Since its inception, PayPal has dedicated its efforts to becoming the ultimate payment processing solution for merchants around the globe. As the king of integration, it plays nice with large and popular platforms like Shopify, BigCommerce, and WordPress WooCommerce plugins. In 2020, PayPal had 12.4 billion transactions and $936 billion in payment volume.
To enjoy such levels of success, PayPal has had to guarantee transaction security. They have several policies protecting merchants and customers from fraud, including the “PayPal Chargeback.”
Unfortunately, some unscrupulous buyers have found loopholes in the PayPal chargeback system and use it to defraud merchants. Since the process can tie up funds and affect your cash flow, it’s prudent to learn how to avoid PayPal Chargeback scams and fight them successfully.
PayPal chargeback explained
The terms “PayPal dispute” and “PayPal chargeback” are often used interchangeably. Though they are part of the same process, they are entirely different.
Buyers can file a PayPal dispute through the Resolution Center and work with the merchant to find a solution. Alternatively, they can bypass PayPal and initiate a chargeback process with their bank or credit card provider.
In this chargeback process, PayPal is merely a middleman that submits proof of transactions to the credit card issuer. The credit card issuer decides whether the chargeback is valid or not based on their policies.
During the chargeback process, PayPal freezes transaction funds awaiting the verdict. If you win, the funds are released to your PayPal account. But if you lose, the transaction is reversed, and you are hit with a $20 chargeback fee.
Reasons for a PayPal chargeback
Buyers request chargebacks for several reasons:
· They don’t recognize or remember the payment
· The product or service bought wasn’t delivered
· The product or service was different from what they ordered
· They didn’t authorize the payment
· They paid twice for the same product
From time to time, you’ll experience a chargeback PayPal scam. This is when a buyer claims the item was defective or wasn’t delivered when everything was fine. Unfortunately, no laws regulate such scams, so it can be hard for you to fight them.
However, there are systems you can have in place to prevent such fraud. These include monitoring orders from high-risk countries, looking out for emails with random numbers and letters, and orders with frequently changing delivery addresses.
To protect merchants from such scams, PayPal has a Seller Protection Program.
Seller Protection Program
PayPal designed this program to protect merchant transactions from reversals and chargebacks. When a buyer purchases an item and later disputes or reverses the transaction, you have higher chances of keeping the purchase amount and avoiding the chargeback fee if the transaction was covered.
For eligible transactions, PayPal Seller Protection Program covers:
· Unauthorized transactions – when a buyer claims they didn’t authorize the transaction
· Items not received – when the buyer claims they didn’t receive items purchased
However, it doesn’t cover items received that don’t match what was ordered. Luckily, you can reduce such complaints by:
· Establishing efficient communication with buyers
· Answering questions about items clearly and promptly
· Providing accurate and detailed descriptions of items
· Resolve transactional issues fast to avoid formal complaints
How to Fight a PayPal Chargeback
Whether you believe the chargeback is a scam or not, you need to remain patient, professional, and calm throughout the process. Your response speed also plays a role in determining the outcome.
1. Speak with the buyer
Some 15-40% of chargebacks are caused by merchant error. These chargebacks can be resolved by communicating to the buyer and coming up with favorable solutions. Settling a complaint by issuing a PayPal refund is better for your reputation and results in smaller losses.
2. Check if the Seller Protection Program covers the order?
If the Seller Protection Program covers the order, then you’ll retain the full purchase amount and not pay the chargeback fee.
3. Get proof of online tracking
If the buyer claims they didn’t authorize the transaction, get proof of the validity of the transaction from an eCommerce dashboard with online tracking. The buyer’s name and address should match those on PayPal’s Transaction page. If the sale is fully or partially eligible, you are protected from losing the fight.
4. Proof of delivery or shipment
A common PayPal chargeback trick buyers use is claiming items ordered weren’t received. However, PayPal requires merchants to upload proof of shipment or delivery from their eCommerce site. This ensures they have evidence to validate delivery during chargebacks.
5. Respond to the chargeback in 10 days
PayPal requires merchants to respond to chargebacks within ten days. Go to PayPal’s Resolution Center to check for any chargebacks ordered. Responding fast can give you an advantage over merchants who take longer, and you get some time to reach out to the buyer and resolve the problem quickly.
6. Send PayPal necessary documentation
Your best defense to PayPal chargebacks is providing documents supporting the transaction. You should send PayPal all your communications with the buyer, the customer’s history, and proof of shipment and delivery.
7. Cooperate with PayPal’s chargeback team
Though it’s the bank or credit issuer that determines chargeback outcomes, PayPal’s chargeback team will help you through the process. They will take the documentation you send and dispute the chargeback on your behalf.
8. The wait
Most PayPal chargeback cases are solved in a month. But since the process follows credit card issuer rules, it may take up to 75+ days to finalize. You can track the process on PayPal’s Resolution Center and offer additional documentation or proof when needed.
Wrapping it up
PayPal’s chargeback process isn’t so different from regular credit card chargebacks. The major differences are in the timelines, the mediator, and the Seller Protection Program. As such, proper document and proof presentation, efficient communication, and adhering to timelines are still key to winning the chargeback.