Payments processing company Stripe is now offering a chargeback protection service to prevent businesses from incurring costs from fraud disputes. Built on Stripe's machine learning-based fraud prevention tool Radar, the chargeback service offers automatic reimbursement for the cost of a disputed charge and any associated fees.
Chargebacks happen when a cardholder makes a claim to their bank or credit card company that a payment made on their card was fraudulent. As part of this process, the business that accepted the payment originally is required to repay the full purchase amount plus a chargeback fee. Stripe posits that chargebacks can cost businesses more than double the original disputed amount when factoring in lost revenue, penalty fees and evidence collection.
"Fraudulent disputes represent a painful and growing issue for companies of all sizes," Stripe said in a statement. "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 three months, during which time the disputed funds remain unavailable to the business, even if they ultimately win the dispute."
The other key selling point for the chargeback service is its association with Radar, Stripe's machine learning fraud prevention platform that analyzes hundreds of different signals about each charge that happens on Stripe's payments platform. Radar automatically identifying fraudulent activities based on patterns learned from Stripe's users, such as combinations of a particular card's use and other purchases from the same IP address. It also allows Stripe customers to submit suspected fraudulent activity for review. The chargeback service is essentially Stripe's way of standing behind the strength of Radar's fraud detection capabilities.
Stripe's Chargeback Protection service will be available to companies in the US and Europe using the latest version of Stripe Checkout. Pricing starts at 0.4% per transaction on top of Stripe's existing transaction fees.