What are effective ways of fighting chargeback fraud?
15 comments
If your service is marketed as 'Prepfully' and payments show as made to 'Prepfully' in customers' card/bank statements (That's very important as @smca highlighted) then I wouldn't believe a claim that the chargeback was accidental.
Likewise, if your service is indeed a "1-1 mock interviews / coaching service" then my reply to any claim that they "forgot they used the service" would be: "Pull the other one".
When they promised to withdraw the chargeback did they actually do it (you might not have any way to know)? My guess is that they didn't.
IMHO these were dishonest customers, and I would blacklist them to avoid repeats.
Now regarding your question specifically I think the only way is to understand why you lost and to beef up your evidence, processes, T&Cs, etc as needed. Unfortunetaly I do not have much insight in that.
Likewise, if your service is indeed a "1-1 mock interviews / coaching service" then my reply to any claim that they "forgot they used the service" would be: "Pull the other one".
When they promised to withdraw the chargeback did they actually do it (you might not have any way to know)? My guess is that they didn't.
IMHO these were dishonest customers, and I would blacklist them to avoid repeats.
Now regarding your question specifically I think the only way is to understand why you lost and to beef up your evidence, processes, T&Cs, etc as needed. Unfortunetaly I do not have much insight in that.
What does "Pull the other one" mean in reply to "forgot they used the service"?
pull the other one
INFORMAL•BRITISH
used to express a suspicion that one is being deceived or teased.
"Your boat was sunk by a swordfish? Pull the other one!"
INFORMAL•BRITISH
used to express a suspicion that one is being deceived or teased.
"Your boat was sunk by a swordfish? Pull the other one!"
It's common in the US, too. I think that the history is:
"Pulling your leg" means that someone is deceiving you (either playfully or spitefully).
"Pull the other one" means that someone pulled your leg, and you are telling them that you noticed by informing them that you have another leg that can be pulled.
"Pulling your leg" means that someone is deceiving you (either playfully or spitefully).
"Pull the other one" means that someone pulled your leg, and you are telling them that you noticed by informing them that you have another leg that can be pulled.
Thanks for the suggestions, really appreciate it.
We're not something people use day-to-day, I think we're mostly just relevant in the 4-8 weeks someone's preparing for a job interview - so I can imagine people forgetting they used something called "PREPFULLY". After talking to these customers I got the sense they couldn't relate their card transaction to the service itself -- but once I sent an email they immediately remembered what it was. In this context smca's suggestion (4) and (5) could be quite useful - if people either Google Prepfully or if I can remind them of what it was within the transaction description - this could pre-empt a chargeback from those who read it.
Re: those who promised to withdraw - indeed, I don't have any way to know if they did do so. There's one chargeback which I "won" without even submitting evidence, so I think this is probably a clear case of it being withdrawn. There's one which I lost just a few hours ago, which triggered this post.
Re: blacklist - yeah I guess this is one way. Interestingly though, 2 of the customers actually immediately offered to pay again, to compensate for the lost revenue - which was both nice of them, and not aligned with the behavior of a someone dishonest. But it might well be worth it to prevent the risk of hitting the Visa/Mastercard threshold for chargebacks. I have a feeling it would be easy to get around though, if someone has the wrong intent they would probably just use a different email or card. Either way - I'll be pretty regretful about having to do this -- repeat bookers are basically our bread and butter - I discount all candidates' first bookings to super low margins as a conversion tactic (i.e. try out a mock interview to a low price) and even lose money on these sometimes. Which gets compensated by the 60-70% of all these users who end up booking additional sessions at the standard price - which is where Prepfully makes money. But probably not worth the risk of letting someone who has done one chargeback do additional ones.
Re: losses - unfortunately I don't get much information re: why we lost the dispute. Indeed the two things to probably work on are (a) more T&Cs and (b) more logs.
We're not something people use day-to-day, I think we're mostly just relevant in the 4-8 weeks someone's preparing for a job interview - so I can imagine people forgetting they used something called "PREPFULLY". After talking to these customers I got the sense they couldn't relate their card transaction to the service itself -- but once I sent an email they immediately remembered what it was. In this context smca's suggestion (4) and (5) could be quite useful - if people either Google Prepfully or if I can remind them of what it was within the transaction description - this could pre-empt a chargeback from those who read it.
Re: those who promised to withdraw - indeed, I don't have any way to know if they did do so. There's one chargeback which I "won" without even submitting evidence, so I think this is probably a clear case of it being withdrawn. There's one which I lost just a few hours ago, which triggered this post.
Re: blacklist - yeah I guess this is one way. Interestingly though, 2 of the customers actually immediately offered to pay again, to compensate for the lost revenue - which was both nice of them, and not aligned with the behavior of a someone dishonest. But it might well be worth it to prevent the risk of hitting the Visa/Mastercard threshold for chargebacks. I have a feeling it would be easy to get around though, if someone has the wrong intent they would probably just use a different email or card. Either way - I'll be pretty regretful about having to do this -- repeat bookers are basically our bread and butter - I discount all candidates' first bookings to super low margins as a conversion tactic (i.e. try out a mock interview to a low price) and even lose money on these sometimes. Which gets compensated by the 60-70% of all these users who end up booking additional sessions at the standard price - which is where Prepfully makes money. But probably not worth the risk of letting someone who has done one chargeback do additional ones.
Re: losses - unfortunately I don't get much information re: why we lost the dispute. Indeed the two things to probably work on are (a) more T&Cs and (b) more logs.
