Are you a Shopify business owner who is dealing with high-risk orders? With the recent surge in fraudulent activities due to the pandemic, it is more important than ever for business owners to ensure that their store is secure from fraudulent orders.
According to LexisNexis, successful monthly fraud attempts increased by 43-48% for mid-to-large retailers and 27% for smaller retailers in 2020. This means that there is an even greater risk of fraudsters taking advantage of Shopify stores.
In this blog post, we will discuss how to deal with high-risk orders on Shopify. We will cover the different methods you can use to detect fraud orders, strategies to deal with them, and best practices to protect your Shopify store from fraudulent orders.
Expert Tips and Advice on How to Deal With High-Risk Orders on Shopify
If you run an online store on Shopify, you know that not all orders are created equal. Some orders come with a higher risk of fraud, chargebacks, or other issues that can harm your business. So, how can you protect your store from high-risk orders while still providing a great customer experience? In this blog, we've gathered expert tips and advice to address the biggest elephant in the room “how to deal with high risk orders on Shopify.”
What is considered a high-risk order on Shopify?
When someone makes an order on Shopify, it means they want to buy something from a store. However, sometimes an order can be considered "high-risk".
Think of it like this: when you lend someone money, you want to make sure they're going to pay you back, right? It's the same with online stores. When someone makes an order, the store wants to make sure that the person is going to pay for what they're buying.
So, what makes an order "high-risk"? Well, there are a few things that can make an order seem risky:
- The person making the order is using a credit card that doesn't match their name. This means that someone might be using a stolen credit card to buy things.
- The person placing the order is from a different country than the store. This can make it harder for the store to verify the person's identity and payment information.
- The person making a purchase has a history of fraudulent activity. This means they've done bad things in the past, like using stolen credit cards to buy things.
When an order is considered "high-risk", it means there's a higher chance that the store might not get paid for what the person is buying. So, the store might take extra steps to verify the person's identity and payment information before they ship out the order. This can include things like asking for more information or even canceling the order altogether.
How does Shopify determine if an order is high-risk?
Shopify uses a sophisticated fraud detection system to assess the risk level of an order. This system analyzes a variety of factors related to the order and the customer who placed it. These factors include:
1. Billing address: Shopify checks whether the billing address provided by the customer matches the billing address associated with the credit card used to make the purchase. If the addresses don't match, the order may be flagged as high-risk.
2. Shipping address: Shopify checks whether the shipping address provided by the customer is the same as the billing address. If the shipping address is different, it may indicate that the customer is trying to ship the order to a different location to avoid detection.
3. IP address: Shopify checks the IP address of the customer's device to determine its geographic location. If the IP address is in a different country than the billing and shipping addresses, it may be a sign of fraud.
4. Email address: Shopify checks the customer's email address to see if it has been used in any previous fraudulent activity.
5. Payment information: Shopify checks the payment information provided by the customer to make sure it matches the credit card's issuing bank and that the card has not been reported as stolen.
6. Order history: Shopify looks at the customer's purchase history to see if they have a history of fraudulent activity.
7. Order value: Shopify may flag high-value orders as high-risk, as they represent a greater financial risk to the store.
Once Shopify has assessed all of these factors, it assigns a risk score to the order. If the score is high, the order will be flagged as high-risk, and the store may need to take additional steps to verify the customer's identity before fulfilling the order.
In addition to its automated fraud detection system, Shopify also offers manual review by its Shopify fraud analysis team, who can provide additional insight into the risk level of an order.
What are the consequences of fulfilling a high-risk order on Shopify?
Fulfilling a high-risk order on Shopify can have several consequences for the merchant. The most significant consequence is that the merchant may not receive payment for the order if it turns out to be fraudulent. This can result in a financial loss for the merchant, as they will have incurred the costs of fulfilling the order without receiving payment for it.
Additionally, fulfilling a high-risk order can have other negative consequences for the merchant, including:
- Chargebacks: If the customer disputes the charge with their credit card issuer, the merchant may be required to refund the payment, even if the product has already been shipped. Chargebacks can result in additional fees and penalties for the merchant.
