Transfer From the Platform to a Managed Account

[Filip Stojanac]

Hi to all, we need help in resolving workflow issue concerning disputes.

We're using Stripe Connect with managed accounts. We're using destination parameter on the charges and everything works like a charm. Problems began when we started to implement dispute handling workflow.

So, first things first, our client requires this dispute handling workflow: 

1 When dispute comes, we immediately reverse transfer of the original charge from the managed account (by using transfer reversal)

2 In addition to that, we pull $15 dispute processing fee from the managed account (https://stripe.com/docs/connect/debiting-managed-accounts)

3a If the dispute process is lost, workflow ends here and everything is fine

3b If the dispute process is won, we have to return amount of the original charge plus $15 to the managed account 

We have problems in achieving point 3b, and it came to our understanding we can't make manual transfers to the managed accounts if we're using automatic transfers with destination parameter. 

So, the question we want to ask is: can we somehow have both? Does someone have better dispute workflow for this exact use-case (mentioned workflow in non-negotiable)?

Thank you in advance!

[Remi J.]

Hey Filip,

What you can do in this situation is reverse the account debit at step #2. If you created a one-time charge [1] you would create a refund [2] and if you created a transfer from the managed account back to the platform [3] you would simply reverse this transfer [4].

None of those operations will require the platform to be on manual transfers which should meet our requirements.

Hope this helps!

Remi

[1] https://stripe.com/docs/connect/debiting-managed-accounts#charging-a-managed-account

[2] https://stripe.com/docs/api#create_refund

[3] https://stripe.com/docs/connect/debiting-managed-accounts#transferring-from-a-managed-account

[4] https://stripe.com/docs/api/php#create_transfer_reversal

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[Filip Stojanac]

Hey, thank you for your answer!

We're doing exactly that in step #2. The problem is in the step #1 because we get charge amount by transfer reversal, we can't reverse it again if the dispute is won. I know we can change things a bit and instead reversal of the original charge create a transfer from the managed account back to the platform, as we do with dispute fee, and reverse it later but I don't know if that is the right approach.

It works on a paper, but then the original charge is not anyhow connected with that transfer and this bothers me a bit. Any thoughts on that?

But if there's no other way of executing this workflow, will go with the way you've suggested

Thanks,

Filip

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[Remi J.]

Hey Filip,

I see what you mean now and I missed this step. One approach would be to only reverse the transfer at step 3b instead at step 1. You wait to see whether the dispute is won or lost. You only reverse the original transfer if the dispute is really lost.

That way you don't have to switch to manual transfers but the caveat is that you have to cover the disputed amount while you wait for the dispute to be resolved. Otherwise, switching to manual transfers would be the only way today.

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[Filip Stojanac]

Hey Remi,

Yeah, that was our initial idea, but the client wants to cover funds from the managed account right away... 

There's another approach, in which we would combine steps 1 and 2 and debit a managed account for the $15 + original charge in the same transfer, that could be reversed in the step 3b.  I believe we'll go that road then, what do you think?

Thanks,

Filip

[Remi J.]

You have to take into account the pricing that will be associated with account debits though. Debiting an account will have a cost associated with it while reversing the transfer created for the destination charge wouldn't. The pricing hasn't been finalized just yet as we're still working on the feature during the preview.

Technically, your approach would work but could end up costing you more than reversing the transfer itself would. It's something that you need to take into account while you plan the integration.

My advice here would be to use manual transfers on the platform in this situation which would make the integration easier to reason with.

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[Filip Stojanac]

Gotcha, I wasn't informed about a cost of the debiting an account. Yeah, in that case, manual transfers seem like a correct path to take.

Just last couple of questions, if we go with manual transfers does that mean we're not using destination parameter on charge anymore, but instead, create a transfer from the platform to the account? And do manual transfers in any way affect transfers from the accounts (platform and/or managed) to the bank?

You helped a lot, thank you very much!

[Remi J.]

Switching to manual transfers would not change anything to your existing integration. You would continue to create charges using the `destination` parameter and debit the managed account for the $15 fee if you want them to cover those funds.

Switching the platform to manual transfers means that you will now build a balance over time in your platform. Every time funds become available, they won't get transferred to your own bank account anymore and switch from your pending balance to your available balance. You will simply decide when you want to withdraw those funds to your own bank account. When you do, you will create a transfer [1] from your own balance to your bank account.

[1] https://stripe.com/docs/api#create_transfer

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[Filip Stojanac]

I see. Thanks, we have everything we've needed, you helped really a lot!

[Mauro Jurinčić]

This has been really helpful.

continuing on this discussion what are the best practices or 'idiomatic' ways if you will of handling this kind of cases where you want to reconcile additional costs caused from disputed from connected account when you are platform account, for example, Shopify also uses Stripe behind scenes as far as I know and looking their docs they also pull dispute charges from owner of the store (those $15 plus original charge amount), my understanding is they are also using some kind of stripe Connect integration.

Thanks

[Remi J.]

Hey Mauro,

The best solution is to debit the account using the new feature available in Preview in the US that Filip referred to in his original email: https://stripe.com/docs/connect/debiting-managed-accounts

If you have follow up questions about the feature or want to discuss your specific integration and business model, I'd recommend reaching out to our support team directly as they could better explain how this could fit your own business: https://support.stripe.com/email

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[Mauro Jurinčić]

Thanks for answer and help,

One more question in the case of using Debiting Managed Accounts to retrieve those funds taken out of Platform account, what happens in edge case  that connected account doesn't have enough stripe balance, for example, it was the first charge that happened  on that account and funds didn't accumulate  yet or they have automatic funds transfers to their bank every two days and funds also didn't accumulate, will the API call just fail, similarly in case te dispute is won and you want to reverse that directly debited Stripe balance back to Managed Account should Platform account always have some minimum balance intact so basically Automatic transfers disabled and transfer manually only amounts that go over that safe buffer to Bank account balance.

[Remi J.]

Our documentation covers this here [1] where it says:

"An account debit cannot make the Managed Account balance become negative unless you have reserves enabled (on by default for all new platforms created after January 31st)"

You should have platform reverses enabled which lets the managed account's balance go negative. We then would try to debit the managed account's bank account (or default payout method) to recover those funds as long as that account has `debit_negative_balances` [2] set to true.

[1] https://stripe.com/docs/connect/debiting-managed-accounts#requirements

[2] https://stripe.com/docs/api#account_object-debit_negative_balances

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