Oscar Lozano

Work

Shopify

Improving the claim and dispute experience between merchants and their customers

Role

Product Design

Year

2021

As part of the Payments and Risk team, I was responsible for working with merchants to prevent, manage, and dispute chargebacks. A chargeback occurs when a customer disputes a transaction with their bank, resulting in a refund to the customer and an additional fee for the merchant. While chargebacks can happen for various reasons, this project focused solely on product-related disputes. Examples of product-related disputes include receiving damaged or defective items, incorrect orders, or products that do not meet customer expectations.

The research

One of Shopify's great strengths is the empowerment given to its employees through access to data. With basic SQL knowledge, any team member, regardless of role or seniority, could extract key metrics, allowing for data-driven decision-making at any point. Using Mode, I delved into data to better understand how chargebacks were impacting merchants on the platform. However, fully grasping the complexities of chargebacks required months of mapping out the entire process. The chargeback process are a highly opaque process, involving multiple parties and scenarios, which made it particularly challenging to navigate. However, this was essential to uncover the deeper issues merchants were facing.

In addition to the data analysis, I conducted five in-depth, semi-structured interviews with Shopify merchants. These interviews helped us gain direct insights into their frustrations with chargebacks, particularly how the lack of clear communication between merchants and customers exacerbated product-related disputes. With the support of Shopify’s user research team, I transcribed and analysed these interviews using Dovetail, ensuring both quantitative and qualitative insights drove our understanding of the problem space.

✦ Research Objective ✦

Asses the issues that merchants are facing when managing and responding to chargebacks. Identify areas in the current chargeback process that require improvement in order to provide a better experience for our users.

✦ Research Objective ✦

The findings

Based on our research, we identified the following as the main issues:

In 2020, the average number of monthly chargebacks per shop (for shops that have chargebacks) was 3.89
Shopify's chargeback win rate is just below 20%, way below industry-standard
Merchants are more likely to win a chargeback when they manually supplied supporting evidence rather than relying on Shopify’s automated responses
Product-related disputes made up for 41.8% of all chargebacks
The existing customer-merchant communication tools being overly generic further exacerbates the chargeback issue.

The hypothesis

We hypothesised that improving the communication between merchants and customers, especially around product-related disputes, could reduce the number of chargebacks. Often, chargebacks happen because customers feel their issues aren't addressed quickly or effectively. By the time they contact their bank, the opportunity for the merchant to resolve the issue is lost.

By focusing on direct communication, we believed merchants would be able to prevent many disputes from turning into chargebacks, ultimately fostering stronger customer relationships and reducing costs associated with chargeback fees.

✦ Key Insight ✦

A tailored solution focused specifically on resolving common merchant-customer disputes, such as return processes, product misunderstandings, or delivery issues, could significantly reduce the volume of chargebacks by addressing issues early on.

✦ Key Insight ✦

Design approach

Our long-term goal was to integrate a dedicated dispute resolution centre directly into Shopify’s admin platform, giving merchants a seamless way to manage customer conflicts within the same environment they use to run their businesses. This would allow disputes to be handled more efficiently, with everything kept in one place, and help build greater trust between merchants and their customers.

However, building such a system from scratch would have required significant time and resources. We needed a faster way to address the growing demand for better support tools. That’s where Shopify Inbox came in. As a built-in live chat tool, it already allowed merchants to communicate with customers either in real time or asynchronously while they browsed the store.

Using Inbox meant we didn’t need to create a new communication layer. We could move quickly, keep everything inside the Shopify ecosystem, and make sure the experience remained consistent for merchants and their customers.

At that time, Shopify Inbox was only available to a limited group of merchants, which gave us the opportunity to roll out new features in a controlled environment, gather feedback, and iterate rapidly without the pressure of a full-scale launch. This approach allowed us to test ideas like manual evidence submission, improve the way merchants and customers framed conversations, and identify which types of disputes were best resolved through direct interaction.

Working in this way helped shape the longer-term vision. It gave us a clearer picture of what merchants actually needed and how the dispute process could be streamlined without sacrificing fairness or transparency.

The initial goal of this project was to redesign the web checkout. To gain insight into the issues and pain points of our current checkout, we conducted 4 months of user research. Our research findings supported the insights we had previously gathered from data analysis. This provided us with a unique opportunity to completely revamp the checkout experience for our users. However, after this research, it was decided that we would shift our focus to building an iOS app. This change in direction allowed us to apply our research findings and utilise native features to deliver a modern checkout experience for our users.

Customers use the Shopify Inbox chatbot to file in a complaint regarding an order. The process is designed to capture all the information a merchant might requires to take action.

We built and launched a fully integrated dispute resolution feature within Shopify Inbox. This let merchants manage order-related complaints directly inside their existing customer conversations. We extended the capabilities of the Inbox chatbot to allow customers to file disputes with just a few prompts. The intake flow captured all necessary information upfront, which meant merchants could respond quickly and avoid drawn-out exchanges.

At that time, Inbox was only available to a limited group of merchants. This gave us a controlled environment to test the new functionality, collect real feedback, and refine the experience. We improved the chatbot prompts, experimented with evidence submission flows, and identified the types of disputes that could be most effectively handled through direct conversation.

While I left Shopify before the next phase could be realised, I’m proud to have laid the groundwork. The project proved that better tooling could lead to fairer outcomes and helped show that even small, well-integrated solutions can make a lasting difference for merchants.