Should Startups Avoid Stripe? How We Got Our Account Back

Update: This post was originally written back in 2014. A few hours after this was published we were contacted by various people at Stripe and got our account reinstated. And we have had no problems with them since. Skip down to the follow-up.

Why We Chose Stripe

We have heard a lot about Stripe in recent years, but as a European company, we couldn’t sign up for a long time. Not until they finally started accepting UK based companies. We have been a high volume PayPal user – both as a merchant and a buyer – since 2007, with over a million dollars traded on their platform. We had our fair share of disputes and long chats with the PayPal support team, but there wasn’t anything unmanageable.

There are two major problems with PayPal though:

1. Their reputation, a lot of clients tell us that they would like to avoid paying with PayPal, at all costs.
2. Their API is a nightmare; it’s overcomplicated and lacks features that should be default in 2014. Long story short, we were excited to build out Kinsta’s credit card acceptance program with Stripe.

The signup process is easy, although you have to send in a lot of documents, that’s understandable. While you’re waiting for the confirmation of your live account, you can already start building your client for their API and they provide libraries for the most common languages, which are written based on modern programming standards and as a result of that, they’re really easy to work with. That’s not a surprise, as Stripe was born out of frustration of the founding team with payment processors available in those days, they set out to disrupt the industry.

And they did: the API doesn’t feel like it’s only an afterthought like it does with PayPal, it’s a real pleasure to work with. Setting up and starting to receive payments with Stripe is easy.

Then the Problems Start

I can’t remember when was the last time we had to deal with a fraudulent payment online, maybe we’re lucky (or maybe PayPal’s fraud protection is not that bad after all). About a week after we started using Stripe (among PayPal and Bitcoin) on our site, the first scammer arrived. The funny thing is that he paid for the service (apparently with a stolen credit card) and never even used the service! A week after that payment was charged back and as it was already deemed suspicious by our team, we refunded it immediately.

As the number of our transactions increased, so did the fraudulent activity. Again, it’s strange that except one person (who tried to use an account for email spamming, but he was caught and banned in no time) all the stolen credit card abusers just wanted to pay us the money and then do nothing, it just seems illogical to me. If they wanted to test a bunch of card numbers, they could’ve done it with a service that costs $1 or so, and if they wanted to use it for spamming or something else, why didn’t they at least try to do it?

Unfortunately, Stripe has a chargeback fee of $15 so we were losing money on each transaction that, in my opinion, should’ve been stopped by Stripe even before they happened. For example, there was a guy who used the same email address and tried cards from 3 different continents in a span of 15 minutes. Unless he’s the Flash, that’s not really possible and it’s a huge warning for all payment processors I know of, yet Stripe didn’t blink an eye.

As we were losing money and Stripe wasn’t providing any help to stop these whatsoever, we set out to find a company who specializes in online fraud prevention. Here are a couple of them that we heard good things about but didn’t have a chance to check them out yet: minFraud by MaxMind, Sift Science and Signifyd. They’re very affordable, even for a small business. I’m really not sure why Stripe doesn’t have a partnership with any of these companies, it seems like a no-brainer for me.

Before we could finish the implementation of any of the above-listed services, one night (and I’d like to underline the night part) we received an email from Stripe, out of the blue, that stated:

Hi,

Thanks for signing up with Stripe!

Unfortunately, at this time we will need to stop offering service for kinsta.com. Currently, Stripe can only support users with a low risk of customer disputes–after reviewing your submitted information and website, it does seem like your site presents a higher level of risk than we can currently support. Unfortunately, we will be unable to accept any additional payments on your behalf.

And that was it.

I’d like to emphasize that none of our legit users disputed anything, ever, only the stolen credit card owners requested a chargeback through their banks, which is what you’d expect. What I did not, however, expect from Stripe in any situation is that they’d just close down our account, in the middle of the night without fair notice. Or help. And that goes in the face of everything that we experienced with Stripe prior to that.

They could’ve given us advice on how to minimize frauds, what we could have changed in our form or anything. Plus a warning like “if this continues, we will have to suspend your account” a couple of weeks before the final decision would’ve been nice, too. On top of all that they’re not replying to inquiries about the issue. This is a perfect case study of how not to handle customer relations.

Is the problem with us? After searching on Google for a bit, it turns out that this is a rather usual way to do business at Stripe nowadays. See here, here, here and here. And if you need more, just do a search yourself and pay extra attention to the comment sections.

Turns out we’re lucky, we have programmers and can move to another API in a short time. When everyday people who sell and ship tangible products get scammed, it can break their whole business and sometimes their lives too (as we’ve read in the topics linked above). To think that implementing a good fraud detection system could solve all this, yet they don’t do anything about it is mind-boggling.

