Why do we have Connect Reserves?

In the case that a connected account with platform-owned loss liability accrues a negative balance (typically due to chargebacks and/or refunds), the ultimate responsibility for that loss lives with the platform. Connect Reserves activate when a platform has connected accounts with negative balances. See Understanding connected reserve balances in the Stripe Docs for more information.

How do Connect Reserves work?

When a refund or chargeback occurs, Stripe will first try to recover the funds from the account where the charge was made. For example, Direct Connect charges live on the connected account, so refunds or chargebacks would be drawn from the connected account’s balance.

If a connected account with platform-owned loss liability does not have enough funds in their Stripe balance or linked bank account to support the refunds or chargebacks, Stripe claws them from the platform to ensure customers can still get timely access to these funds. This might cause the platform’s account to have a negative available balance.

When the connected account’s balance goes negative, Stripe will create a reserve_transaction on the platform account. If there are funds in the platform’s available balance to cover the full amount of the reserve_transaction, that is what will fund the reserve. If the available balance is insufficient to cover the reserve_transaction, the platform’s available balance will be drawn into the negative and a debit to the platform’s linked bank account will be initiated to cover the negative balance.

A connected account with platform-owned loss liability that becomes less negative (e.g. from ongoing processing) will initiate releases from the Connect Reserve balance. Additional reserve_transaction adjustments will be created, and funds will be moved from the Connect Reserve to the platform’s Available Balance.

At any given moment, the Connect Reserve for a platform should be about equal to the sum of negative loss-liable connected account balances, barring any data delays.

Connect Reserve collection transfers

When a connected account’s negative balance has persisted for 180 days, it becomes more unlikely that the connected account will process new charges sufficient to zero out the negative balance. At that point, a connect_collection_transfer balance transfer is created, pulling funds out of the Connect Reserve and into the connected account’s balance, which will subsequently be zeroed out.

If a platform wants to zero out the connected account negative balance before 180 days, it can send a transfer to the connected account for the full amount of the negative balance. At that point, the connected account liability will decrease, creating another reserve_transaction to release funds out of the Connect Reserve.

View Connect Reserve status and details in Dashboard

You can view your connected accounts Reserve information on the balance page of your dashboard at https://dashboard.stripe.com/balance/overview

Each reserve transaction is also visible in the balance history export from your dashboard. These will appear as `Reserved funds` under the Type filter:

`Connect collection transfers` refer to the movement of funds from your reserve to connected accounts with negative balances that have persisted 180 days.

Check out the Connect Reserves FAQ to learn more.