That would be an interesting way to solve this type of problem: make the payment processor pay interest on money withheld. Even at a low interest rate, it would hopefully incentivize them to figure out better ways of handling the risk. Are there any US legislators on HN?

I doubt that 1.01%[1] of the balance frozen by stripe plays a major factor in their calculus. If the situation has gotten to the point where stripe is freezing a customer's account for 120 days, they've probably already written them off as a customer. After all, who in their right mind would still stick with stripe after that? The biggest cost would be lost future revenues from the customer.

Some napkin math:

Assuming that a customer gets paid monthly by stripe, that would mean the amount frozen by stripe would be 1/12 of a customer's ARR. Applying the federal funds rate to that over 120 days works out to a cost 0.0843% of customer's ARR. Meanwhile, stripe charges 2.9% in fees. Not all of that goes to stripe, some goes to banks in the form of interchange. If we assume stripe gets 0.5% after interchange, that would mean the losses from losing the customer for one year alone would be 0.5%, an order of magnitude higher than whatever interest they'd be forced to pay.

[1] current federal funds rate is 3.08%. if it's applied over 120 days, it works out to around 1.01%