> Have responsive customer service. Some potential chargebacks can be prevented simply by being very accessible. Analyze your UX to see that customers have everything they need to understand how to get in touch with you easily in all emails. Even so, some percentage of customers will just do a chargeback and never contact you.
> Make sure to include your service name in the bill. Some chargebacks happen because a company operates off of a website like "example.com" but then does the credit card billing through "ABC Jones Incorporated". It's very easy to forget a service if you see the wrong thing on your credit card statement.
> This might be a little off-putting to some potential customers, but if part of your business involves having a live video chat with them, it seems like there might be a way to get fairly convincing proof that they used it somewhere in the process of a call. Even so, you'll lose some percentage of chargebacks just because credit cards generally side with their own customers.
> Your business caters to people who are looking for work and are probably a little financially desperate and can't afford an immediate hit to their wallet. Understand that this might mean more chargebacks than normal, partially out of desperation. And consider if this is an opportunity in disguise: maybe you can offer a free service but then figure out a way to get paid more once they are employed?
> Consider if offering payment through some unchargebackable options such as crypto might be feasible.
> Make sure to include your service name in the bill. Some chargebacks happen because a company operates off of a website like "example.com" but then does the credit card billing through "ABC Jones Incorporated". It's very easy to forget a service if you see the wrong thing on your credit card statement.
> This might be a little off-putting to some potential customers, but if part of your business involves having a live video chat with them, it seems like there might be a way to get fairly convincing proof that they used it somewhere in the process of a call. Even so, you'll lose some percentage of chargebacks just because credit cards generally side with their own customers.
> Your business caters to people who are looking for work and are probably a little financially desperate and can't afford an immediate hit to their wallet. Understand that this might mean more chargebacks than normal, partially out of desperation. And consider if this is an opportunity in disguise: maybe you can offer a free service but then figure out a way to get paid more once they are employed?
> Consider if offering payment through some unchargebackable options such as crypto might be feasible.
Chargebacks are a cost of doing business.
Letting the price reflect those costs is the simplest thing that might work.
Other pricing strategies like subscriptions and packages might also mitigate the cost of chargebacks.
Winning chargebacks is the most complicated thing that might work.
Good luck.
Letting the price reflect those costs is the simplest thing that might work.
Other pricing strategies like subscriptions and packages might also mitigate the cost of chargebacks.
Winning chargebacks is the most complicated thing that might work.
Good luck.
Hahah yeah, I will (feels a bit cynical but maybe practical) raise all prices by 3-4% to compensate for this cost.
Won't packages increase the risk meaningfully though? It's actually something I've hesitated rolling out because of exactly this risk eg. 5 transactions for 100$ where 1 of them gets a chargeback is a much easier hit to bear than 1 trasaction for 500$ getting the hit?
I guess from a chargeback rate "%" perspective it might be better to have just 1 large chargeback instead of multiple small ones... but then at the same time it also reduces the evidence I can submit to Visa / Mastercard / banks that this person actually made multiple bookings.
Won't packages increase the risk meaningfully though? It's actually something I've hesitated rolling out because of exactly this risk eg. 5 transactions for 100$ where 1 of them gets a chargeback is a much easier hit to bear than 1 trasaction for 500$ getting the hit?
I guess from a chargeback rate "%" perspective it might be better to have just 1 large chargeback instead of multiple small ones... but then at the same time it also reduces the evidence I can submit to Visa / Mastercard / banks that this person actually made multiple bookings.
If you double your price, then fighting chargebacks is less necessary for survival.
I mean think of chargebacks like a money back guarantee and the price as a way to offer that value to your customers.
Heck you could offer a money back guarantee as a way of segmenting the market.
Then your customers might talk to you rather than their credit card company. And your chargebacks go down. You’re still out the money, but your relationship is stronger. I mean, contesting a chargeback isn’t doesn’t delight anyone. Including you.
Raising prices is better than reducing costs. Always.
I mean think of chargebacks like a money back guarantee and the price as a way to offer that value to your customers.
Heck you could offer a money back guarantee as a way of segmenting the market.
Then your customers might talk to you rather than their credit card company. And your chargebacks go down. You’re still out the money, but your relationship is stronger. I mean, contesting a chargeback isn’t doesn’t delight anyone. Including you.
Raising prices is better than reducing costs. Always.
Some 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.
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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)
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)
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.
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)
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)
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.
Thanks 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.
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.
My pleasure, hope it's helpful.
Yes—on the last point it won't reduce any but might help increase your "win" ability for the chargebacks that do slip through.
Yes—on the last point it won't reduce any but might help increase your "win" ability for the chargebacks that do slip through.
I don’t just show the emails but I
1. draw arrows on the screenshots 2. Upload audit log showing usage 3. Write a short summary that states they intend to continue using the product (ie there will be future transactions)
1. draw arrows on the screenshots 2. Upload audit log showing usage 3. Write a short summary that states they intend to continue using the product (ie there will be future transactions)
(1) is new, will do that too going forward, makes a lot of sense.
(3) might make sense for subscriptions, doesn't work too well for transactions regretfully.
Have you considered that making payments final is one of the solutions to this?
And when a customer wishes to use a payment method that makes chargebacks possible, let them pay a (let’s say 20%) premium?
See also: https://news.ycombinator.com/item?id=38190619
And when a customer wishes to use a payment method that makes chargebacks possible, let them pay a (let’s say 20%) premium?
See also: https://news.ycombinator.com/item?id=38190619
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?