TL;DR: We run multiple SaaS products on Stripe. Even with clear renewal reminders, invoices and easy cancellations, some users skip refunds and go straight to chargebacks.

A $10 payment ended up costing us $43.95 recently. Banks almost always side with the cardholder, and the only reliable “win” I’ve seen is when the customer withdraws the dispute themselves.

So here’s my question to the community:

What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?

What actually prevents someone from using a SaaS product, filing chargebacks every time they cancel, and essentially getting refunded for the last several months of usage?

Would love to hear your thoughts.

I assume if you are running multiple SaaS you already discovered this - but the expectation is that you will amortize the cost of a chargeback into your price if you are a legit business.

Card-not-present (I.E. internet transaction) has a lot more merchant fraud then friendly fraud (what we call these cases) and the incentives for both merchants and banks is to make sure the customer never loses trust in the system. If people were afraid to use their cards on the internet everyone loses.

It doesn't make sense for both the merchants and the banks to arbitrate every 10$ transaction. I doubt your case even reached a human, or if it did they even gave it a minute of thought - you are just someone who does not know the rules to them.

Now if a customer abuses the chargeback mechanism, he'll have is card revoked, probably be blacklisted and his life would be an insane amount of complicated from now on. But you'll never see these cases. Be sure that if someone could abuse the chargeback mechanism to the extent you mentioned, the system would be unusable, the fact you get chargebacks only rarely is a testemant that there is policing going on at the bank side.

It's just not 100%. Like Patio11 says - the optimal amount of fraud is non-zero[1]

If you have a large chargeback (let's say 1000$ and more) you might actually get someone to review it, and there's a slight chance you'll win if the case is good. But the system is not geared for that.

It's geared towards you amortizing the cost of chargeback into your price - and eventually the people who pay it is always the customer, not the merchant.

[1] - https://www.bitsaboutmoney.com/archive/optimal-amount-of-fra...

> What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?

they have a banking relationship with their client, and none whatsoever with you

if they decline the chargeback they then take on a load of risk (they might lose their client, they might get reported to the regulator, they might be sued by their client and then stuck with the bill)

but if they just pass it on then you take all the pain

not surprising at all given the structure of how credit card payments work

The credit card business of banks wants customers to spend money so they earn transaction fees. Everything the bank does is in service of this goal. Making it harder to do chargebacks would measurably reduce the transaction fees they earn in aggregate.

Your SaaS is a dime a dozen to them. They dont care about you. You dont make them any money, especially when the customer is actively trying to stop doing business with you.

My niche SaaS (monthly subs, no annual) gets about 1 or 2 chargebacks a year.

I give instant refunds, we are very lenient with our terms, and I've made the unsubscribe flow 2 clicks from email or dashboard (want to cancel? click. Are you sure? click. Done. Confirmation email). Every subscription email also includes short instructions on cancellation.

Even with a very customer friendly posture, the chargebacks fall into three categories:

- bad experiences with other companies, so instant chargeback instead of emailing or calling - miscommunication between customer departments (accounting doesn't know about the subscription and chargeback) - fraud or lying about usage

We've won about 50% of the chargebacks disputes. I recently added an admin interface that has a chargeback defense function that compiles evidence into a handy package I can upload to Stripe to dispute.

Seems like banks and payment networks are incentivized to make it simple to collect all those chargeback fees.

The bank most likely does not ignore them as such, it’s more that they are superseded by the credit card merchant agreement.

This could also be from fraud. Card testing for example, where they aim to figure out missing card details. Or some other nefarious use of stolen card details.

Just consider it cost of doing business and move on. You can also offer discounts for alternative payment methods but something tells me cards will be more attractive.