TABLE OF CONTENTS
- PayPal Chargeback
- Chargeback prevention
The dispute is the process of filing a customer complaint about a purchased item through PayPal. In this case, PayPal is not involved in the review of the case. If the customer's complaint was not satisfied, the customer or the merchant could escalate this request to claim.
On the Paypal side, there are a few different types of disputes and chargebacks, but they are all divided into three groups:
PayPal internal inquiry
The internal inquiry raised through the PayPal Resolution Centre is a dispute between two users inside PayPal. Customers can file a PayPal dispute in 120 days timeframe after the transaction. Merchants have only 7 days to address such disputes, refund or oppose. Customers have 20 days from the time they open a dispute to file a claim. If a customer does not escalate an internal dispute to a claim in 20 days, that dispute will automatically get closed in the merchant's favour. Quite often, if you do nothing, customers forget about the dispute. Consequently, it gets closed automatically.
A PayPal Transaction Dispute is a formal notice that a problem exists. PayPal does this to push the customer into contacting the merchant before things get out of hand. It's a less confrontational way of guaranteeing the merchant is in the loop; otherwise, customers may bypass you altogether.
The ideal option for merchants is to contact the customer at the dispute stage using our chat in the Solid admin panel. PayPal review these messages and, in the future, if the customer never replied - can close the dispute in your favour.
However, it is important to keep in mind that closed PayPal disputes in the merchant’s favour can later result in chargeback raised with a card issuer. Meaning, even in cases where customers never replied, there is still an option for them to submit a dispute (chargeback) via card issuer bank, which can later increase your chargeback rate. And we all know it is not a good thing.
Merchants are able to identify transactions with the possibility of receiving a chargeback using pre-chargeback alerts. A pre-chargeback alert is not an actual chargeback case but an indicator of a chargeback that could follow. Merchants are able to respond to these alerts and will get a 20-hour window to issue refunds.
Internal Claim (chargeback)
If a dispute got out of hand, it gets escalated to a claim. Merchants must address it within 10 days timeframe. It can have several reasons:
Item Not Received,
Significantly Not As Described,
Merchants cannot send messages to the customer at this stage, but you can oppose the claim, providing proofs which Paypal will consider. At this point, we recommend making refunds since most of your disputes can lead to further chargebacks. In case of a refund, the customer can revoke a claim.
External chargeback is a chargeback initiated by customers through their Card issuers, not through Paypal. These chargebacks must be answered within 10 days. There is also no way to send messages to the customer at this stage, but there is a possibility of contestation - providing evidence that you provided the service.
External chargeback rates should not exceed 0.9% of sales.