←back to thread

Stripe Chargeback Protection

(stripe.com)
341 points shedside | 3 comments | 03 Jun 19 11:19 UTC | HN request time: 0s | source
Show context
nickjj ◴[03 Jun 19 16:43 UTC] No.20085221[source]▶
How did you arrive at 0.4%? That seems like a lot to pay for insurance.

If they take 2.9% normally, 0.4% is about 14% extra in fees for every transaction you make, but disputes on a legitimate product are probably 1 in 5,000 (and Stripe will charge you a $15 flat fee if you lose the dispute which you will if it was related due to credit card fraud).

If you sell 5,000 products at $50 that's $250,000 in revenue. Stripe would normally take 2.9% which is $7,250 but now with "fraud production" they would take 3.3% for $8,250. So you've just spent an extra $1,000 out of pocket to save yourself $15 in a dispute fee that Stripe charges you. That's really steep.

If you had 66 fraud charges within 5,000x $50 transactions (to break even on fees), I would really look into why you're getting so many disputes. That's astronomically high.

replies(4): >>20085495 #>>20086196 #>>20086979 #>>20088743 #
amirhirsch ◴[03 Jun 19 19:06 UTC] No.20086979[source]▶
The value is there is you have greater than 1 in 250 transactions charged-backed and lose. This is high, but certainly within the range -- consider that Signifyd has business for their chargeback protection at a 1% rate. Of course Stripe has more data for better risk modeling....so perhaps Stripe should not be allowed to charge for additional charge-back protection services since it implies they now have a dis-incentive to prevent charge-backs for customers who aren't paying extra.
replies(1): >>20087016 #
nickjj ◴[03 Jun 19 19:08 UTC] No.20087016[source]▶
I guess I'm out of touch on what it is like for physical products.

I only sell digital products but the dispute rate is over an order of magnitude less than 1 in 250.

replies(1): >>20087263 #
1. amirhirsch ◴[03 Jun 19 19:26 UTC] No.20087263[source]▶
I sell a physical product on a Shopify store. Charge-backs cost me $8000 out of >$3,000,000 revenue (14 orders out of 11362). At least one of them (totaling $2000) I should have known was fraudulent because I even asked for photo ID confirmation and received a scan of a print-out which I didn't check well enough.

I simply started to require PayPal for international customers instead of Stripe checkout and that reduced fraud to zero.

(edit: PayPal fees are like 4.4% for international, but it's cheaper than using something like Signifyd on-demand which takes 4% on top)

replies(1): >>20090195 #
2. nickjj ◴[03 Jun 19 23:39 UTC] No.20090195[source]▶
Thanks for sharing real numbers.

So you would have paid $12,000 to Stripe for charge back insurance, which is double what you really paid (well, it's not double since you really paid 8k, but from the sounds of it that 2k loss could have likely been prevented with a more careful background check which makes it a 6k loss).

Question: would you pay that extra $4,000 to $6,000 to never have to deal with charge backs again?

replies(1): >>20096340 #
3. amirhirsch ◴[04 Jun 19 16:09 UTC] No.20096340[source]▶
No. I evaluated Signifyd and the truth is that it wasn't worth it economically or from a "never have to deal with charge backs" perspective, because I still have to deal with the operational errors that cause most of my charge-backs.

When you sell a physical product, usually you get "friendly" charge-backs because the customer didn't receive the product. This means something is wrong with your logistics like a package went missing or didn't get sent out. Often you also missed the messages from the customer wondering where the order went---saying they will contact their credit card company if they don't hear back from you. So you can't just not deal with that.