Takeaway

Not long ago Stripe was just a startup happy for all new clients, set out to disrupt the way PayPal handled customer care and business in general. A few years in and they’ve become the same faceless enterprise. Even if it’s hard as you scale, you should never lose sight of your initial goals so that you can keep true to yourself and provide the value that users signed up for in the first place. This should be the most important takeaway for everyone dealing with customers, including Kinsta.

When you’re building a company that you’d like to last a long time, don’t forget that your current small clients (and I’m not arrogant enough to consider ourselves anything other than tiny in Stripe’s eyes) can grow huge in no time, after all this is the Internet we’re talking about! We’re living in the age of hyperscaling.

It’s also important that as a startup you provide multiple payment options for your clients. Not everyone likes PayPal but not everyone trusts online merchants with their credit cards – and then there are those who like to use Bitcoin. If you’re starting a business nowadays it’s better to be prepared for the “next big thing”. Bitcoin could be one of those.

We sincerely hope that Bitcoin (or something else based on the groundwork laid out by Bitcoin) will get mainstream in the coming years, it makes all this so simple (no disputes, no chargebacks, ridiculously low fees). For now though we’ll talk to a couple of other credit card processing companies (but we’re leaning towards Braintree) and update this post once we have a solution. Until then we can only advise you to stay away from Stripe, they’re not the great startup they once were.

Follow Up – A Few Hours Later

We all make mistakes. We’re just a small hosting startup yet we make mistakes every now and then, I can imagine how hard it can be to look after hundreds of thousands of customers. That, though, is not an excuse, you have to be proactive and if you make a mistake you better own up to it and learn from it.

That’s exactly what Stripe did and I’m happy to say that we got our account reactivated and a lot of friendly people from the company reached out to us and made sure we don’t feel left behind. I even had the chance to chat with Patrick Collison, co-founder of Stripe and Andy Young, head of Stripe’s UK division. These guys are building a company that is valued well over a billion dollars yet still took the time to contact us personally, now that’s exemplary customer care.

When you’re dealing with a lot of clients you have to have a (high) level of automation otherwise you’d have to operate a customer support team so large that it could fill a city. Automation is never perfect and as someone who spent five years in the search engine optimization (SEO) business, I’m no stranger to getting screwed by an algorithm.

In Google’s case, we were used to not being able to reach out to anyone and our only option was to dust ourselves off and start over. However, I don’t expect the same from a company that we are a paying customer of. That’s what hurts the most in my opinion: not being able to get help for your problems and the lack of communication from your business partner.

Takeaway

If you’re dealing with customers directly, customer care is everything, even more so in the modern days of social media. Stripe is not the only payment processor online and just like they grew up in the shadows of PayPal (which didn’t provide adequate customer support and made it really hard for developers to integrate their services) they can be knocked out by a current or future competitor that may provide better support and/or a better product at the same pricing levels. In today’s all connected world giants are rising and falling every day.

It’s a fact that bad news and bad reviews spread much faster than good ones. You have to monitor social media as much as you can. The discussion about your brand is happening whether you like it or not, the only choice you have is to join or look the other way and pretend that social media doesn’t exist. Now if you’d like to build a longterm business it’s not really a choice.

In order to a startup to succeed, in my opinion, you have to have three things: meritorious support, one of the best products (or services) in your niche and competitive pricing.

Customer support is everything though. It is possible that the founders and the management didn’t even know about the issues customer face when trying to reach the support team. Or that overnight, immediate account closures happen at all. It’s important to directly ask your clients for feedback every now and then and work together with them to make your product better.

The industry Kinsta is in (web hosting) is infamous for abysmal customer care. I guess in the old days it was easy to put together an okay(ish) server box and put as many clients on it as possible, take their money and when they complained you made them feel like they aren’t really entitled for any support because the service is so cheap.

Even though Kinsta provides the best web hosting performance among all of our current competitors, that’s only 10% of the recipe to success. I’d say added value (backups, security, custom admin features, etc.) is another 10% and the other 80% is customer support. Everyone who knows Linux can put together a hosting server, some of them can even build outstanding servers, but if they don’t provide fanatical support (I hope Rackspace won’t sue us for using their trademarked term…) it’s simply not enough.

Summary

As I mentioned earlier, we do really like Stripe. As the lead developer of our team, I’d say it’s the best thing that happened to online payments since PayPal. They made a mistake, maybe a tiny one for them, but a huge one for us and when I called them out on it they owned up to it and did everything in their power to fix it. I’m happy to call them a business partner.

Update: Fast forward 5 years and we are still happy with Stripe. In fact, you can check out how we’ve reduced credit card fraud by 98% using Stripe Radar.