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When planning your Connect integration, you need to decide how to handle risk and loss liability. This entails understanding the sources of risk for your business and taking steps to prevent and mitigate losses. As a Connect platform, you also need to determine how to handle the risk of unrecoverable losses associated with your connected accounts when you configure your integration. Depending on your business model and the payment types you use, your platform can take responsibility for losses incurred by your connected accounts, or you can assign that responsibility to Stripe.
Negative transactions such as refunds and chargebacks can cause a connected accounts Stripe balance to become negative. Negative transactions apply to platform or connected account balances, based on whether the associated payment was a direct charge or indirect charge:
Your platform is always responsible for its own negative balances. However, responsibility for your connected accounts negative balances can belong to your platform or to Stripe, depending on your integration.
Regardless of ultimate responsibility, if a connected accounts balance becomes negative, Stripe first attempts to offset the negative amount by collecting funds from the accounts external account.
If your platform is responsible for negative connected account balances, Stripe also holds funds in your platform account in reserve, pending the collection of the funds from the connected account. In this case, if a connected accounts balance remains negative for 180 days, we transfer funds from the platform reserve to cover the negative amount.
Connected account balance liability applies only to connected account balances. It doesnt affect negative platform balances caused by transactions related to indirect charges. If you use indirect charges, assign negative balance responsibility to your platform, not to Stripe. Assigning responsibility to Stripe doesnt absolve your platform of responsibility for its own balance.
Responsibility for negative balances affects many other configuration options and behaviors. Consider them carefully when designing your integration:
| Stripe is responsible | Platform is responsible | |
|---|---|---|
| Losses | Stripe covers losses due to your connected accounts negative balances. | Your platform can incur losses due to your connected accounts negative balances. |
| Payment fees | Stripe can collect payment fees directly from connected accounts or from your platform. | Stripe collects payment fees from your platform. |
| Operational responsibilities | Stripe risk teams manage all payments-related connected account risk. Your platform can take advantage of Managed Risk, which automatically monitors risk signals and applies risk interventions. | The platform manages all payments-related connected account risk. You cant use Managed Risk. |
| Reserve funds | Stripe doesnt hold reserves on your platform account to cover negative connected account balances. | Stripe might hold reserves on your platform account to cover negative connected account balances. Your platform can hold reserves on connected account balances. |
| Connected account experience | Your connected accounts can use the full Stripe Dashboard or the Express Dashboard. Stripe directly contacts your connected accounts to prevent, mitigate, and resolve payments risk-related issues, and in some cases can take action against them. | Your connected accounts can use the Stripe Express Dashboard, but not the full Stripe Dashboard. Your platform has a greater degree of control over the payments risk-related experience of your connected accounts. |
| Payment and payout pauses | You cant pause payments or payouts for your connected accounts. | You can pause payments or payouts for your connected accounts. |
| Connected account debits | You cant directly debit connected account balances. | In certain regions, you can debit funds from your connected accounts. |
| Know Your Customer (KYC) requirements | Stripe is responsible for collecting KYC information from your connected accounts. | Your platform is responsible for collecting KYC information from your connected accounts unless they use the Stripe Express Dashboard. |
| Stripe fees | If you pay the listed prices for other Stripe fees, we dont charge additional fees for negative balance liability. | Stripe charges no additional fees. |
| Embedded finance | Your platform cant use Stripe Treasury or Issuing. | Your platform can offer Treasury and Issuing features to your connected accounts. |
You can identify whether Stripe or your platform is responsible for a connected accounts negative balances by examining its properties. The specific property you need to check depends on the version of the Accounts API:
defaults hash, you must specify defaults in the include parameter.)In both versions, if Stripe is responsible, the value is stripe, and if your platform is responsible, the value is application.
Any approach to risk management involves many potential sources of payments risk, in two general types:
The main types of account risk are credit risk and fraud risk. Both can result in chargebacks and unrecoverable negative balances.
| Type | Description | Examples |
|---|---|---|
| Credit risk | The risk that connected accounts are unable to fulfill their obligations to their customers, such as failing to deliver orders due to unforeseen supply issues. If a connected account accumulates more refunds and chargebacks than it can financially cover, it can result in default. | During the COVID pandemic, some hotels and short-term accommodation providers represented by connected accounts went out of business. As a result, customers who had pre-paid for future stays submitted chargebacks, which were covered by the platforms that processed those payments. |
| Fraud risk | The risk that dishonest owners or employees of connected accounts intentionally dont fulfill their obligations to their customers, such as taking orders for unavailable goods and services. |
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Stripe provides several tools to help your platform manage transaction and account risk. The main tool is Radar, which helps detect and prevent fraud by scanning every payment. It also offers tools to prevent, detect, and mitigate risks posed by your connected accounts.
Platforms that arent responsible for connected account negative balances can also take advantage of Managed Risk, a full-service solution that protects your platform by managing risk and covering any negative balances on your connected accounts.
In addition to operational risk management solutions, Stripe provides KYC and risk-based screening to help onboard connected accounts and maintain compliance with evolving regulations. Stripe screens include the following:
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