The best strategy for a merchant is to:

  • keep records of transactions and communicate effectively with customers at every stage of the dispute or chargeback process
  • understand the reason codes for chargebacks and develop ways to prevent them from occurring

By implementing these strategies, merchants can minimize disputes and chargebacks, maintain positive relationships with their customers, and ensure the longevity of their PayPal accounts.


PayPal entity

Lifecycle
dispute_life_cycle_stage Description
INQUIRY Customer and merchant resolved the dispute without escalation to PayPal. This occurs when the customer has not received goods, reports goods not as described, or needs more details.
CHARGEBACK Inquiry escalated to a claim. PayPal investigated and decided that it was visible only to PayPal agents. Merchant can accept, challenge, or resolve the claim.
PRE_ARBITRATION Merchant's first appeal stage. Appeal a chargeback if PayPal's decision is unfavorable. Must appeal within the appeal period.
ARBITRATION Merchant's second appeal stage. Appeal a dispute again if the first appeal was denied. Must appeal within the appeal period.
Channel
dispute_channel Description
INTERNAL Internal Dispute. Customer contacts PayPal to file a dispute with the merchant.
EXTERNAL External Chargeback. Customer contacts their card issuer or bank for a refund.
ALERT Pre-chargeback alert when customer contacts their card issuer.
Reason
reason Description
MERCHANDISE_OR_SERVICE_NOT_RECEIVED Customer did not receive the merchandise or service.
MERCHANDISE_OR_SERVICE_NOT_AS_DESCRIBED Merchandise or service not as described by the customer.
UNAUTHORISED Customer did not authorize the purchase.
CREDIT_NOT_PROCESSED Refund or credit was not processed for the customer.
DUPLICATE_TRANSACTION Transaction was a duplicate.
INCORRECT_AMOUNT Customer was charged an incorrect amount.
PAYMENT_BY_OTHER_MEANS Customer paid for the transaction through other means.
CANCELED_RECURRING_BILLING Customer was charged for a cancelled subscription.
PROBLEM_WITH_REMITTANCE A problem occurred with the remittance.
OTHER Other.
Status
status Description
OPEN Dispute is newly initiated and under investigation. Both parties have 10 days to resolve it before it may escalate to a claim.
WAITING_FOR_BUYER_RESPONSE Waiting for the customer to respond after the merchant has provided a resolution or evidence.
WAITING_FOR_SELLER_RESPONSE Waiting for the merchant's response, often after the customer escalates the issue.
UNDER_REVIEW PayPal is reviewing the evidence from both parties to make a decision, typically in cases of internal chargebacks.
RESOLVED Dispute has been settled, either by mutual agreement, PayPal’s decision, or through the appeals process.
OTHER Catch-all status for cases that do not fit standard categories.
Outcome
dispute_outcome Description
RESOLVED_BUYER_FAVOUR Dispute was resolved in the customer's favor.
RESOLVED_SELLER_FAVOUR Dispute was resolved in the merchant's favor.
RESOLVED_WITH_PAYOUT PayPal provided the merchant or customer with protection, and the case is resolved.
CANCELED_BY_BUYER Customer cancelled the dispute.
NONE Dispute was created for the same transaction ID, and the previous dispute was closed without any decision.
Solidgate offers a reporting solution provides detailed insights into PayPal disputes, covering every stage from initiation to resolution. It includes essential data like dispute IDs, order details, amounts, and reasons, helping businesses enhance dispute management and operational efficiency.

Prevention recommendations

Beyond card payments, PayPal processes various alternative payment methods such as bank transfers, Buy Now Pay Later (BNPL) options, and more. According to Solidgate findings, the denominator includes all sales for external chargebacks, while the numerator only accounts for a half of the sales. Plus, PayPal uses multiple MIDs to distribute transactions, and this distribution process is completely unclear. All this can lead to inconsistencies, where some MIDs may have higher chargeback rates despite an overall rate being below the thresholds of the monitoring programs. Unfortunately, these MID-specific rates are unpredictable and hard to track.

These recommendations help lower the risk of fraudulent activities on a PayPal account and improve overall payment security.

Download to reduce the risk of PayPal account fraud and improve overall payment security.

PayPal fraud prevention recommendations

Block fraudulent geographies

Some Tier 3 countries and regions may have higher fraud levels. By identifying these high-risk areas, you can proactively protect your business from fraudulent activity. This may include implementing more stringent verification processes or blocking transactions from these regions altogether.

Geographies Statistics may show that certain countries are responsible for a significant number of fraudulent transactions. In such cases, you may consider completely blocking traffic from these regions, such as those in Africa, Latin America, or Southeast Asia.

Implement clear unsubscribe options

Solidgate retries invoice collection four times after a failed attempt. If the retry period extends beyond the billing period, Solidgate cancels the subscription and sends a webhook to adjust billing and discontinue product use.

