the same time.
Proving that your customer understood and agreed to your service terms at checkout or did not follow your policies regarding returns or refunds helps your case tremendously.
Make sure to include a clean screenshot of how you presented the policy—including only a text copy of these is not enough.
Quick Note: Card networks will consider any illegible text or data you submit with your response incomplete and not review it at all, so make sure it can be understood.
Step #6: Use Anti-Chargeback Tools to Fight Fraud
As fraud patterns keep evolving, the businesses that win are the ones who adapt their defences.
Instead of relying on chance when fighting PayPal and Stripe disputes, consider using a tool like Chargeflow to gain insights into 50+ data points and practically recover disputes on autopilot.
Chargeflow is the world’s first fully automated chargeback recovery system to help you recover chargebacks without lifting a finger.
Running a successful online business is a lot of work. Keeping your hard-earned money shouldn’t be an added burden. So there’s no shame in getting the help you need to plug any revenue hole, especially in these times of elevated chargeback disputes.
Shopify & Stripe Disputes: How Merchants can Avoid Losing to Fraudsters
The key to winning PayPal & Stripe disputes is keeping your evidence clear, concise, and to the point.
The more fluff you include, the harder it is for representatives to decide which side is right.
And for stores moving tons of products each week, it might be helpful to use a tool like Chargeflow to handle your disputes automatically instead.
If you found this guide helpful, make sure to check out more of the content on our blog!
About the Author:
This guest post was written by Tom-Chris Emewulu, Content Marketing Manager from Chargeflow. Tom-Chris Emewulu is Chargeflow's Digital Evangelist. With 7+ years of digital marketing experience, he crafts compelling, data-driven SEO articles that put brands on page 1 of Google search. Forbes, DW, Business Insider, Businessss2Community, and many other publications have featured his works.
You can find him on Social Media via @tomchrisemewulu.