Card payment chargeback - what's the deal?

Payments + Shipping & Fulfilment
1

Hi,

We successfully fulfilled an order to the tune of £500+ in early March.

It is now 26th May and we are horrified to learn that the customer filed a chargeback claim for the order and as always, Shopify (being the devils that they are) are withholding our funds.

Some notes about this order:

  • We use the “FraudBlock” app, which auto-closes and orders that Shopify Payments flags as “Medium” or “High” risk - this order was a “Low” risk

  • The customer’s billing & shipping addresses were the same

  • The customer did not ever communicate with us via any channel since the order was placed (or beforehand)

  • The customer used a 5% discount coupon code from one of our “welcome” email campaigns

  • The customer successfully signed for the delivery (next day)

Shopify support are NOW saying to my that EVEN IF Shopify’s OWN fraud-detection deems an order as “Low” risk, we still have no recourse for protecting ourselves and Shopify’s hands are tied. How can this be right? How can they have their cake and eat it too?

It absolutely sickens me that we will be cash(flow)-strapped for the next 75-or-so days while we challenge this chargeback, but I’m more worried about the potential of a negative outcome for us. We operate as transparently, honestly and to the law as possible and if we can’t win a case like this, then we might as well pack up shop now and I would seriously question Shopify’s business model if they can’t do anything to protect its merchants in situations like this. What a FLAWED business model and hopefully it would only be a matter of time until the industry is made aware of Shopify’s practises and lack of merchant support.

Can anyone shed any light if they’ve been in similar situations?

Thanks

M

2

Hi,

Does anyone have an opinion on this? Silence as always from this place I see…

3

Does no one want to respond to this? Where are Shopify representatives?

4

Hello is anyone there?

5

@Hello_There ,

June here from Shopify. Thanks for taking the time to share your experience.

I know there are few things as unsettling as having a customer dispute an order out of nowhere, when you know it has been fulfilled, and especially when you’ve taken precautions to protect your business. May I ask what reason was given for the chargeback?

First and foremost, I do want to make sure you respond to the chargeback from your order page, and take a moment to collect and submit any additional evidence - for example, proof that the customer signed for delivery.

In regards to the order you’ve described, as you’ve said, it did not present any indication that there was a risk of fraud. While we do analyse each order against these criteria, such as the ones you’ve mentioned, at the end of the day it is impossible to entirely predict a customer’s actions I’m afraid.

I would like to be hopeful and think that there has been a misunderstanding with your customer and that if you contact them, they will agree to drop the dispute. Either way, I absolutely recommend that you submit any and all evidence in your chargeback response to let your customer’s bank know, without a shadow of a doubt, that this order has been fulfilled.

I am glad to hear that you have a workflow in place to manage medium- to high-risk orders, but also understand that the difficulty lies in the possibility of a surprise chargeback from a low-risk order. Currently US merchants are able to use Fraud Protect to bridge this gap - I’ve shared a link here not only for more context on what this feature offers, but because I encourage any US-based business owners who come across this thread to give it a look.

Some quick details on Fraud Protect:

  • Fraud Protect offers protection against chargebacks for most orders.
  • If a fraudulent chargeback is made on a protected order, Shopify will reimburse a merchant for the full disputed amount and chargeback fee, as well as handle the chargeback process on their behalf.
  • Exceptions to this would be: if the customer claims they did not receive the product, or if they believe the product was defective, damaged, or not as described.
  • If an order is not protected, a merchant can make an informed decision about whether or not to fulfill it.

While we don’t currently have an international equivalent to Fraud Protect, we have seen some app alternatives emerge, such as Signifyd - Fraud Protection, though I’ll admit this is not the most affordable solution and wouldn’t recommend it for all businesses.

Beyond that, if you are not satisfied with our own fraud analysis, you might consider introducing an additional fraud analysis app for a second opinion. Some popular examples are:

All of this to say, I deeply empathize with what you’re dealing with right now and hope you will let me know how I can continue to support you. Thanks for bearing with the lengthy reply! Wishing you a wonderful day.

6

I am dealing with the same thing - customer filed a chargeback claiming that they did not receive the product. I immediately (September 23) submitted screen shots, proof of delivery/tracking, etc. & my account was updated with this message: “What follows is compelling evidence, and a valid remedy for this chargeback.” It did not matter. Shopify still deducted the funds (several hundred dollars) from my account along with a $15 fee. I then had to wait almost a month for a response only to learn that the customer’s bank has sided with them..??? What is the solution here? And why did Shopify wait until October 17 to send my response? “We submitted your response to the dispute on October 17, 2022 at 7:00 am. The customer’s bank sided with them.”