Human history is littered with a wide range of currencies. Seashells, coins forged from precious metals, paper currencies backed by commodities like gold, modern fiat currencies, and now, cryptocurrencies. So many currencies, and in the span of history, so many choices. Still, when it comes to making non-cash payments, Visa, Mastercard, Discover, and American Express dominated the latter half of the 20th century. Consumers could use credit and debit cards from these companies, write checks, or pay in cash but that was about it. Now, non-cash payment platform have exploded, giving us PayPal, Venmo, Zelle, and many more.
When credit cards came on the scene, they needed chargeback policies to protect cardholders from fraud and abuse. So where do chargebacks come into play with these new payment options? Myriad payment options have empowered consumers, providing options for people with minimal credit history and low credit scores. Alternative payment options are a boon for under-banked individuals, and customers in general too.
Alternative payments can also be great for merchants, allowing them to access a larger customer base. Many alt payments feature lower processing fees compared to conventional payment schemes. And they largely do away with the hassles associated with handling cash and checks.
But chargeback dispute management is still a major headache for merchants. Any merchant that accepts alternative payment methods should understand how disputes with these platforms work. Let’s take a look at the dispute process for PayPal, one of the most popular alternative payment methods.
A Quick Look At Chargebacks and Disputes on PayPal
To better understand how chargebacks and disputes work with electronic payment methods, we’re going to take an in-depth look at one of the most popular alternative payment platforms: PayPal. A principal challenge with alternative payment platforms is that each service may have a different dispute management process, so keep that in mind.
PayPal has emerged as an online force, processing more than 15 billion payments in 2020 alone. The company also had nearly 340 million users in 2020, with the average active PayPal user making over 40 transactions that year. In other words, PayPal has significant market share in payments.
With PayPal, merchants have to worry about disputes managed through the company’s own dispute resolution procedure and chargebacks too. Chargebacks typically occur when someone made a payment with a linked card through their PayPal account. If you face a dispute over a transaction made with a traditional credit or debit card, you’ll typically go through the normal chargeback process.
If the purchase was made with a user’s PayPal balance, then you’ll likely have to use PayPal’s own dispute resolution process. Typically, PayPal will issue refunds if a product is not delivered or is “Significantly Not As Described.” The company may also void or refund unauthorized transactions.
PayPal first asks that buyers and sellers try to resolve their problems between themselves. After 20 days, if the buyer and seller can’t reach an agreement, PayPal will step in as a neutral party. Unlike with chargebacks, disputes don’t automatically result in fees and there is no processing fee, which is good news for merchants.
Venmo, Apple Pay, Google Pay, Amazon Pay, and More
PayPal is one of the most popular online payment platforms and can be used on a wide range of websites. Many other companies now offer similar services. In fact, PayPal itself actually offers a “competing” peer-to-peer service called Venmo. Apple Pay, Google Pay, and Amazon Pay are also increasingly popular.
You’ll need to check with each payment method to verify the dispute process. For example, there’s the “Venmo Payment Protection Plan,” which covers purchases made with Venmo debit cards, purchases through authorized merchants, and some payments for goods and services made through the Pay and Request feature. Payments to merchants that aren’t authorized may be denied immediately. Venmo chargebacks might be an issue if a product is not received, not as described, or damaged.
Unfortunately, each alternative payment processor offers its own dispute resolution service. And industry analysts have identified Google Pay and Apple Pay-based fraud as among the hardest types of fraud to fight.
Keep in mind, that as with PayPal, users can sometimes use traditional credit or debit cards through the payment processor. What looks like a transaction processed by Venmo may actually have been a credit card charge and you may face traditional chargebacks.
Cryptocurrency Payments and Disputes
Bitcoin and cryptocurrencies have become very popular over the past few years, both as investments and also for making payments. Once a transaction is made with Bitcoin, it’s almost impossible to reverse. However, payment platforms, for example bitcoin wallets, may have mechanisms in place to protect users and merchants alike.
There are many rivals to bitcoin, including Dogecoin and Ethereum. You’ll want to check out how each cryptocurrency works and it’s smart to read the fine print for crypto wallets and the like before accepting purchases made with them.
Should merchants accept cryptocurrency payments? That’s a big decision. Accepting more payments typically means widening your audience. However, cryptocurrency prices can fluctuate – $1 in Bitcoin today can be worth far less tomorrow. If you’re new to them, the entire field is quite complicated.
Buy Now, Pay Later Installment Services
Another popular option for shoppers are consignment plans offered through companies like Klarna, Afterpay, and Quadpay. With these services, customers will “buy now, pay later” for their goods in installments. Typically, the customer will fork over part of the cost upfront, say 25 percent. Then they will make payments until the product is paid off.
Usually, merchants are provided with the funds upfront by the “buy now, pay later” company. Thus, Klarna will provide the merchant the full 100 percent of the purchase upfront. Usually, customers must follow the merchant’s return policy to get their money back. If the products never arrive, consumers can then contact the payment company.
Still, each individual company will offer its own methods for managing disputes. So before accepting payments through these platforms, it’s wise to read the fine print.
Take Away: Know What You’re Getting Into
Alternative payment methods can be a boon for consumers and merchants alike. They can reduce frictions, make it easier to purchase expensive goods, and may feature lower processing fees. Still, each platform might have a unique dispute resolution process. Before accepting payments from any particular service, you’ll want to check out how that dispute process works. It’s also wise to look into fraudulent activity associated with each service. When disputes do emerge, make sure you’re following rules and guidelines as doing so may mitigate risks.