Ensure a visible Unsubscribe button in emails and customer profile pages to cancel subscriptions easily. Provide immediate confirmation and clear cancellation policies, and develop a self-service portal for managing subscriptions and processing refunds.

Unsubscribe option example Every email and customer profile page should have a visible Unsubscribe button that allows customers to cancel subscriptions or recurring payments easily.

Enable redirection widget

The redirection widget lets customers contact the merchant directly to resolve issues after a transaction. A link provided in the PayPal Resolution Center allows customers that action, instead of reporting to PayPal or filing a chargeback.

Merchant benefits:

  • Redirection widget helps reduce disputes raised with PayPal.
  • Merchants can improve customer satisfaction and boost retention rates by delivering exceptional customer service.

To activate the redirection widget, provide your account manager with the support link, and Solidgate then handles the setup and activation.

Unsubscribe option example

Quick resolve of dispute alerts

Handle internal disputes directly with the customer within 20 hours after receiving the alert. This allows you to deflect fraudulent disputes with pre-dispute compelling evidence or issue refunds for valid requests before they become formal claims. Immediately communicating with the customer to resolve internal disputes prevents them from filing an official dispute with PayPal. This not only saves you from chargeback fees but also increases customer trust in the company. Dispute alert example When customer support receives a pre-chargeback alert, immediately communicate with the customer, investigate the transaction, and, if the request is valid, issue a refund within 20 hours.

Prioritize payment methods

Customizing the order of payment methods can reduce fraud by encouraging the use of less risky options. For example, prioritize card payments, Google Pay, and Apple Pay while placing the PayPal button lower. This should be done carefully to avoid affecting sales conversions, as some customers prefer PayPal.

Payment Form and Payment Page prioritize card payments, with Google Pay and Apple Pay first and PayPal last by default. Channel name example In the Payment Form, offer card payments, Google Pay, and Apple Pay first, followed by PayPal.

Consider client risk scoring

Using a risk scoring system to determine if a customer can use PayPal for payment. This helps reduce fraud by accurately predicting high-risk transactions and disabling the PayPal option for those customers.

Develop a model that assesses the likelihood of fraud based on customer behavior, geographical location, transaction history, and other factors. If the risk is high, the PayPal button may be deactivated for that customer.

Send billing notifications

Notifying customers before re-billing for subscriptions reduces disputes, and refunds. Use subscription webhooks to monitor status changes efficiently. Webhooks provide asynchronous updates for various subscription events such as initiation, renewal, pausing, updating, and cancellation. These notifications help keep both merchants and customers informed about the current status of their subscriptions, ensuring transparency and timely action. Send a notification before the subscription renewal to inform customers of the upcoming charge and allow for cancellations.

Use business name consistently

Ensuring your Doing Business As (DBA) and statement descriptor names match the Product Name. Seeing different business names pop up across your documents and platforms confuses customers who, not recognizing the purchase, start requesting chargebacks en masse.

Customizing your PayPal account is a must-have strategy to ensure transaction safety and enhance the shopping experience. By providing clear billing information, prompt customer service, and easy account management, you can foster more secure sales.

If your legal entity name is “Tech Solutions LLC,” it should match your DBA name “TechGadgets,” your descriptor “TechGadgets,” and your website.

The legal name is the official name of the legal entity, whereas the business name (Doing Business As or DBA name) is the trading name of the business. The DBA name is prominently displayed on PayPal invoices and statements.

If a business does not have a registered business name, trademark (or any supporting documentation), its customers see the legal entity name instead of the DBA name.

To confirm a DBA name for use on PayPal, it can be registered as a trademark or a trade name. For example, a business name can be registered in Cyprus by completing an application Form EE1 Reference . In the USA, the best brand strategy Reference can be chosen. For a convenient and cost-effective solution to registering and managing trademarks worldwide (covering up to 100+ countries), a trademark can be registered through WIPO's Madrid System Reference .

Always ensure compliance with local requirements to avoid delays or complications in the registration process.
Billing descriptor

The billing descriptor for account transactions appears on the customer’s credit card statement, which PayPal sends to processors. Also known as a statement descriptor or billing statement, it helps clarify the nature of the transaction for the cardholder. Therefore, setting up an easily recognizable credit card statement name is important.

The descriptor information allowed by PayPal has a maximum length of 22 characters PAYPAL*[DESCRIPTOR] and follows this format:

  • PAYPAL prefix uses 8 characters
  • descriptor also supports the following ASCII characters: alphanumeric characters, dashes, asterisks, periods, and spaces
Brand information

Brand information plays a crucial role in enhancing business identification. For instance, customizing your logo and including comprehensive customer support details (email address and support number) can significantly improve customer experience and promptly address customer inquiries.