(Edwin from Stripe here.) Stripe CVV verification can be turned on with a click or two in the Dashboard (https://dashboard.stripe.com/radar/rules). (The card issuer automatically also does their own verfication, and they can choose to decline or approve based on their own logic.) But the effectiveness really depends on the type of business. We have it off by default because we found it improves payment acceptance rates for businesses by 0.08% on average—with no tangible effect on fraud. Basically, Stripe Radar ML fraud detection would catch the fraudster anyway. So we thought businesses could use the small bump in revenue.
We ran various tests with radar. For us, radar universally costs us more than it saves in fraud. The one time we got hit hard by a fraudster, radar was on but failed to catch them. stripe ended up refunding radar fees because it was so obviously fraud. Frustrating experience. Radar would probably make sense at 1/10th the price. Nice layer, but very expensive for the value.
I seem to remember that we just never tried it because we knew that the cost of fraud was <5c per order.
I think it only makes sense for certain types of business. For retail at <$200-$400 AOV, it didn’t make sense. Maybe for <$100 it might make sense to deter testers, and maybe for much higher values it might due to the risk.
Sounds about right - Stripe's default fraud detection is pretty good I think but putting the useful features behind a $0.02 per transaction cost is a bit annoying.
I'm curious, you folks probably make money off of fraud right? You probably have negotiated whatever dispute fee you pay processors directly well below the $15 you pass on to sellers, pocketing the difference.
So I'm guessing that Radar's price was set with this in mind, you ran the regression to set a price to ensure revenue does not decrease by having better fraud detection. Hence the super expensive price. If this wasn't the case, Radar probably would be free.
Probably creates a really bizarre incentive. You don't want to deal with obvious scams that hurt processing reputation, but you probably also want to make your built in fraud detection just crappy enough to ensure you capitalize on that revenue.
No, we don't profit from fraud. First, just want to make clearer here that Radar is included for free in our standard pay-as-you-go pricing. The per-transaction fee is only applied if you have a custom pricing plan that "unbundles" our services by line item, or if you require our more advanced features (Radar for Fraud Teams).
On the dispute fee, banks charge varying amounts (they employ dispute investigators to read evidence, so it costs them to process). Some charge $10. Some charge $20. The average is $15, so we pass that $15 onto the Stripe user. (That way when accounting, the user doesn't have to factor in different fee amounts per bank—they only need to count the number of disputes, which is much easier.) We flex the average based on the country too—e.g., AU banks charge more, so the dispute fee is $20.
If a business wins the dispute, though, we refund the fee at our expense—the banks do not—because we feel it's the right thing to do.
They probably spend a huge amount of money on combating fraud. Whether that cancels out the unwanted profits from fraud? I have no idea. But you can expect them to be spending a great deal on getting rid of it.
