PayPal’s Simple Solution to Reducing Disputes (Chargebacks)

Chargebacks are always a hot topic for online retailers.

A few weeks ago I was editing some PayPal settings when I noticed something called a “Customer service message” where you can “Create a personalized message for customer disputes.” That caught my eye, so I clicked it. On the page it’s described as:

Customize the message online customers see when they try to file a dispute in the Resolution Center. People who will get this message have:

  • Bought an item from you online, but said it didn’t arrive, AND
  • Tried to file a dispute in the Resolution Center for items not received or significantly not as described.

Before you post this message, you can preview what they’ll see when they try to file a dispute in the Resolution Center.

Cool! After some Googling I found that this feature is many years old, but it was new to me/us. I set the pages up for both Detailed Image and SportsLizard. Here’s the preview of the DI page:

PayPal Customer Service Message

It’s such a simple idea, yet I’d imagine that it will be pretty effective (although it’s far too early to tell). For DI, this only applies to customers who pay with PayPal and file the dispute within PayPal, which is a very small percentage of an already small number of customers who file chargebacks, but even if it saves a dispute or two a year I think it’s worth it. For SportsLizard though, we get a lot more disputes because people sign up for the $4.99/month premium price guide service and then forget about it. All of those subscriptions are through PayPal, so each person filing a dispute will see the message, and hopefully more will contact us instead of filing a dispute. We do refund payments so long as they haven’t been actively using their account during the time period in which they were charged.

All of this got me to thinking: could this scale to all chargebacks? It’s by no means an exhaustive solution, but by letting the merchant display a personalized message right at the time the customer is filing, I think it would diffuse a decent percentage of chargebacks. Whether that number is 10% or 75%, I have no idea. For it to scale, every credit card processor would have to pull the message from one single source, and the message would have to be integrated into both online and phone systems. Tough? Yes. Impossible? No. I just worry that credit cards don’t have the incentive to do anything like this. Maybe eventually they will if the cost of handling chargebacks becomes too large. Then again, their only costs are in handling the chargeback complaint…the merchant is the one who always pays.

Thoughts?

5 comments on PayPal’s Simple Solution to Reducing Disputes (Chargebacks)

  1. Dave says:

    I never knew this existed either…small things that can make a difference. Thanks for the heads up!

    • Adam McFarland says:

      It’s amazing that between the two of us we had never heard of this. We’ve both done a ton of volume with PayPal for years. Bad job on their part promoting such a simple feature!

  2. Mark W. says:

    This post is interesting to me since it reminded me of a fairly recent incident involving me, PayPal, and the seller. I didn’t receive an item in the mail a couple of days after the expected date of arrival had passed. So I went online to report it. Since I used PayPal, the report went through PayPal. In other words, I didn’t contact the seller directly. In hindsight, I wished I did contact the seller directly because the seller replied with something like – “I sent it in the mail on such and such a date. So there.” So after my initial WTF reaction, I saw it from the seller’s perspective. Of course, after receiving the seller’s reply, I got my item in the mail on the same or next day. Oh well.

    • Adam McFarland says:

      Thanks for the comment Mark. I write these posts from a retailers perspective, both because I think it’s a problem that doesn’t get any awareness and because I think there are plenty of consumer-advocacy blogs out there. In other words I think small business owners are under served when it comes to this problem. However, we’re all consumers as well and it can be very frustrating when you pay for something and don’t receive it. I know I immediately assume the worst because there are so many bad companies out there. It’s hard to know when to give a company the benefit of the doubt and when not to. There is a reason why chargebacks exist in the first place, and there are plenty of legit reasons to file them.

  3. Chod says:

    Absolutely brilliant this. Didn’t know it existed and i have been using PayPal since 2002!!!

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