- Damage to reputation: If the merchant fulfills a high-risk order that turns out to be fraudulent, it can damage their reputation and make other customers wary of doing business with them.
- Increased fraud risk: If a merchant fulfills a high-risk order, it may encourage fraudulent activity in the future, as fraudsters will see the merchant as an easy target.
Is it possible to automatically decline high-risk orders on Shopify?
Yes, it is possible to automatically decline high-risk orders on Shopify.
When someone places an order on a Shopify store, the platform's fraud detection system analyzes the order and assigns it a risk score based on various factors, such as the customer's location, order history, and payment information. If the risk score is high, it means that the order is considered high-risk, and the store owner may want to take additional steps to verify the customer's identity before fulfilling the order.
What should I do if I receive a chargeback for a high-risk order on Shopify?
If you receive a chargeback for a high-risk order on Shopify, there are several steps you can take to protect your business and try to reverse the chargeback:
1. Review the chargeback reason: The first step is to carefully review the chargeback reason provided by the customer's bank. This will provide information about why the customer disputed the charge and can help you determine the best course of action.
2. Gather evidence: To dispute the chargeback, you will need to provide evidence that the transaction was legitimate and that the customer received the goods or services they paid for. This may include order confirmations, shipping and delivery information, and any other relevant documentation.
3. Respond to the chargeback: Once you have gathered your evidence, you will need to respond to the chargeback within the time frame provided by the bank. This typically involves submitting your evidence to the bank's dispute department and making a case for why the chargeback should be reversed.
4. Follow up with the bank: After you have submitted your response, it is important to follow up with the bank to ensure that your dispute is being processed and to provide any additional information that may be requested.
5. Consider professional help: If you are unable to successfully dispute the chargeback on your own, you may want to consider hiring a chargeback management service or a lawyer with experience in this area. They can provide expert guidance and help you navigate the dispute process.
It is important to note that chargebacks can be costly and time-consuming for businesses, and may also damage your reputation with customers and payment processors. To reduce the risk of chargebacks, it is important to take steps to prevent fraud and understand how to deal with high-risk orders on shopify.
Best Practices on How You Can Protect Your Shopify Store From High-Risk Orders
By implementing best practices for order processing and Shopify fraud prevention, you can minimize the risk of chargebacks, refunds, and other financial losses. In this section, we will discuss the top best practices to protect your Shopify store from high-risk orders and keep your business safe.
Implement Shopify Fraud Detection Tools
The first and most important step in protecting your Shopify store from high-risk orders is to use fraud detection tools. Shopify provides built-in fraud detection tools that use machine learning algorithms to analyze each order's risk level based on various factors, such as billing and shipping address, IP address, and payment method. These tools can help you identify high-risk orders and take appropriate actions.
Verify Billing and Shipping Information
You should always verify the billing and shipping information provided by the customer. Check if the billing and shipping addresses match, and look for any red flags, such as suspicious or incomplete addresses. You can also use third-party services to verify the information provided by the customer.
Use 3D Secure Authentication
3D Secure is an additional layer of security that requires the customer to enter a password or a one-time code sent to their phone or email to complete the payment. This can help protect you from fraudulent chargebacks.
Limit High-Risk Payment Methods
You should limit the use of high-risk payment methods, such as prepaid cards, virtual credit cards, and international credit cards. These payment methods are often associated with fraudulent activities, and you should only accept them if you have the proper fraud detection tools and verification procedures in place.
Monitor Order Patterns
Keep an eye on the orders placed on your Shopify store and look for any suspicious patterns. For example, if you notice multiple orders from the same IP address or with the same billing or shipping address, it could be a sign of fraud.
Set Purchase Limits
You can set purchase limits for customers to prevent high-risk orders. For example, you can limit the number of items a customer can buy in a single transaction or the total amount they can spend in a day.
Have a Clear Refund and Chargeback Policy
You should have a clear refund and chargeback protection Shopify policy in place and communicate it to your customers. This can help prevent fraudulent chargebacks and make it easier to handle disputes with customers.
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