Learning About PayPal Chargebacks

Ah chargebacks…. You’re doing your best to deal with them but some days it seems as though you’re losing the battle against the time, resources, people, fees, and lost revenue that these chargebacks are costing you. As a card-not-present merchant, you do a lot of business with PayPal. PayPal is one of the number one ways people pay for, invoice, send, and receive funds. Unfortunately, just like other forms of card-not-present payment methods, using PayPal does not protect you from chargebacks.

The good news is that the PayPal chargebacks you’re receiving can be managed and do not need to sink your business. You don’t need to throw up your hands in defeat when you receive a chargeback through this payment medium.

Understanding PayPal Chargebacks

The great news for you as a merchant is that PayPal wants to prevent chargebacks as much as you do. Because of this, they have an excellent online resource center that provides you with lots of information about their chargeback process and how you, as a merchant, are involved in the process.

To help you find your way through the PayPal resource center, we’ve pulled out the information that we want you to read and know and we’ve included links to what we think are some of their must read articles.

If a customer files a chargeback claim over a product or service they purchased from you over PayPal, you are notified by PayPal. This isn’t different from the process that other issuers use – essentially, you’re the last person to learn of the chargeback claim. (As you know, this is typically too late in the process, which is why even with PayPal, you need an end-to-end chargeback solution working for you.)

PayPal states on their website: “If you receive a chargeback, we’ll let you know. If you don’t agree that the chargeback is valid, you can help us dispute it by providing information about the transaction in the Resolution Center…

PayPal charges a fee to the seller when the buyer files a chargeback with his/her credit card issuer. If the transaction is protected by Seller Protection Policy, PayPal will cover the amount of the chargeback and waive the chargeback fee. You can view the chargeback fee and process in the User Agreement.”

This means that you need to take measures to stop chargebacks before they happen. The fees that PayPal (and other issuers and banks) charge add up and, as you know this will eventually impact your chargeback ratio.

The typical chargeback disputes that PayPal sees are:

• “Item not received: a buyer pays for an item, but never receives it.
• Significantly not as described: a buyer receives an item that’s considerably different than what he or she expected when placing the order.
• Unauthorized transaction: a purchase was made without the cardholder’s consent.”

Now, if you’ve been reading our Resources and FAQs sections, you’ll likely recognize these chargeback dispute scenarios as friendly fraud or to put it more bluntly, chargeback fraud. Because of this, it’s even more important that you invest in an end-to-end solution that works to prevent chargebacks from happening and if they do occur, then works for you to manage and solve the chargeback claim.

The advice that PayPal includes in the article titled Help avoid disputes and chargebacks is common chargeback best practices knowledge. We hope that you’re already putting into practice these best practices. Of course, we’re here to help you with this and can provide you with real advice you need to prevent chargebacks from affecting your bottom line.

PayPal does have a Resolution Center which they’ve designed to help you manage and learn about any customer disputes, claims, and chargebacks. The Resolution Center is an excellent resource for you, but it shouldn’t be your chargeback management solution. Ask yourself this: do you have the time and people to devote to just the PayPal Resolution Center? We’re going to assume the answer is No. Not only do you need the time but you also need employees who are experts in chargebacks and the PayPal chargeback process.

What Can You Do?

We want you to take control of your chargebacks and put the power and control back in your hands. To do this, you need to ask our Chargebacks experts for help. Contact us and we’ll discuss your chargeback ratio and specific business situation. We’ll be honest and open and will work with you to find a solution that works for your specific business.

Remember, we’re in this together. We want to put an end to chargebacks and we are the team that can do this for you.