PayPal has made it easier for card-not-present merchants to reach a wider customer base. No longer a fringe method of payment, PayPal is commonly used by all types of customers, regardless of their experience with online shopping. For many online consumers who maintain a balance in their PayPal accounts, paying for items with PayPal is preferable to using a credit card. In fact, many merchants prefer that their customers use PayPal to reduce the risk of losing sales. However, we still have the sticky matter of PayPal chargebacks.
Yes, PayPal chargebacks are an issue and they occur just as frequently as credit card chargebacks. Accepting PayPal payments does not prevent you from becoming a victim of chargebacks or chargeback fraud.
PayPal Chargeback Primer
Just as we recommend that you be up-to-date with the chargeback guidelines detailed by your acquirers and associated credit card companies, we recommend the same for your use of PayPal. All merchants can benefit from increasing their understanding of how PayPal processes chargebacks and disputes.
To acquaint yourself with their particular dispute processes, we recommend you read the following sections of the PayPal website:
- Resolving disputes, claims, and chargebacks
- Help avoid disputes and chargebacks
- Disputes, claims, chargebacks, and bank reversals
- Seller Protection for Merchants
Knowing in advance how you’re expected to respond to a claim, chargeback, dispute, or bank reversal, could make a big difference in retaining well-earned profits. PayPal expects its merchants to fully understand and comply with all rules and regulations. Equally important is understanding how and when the Seller Protection policies apply.
Remember, each scenario has its own requirements, so it’s wise not to assume that what you did for a claim will apply to a chargeback or dispute. Success for you means having the right payment solution support when you need it—so don’t leave this to chance or for the last minute.
There are three ways customers using PayPal can file refund requests: dispute, chargeback, or bank reversal. This is unique to PayPal and warrants some further explanation, since it’s easy to overlook what distinguishes each of these three scenarios.
- PayPal dispute: The customer contacts the merchant directly through the PayPal Dispute Resolution Center to file a dispute. The customer and the merchant work together to solve the problem. If an agreement can’t be reached, the customer escalates the dispute to claim a request for refund/reversal. This is when PayPal gets involved to determine what’s best to resolve the matter.
- PayPal chargeback: The customer contacts their card issuing bank directly to request a refund. Many customers have their credit cards linked to PayPal for payments, and it is the credit card that is being charged, rather than debiting the PayPal account.
- PayPal bank reversal: The customer contacts their bank directly to request a refund. Many customers have their bank account linked to PayPal for payments, and it’s their bank account that is debited rather than the PayPal account.
In an ideal scenario, your customer will file a dispute in the PayPal Resolution Center, providing you the opportunity to directly resolve the problem with the customer. On the customer side, PayPal does its best to direct customers to the PayPal Resolution Center as the most proactive method of solving issues with purchases.
When a customer files a PayPal chargeback, the process is very similar to that of a standard credit card chargeback. PayPal is notified of the claim by the issuer, you are then alerted to the chargeback claim and PayPal asks you to provide specific details about the transaction. This is then forwarded to the issuer so that the chargeback can be resolved.
Many merchants mistakenly believe that the PayPal Seller Protection policy protects them from these chargeback claims—however, this is not the case. The PayPal Seller Protection policy provides protection for merchants under very specific circumstances and for very specific purchases.
Succeeding as a PayPal Merchant
Be sure to stay on top of the latest updates to the PayPal user agreement and that you know how the PayPal Seller Protection policy applies to your business.
Verifi is your trusted team of experts when it comes to payment solutions, chargebacks, and fraud detection. Working together, we can save you time, money, and stress—allowing you to focus on what you do best for your business. Don’t let chargeback myths and the lack of understanding be your undoing—rely on Verifi to provide you the expertise you need.