We’ve had many customers express surprise, concern and even anger at our steps to ensure all events have some level of chargeback reserve. Here are some answers to FAQ’s:
Your Corona-report does not show a drop in registrations. Why did you change your stance this week?
This is moving fast. When we first wrote about this on Feb. 27 there were 60 cases in the US and 400 in Italy. Today on March 11 there are 1,050 and 10,149 in those countries – greater than 10X increase in less than 2 weeks. And it is expected that the numbers are underreported (a RunSignup employee has symptoms and the cost of a test is $3,000).
Moves by a number of US cities, states, universities and businesses, along with the cancellation of most conferences over the next several months is stacking up very quickly.
Just in the past day and a half we have seen a wave of postponements and cancellations of events that are on RunSignup.
The exponential path that many countries are now on is well explained by this mathematician. A simplification of his article is that there are 463 deaths in Italy as of today, and the approximate mortality rate is 1% – meaning there were about 46,000 people with the virus 2-3 weeks ago.
Locking down the movement and gathering of people is what has decreased the virus spread in China, South Korea and Singapore. This is why Italy moved to lock down their country over the past couple of days.
Our conclusion is that there is at least some probability that there will be more aggressive and coordinated lock down in the US. But even if there is not, the trend is not encouraging.
Similarly, as we have stated on all of our trend reporting and our explanation on chargebacks – this is all very backward looking.
So, while we wish we had more foresight (and many people still disagree that there is a problem at all), and we wish we had been able to communicate with further notice, we are just human and trying to do our jobs.
“But you are taking our money!”
Actually we are not. We are merely holding it in your merchant bank account to cover potential chargebacks. We will hold that reserve until one week after your scheduled date.
The purpose of this is to ensure that you as the seller of the service to the card holder are able to meet your financial obligations if the card holder processes a chargeback.
“But we are going to hold our event, so we do not need a chargeback reserve!”
The problem is that no one has control over that. Many communities in the US are now shutting down any gatherings or events. There is no way to guarantee this, and even if the event is held, we expect that if the Coronavirus continues to spread then there will be an increase in chargebacks regardless.
“RunSignup has removed all of its risk and placed it all on us.”
The burden of chargebacks does fall on the event to deliver to the cardholder.
Even though we do not have an obligation, RunSignup actually has very large risk. Let’s say a marathon that was collected and been paid $100,000 is postponed or cancelled. On that marathon we collect after credit card fees and partner fees about 2% (that is our gross profit that we use to pay our employees and do education to our customers and maintain our systems) – so we have “made” about $2,000. If there is a 20% chargeback rate, and the race has no money in their reserve, then the $20,000 of chargebacks comes out of the RunSignup bank account.
In cases like this, RunSignup would be trying to collect that $20,000 from the race. Many races would fulfill their obligation, but there would be high overhead for everyone involved and the unpleasant prospect of legal battles.
With over 20,000 races, this is bound to happen somewhere. Generally speaking, our customers do not currently have sufficient reserves to handle this kind of large scale risk, which is what prompted these changes. In some cases, we will have built up too much reserve on behalf of customers and in other cases we will not have enough.
We have talked with other registration companies, and they will be implementing similar policies in the days ahead.
So obviously, we would love for this situation to not be happening. But we are really all in this together.