People Use Credit Cards to Make Purchases then Open Dispute

[ieyrice1]

Dear Square Community,

I am reaching out to address a recurring issue that many of us might be facing. Our online orders processed through Square are repeatedly subject to fraudulent chargebacks. Here’s what typically happens: A customer uses a credit card to make a purchase on our Square-hosted site, receives their order via DoorDash, and then, weeks later, initiates a chargeback, ultimately receiving a refund. Despite our efforts to resolve these disputes, the credit card issuers often side with the customer, leading to significant losses for our business.

It appears that the protections intended to safeguard consumers are being exploited to defraud small businesses like ours. Square's role seems limited to that of an intermediary, with little power to act against such abuses. Moreover, even when activating Square’s online risk alerts, the system fails to prevent these incidents, only informing us of suspicious activity after the fact with messages like, "We are sorry, we noticed suspicious activity but there was a system error so we couldn't stop it!"

This pattern suggests a misuse of the chargeback system, which not only impacts our revenue but also undermines the trust in transactional security. Are there effective strategies or tools that other businesses employ to mitigate these issues? Any guidance or modifications to Square's current dispute resolution protocols would be greatly appreciated.

Thank you for your attention to this matter. I look forward to your suggestions and a possible resolution.

Best regards,

[Katie_SQ]

Thank you for sharing your thoughts here @ieyrice1.

We appreciate you reaching out to our community for guidance on this thread. While we wait for other sellers to share their experiences, I'd like to provide some additional information about the disputes process and offer some suggestions on how to identify and prevent suspicious transactions.

While Square doesn't determine the outcome of a dispute (that decision lies with the customer's bank, such as Visa or Mastercard) our Disputes Resolution Team is here to assist you throughout this process. We can help you make your case to your customer's bank by assisting you in submitting the required information.

It's great to hear you've set up online Risk Alerts. I'd be happy to clarify the main purpose of this feature for you. Risk alerts allow you to view additional information regarding online payments, and can help to determine whether flagged payments should be refunded to avoid disputes, as well as blocking a suspicious payment card from purchasing from your website in the future.

To further reduce the likelihood of higher-risk transactions, I'd recommend setting up Risk Rules for added protection. A rule allows you to choose what happens to a payment if certain conditions are met, resulting in automatic action being taken before the payment progresses to a processed state. You can learn more about setting up rules here.

I’d also recommend looking Risk Manager’s 3D Secure (3DS). When 3DS is enabled, customers may be required to provide additional information in order to complete the transaction.

I hope this helps address some of your concerns for now, and if anything else comes up, feel free to reach out.