Protecting your hard-earned revenue and customer trust from fraudulent activities.
As an online merchant, I know firsthand the constant battle against fraud. It’s not just about losing money on a single transaction; it’s about chargebacks, lost inventory, wasted shipping costs, and the erosion of trust in your business.
Over the years, I’ve learned that being proactive is the only way to stay ahead. Relying solely on your payment processor isn’t enough. You need to implement robust anti-fraud settings directly within your Shopify store.
In this article, I’m going to walk you through the essential Shopify anti-fraud settings and strategies that I personally use and highly recommend to protect your business.
First, let’s talk about Shopify’s built-in fraud analysis. Every order placed on your store is automatically analyzed by Shopify for potential fraud. You’ll see a ‘Fraud analysis’ section on each order page.
This analysis provides risk indicators: high, medium, or low. A ‘high’ risk order means Shopify has identified several suspicious characteristics, while ‘low’ risk suggests it’s likely legitimate.
It’s crucial to understand that these indicators are just that – indicators. They are not definitive proof of fraud, but they should guide your decision-making process. I always pay close attention to anything above ‘low’ risk.
Beyond the immediate risk level, I always check the customer’s order history. Has this customer ordered before? Are their previous orders legitimate? A consistent history of successful orders is a good sign.
Remember, your payment gateway also plays a role. While Shopify provides its analysis, payment processors like Stripe or PayPal have their own sophisticated fraud detection systems running in the background.
Now, let’s dive into the manual review process. Even with automated tools, there will be times you need to manually review an order, especially those flagged as ‘medium’ or ‘high’ risk.
One of the first things I look for is an Address Verification System (AVS) mismatch. If the billing address provided by the customer doesn’t match the address on file with their bank, it’s a major red flag.
Next, I check the IP address. Does the customer’s IP address match their billing or shipping location? If an order comes from, say, Russia, but the shipping address is in the US, that’s suspicious. VPNs and proxies are common tools for fraudsters.
Email addresses can also be telling. Generic email addresses (like random strings of letters and numbers), disposable email services, or emails that don’t seem to match the customer’s name can indicate fraud.
I also verify phone numbers. A quick Google search of the phone number can sometimes reveal if it’s a burner phone or associated with known fraudulent activity. Sometimes, a quick call can clear up doubts.
Be wary of unusually large orders, especially for high-value items, or multiple orders placed in quick succession using different cards but similar shipping details. These often signal a fraudster testing stolen cards.
Another common red flag I’ve encountered is a first-time customer requesting express or overnight shipping. Fraudsters want to get their hands on the goods quickly before the card is reported stolen.
Gift card purchases are also a high-risk area. Fraudsters often use stolen credit cards to buy gift cards, which are harder to trace and can be resold or used for other purchases.
International orders, while often legitimate, generally carry a higher risk of fraud due to the complexities of verification and chargeback disputes across borders.
Moving on to Shopify’s actual settings, ensure you require the CVV (Card Verification Value) for all credit card transactions. This simple step significantly reduces the risk of fraud.
Also, make sure your payment gateway is configured to use AVS (Address Verification System) and CSC (Card Security Code) checks. These are fundamental layers of protection.
I strongly recommend setting your payment capture to ‘Manually capture payment for orders’. This allows you to review an order’s fraud analysis before the funds are actually captured and the order is fulfilled.
Consider integrating a dedicated fraud prevention app from the Shopify App Store. Solutions like Signifyd, Riskified, or NoFraud use AI and machine learning to provide more sophisticated fraud detection.
These apps often come with chargeback guarantees, meaning if they approve an order that later results in a chargeback, they’ll cover the cost. This can be a significant peace of mind for high-volume stores.
Shopify Flow, if available on your plan, is an incredibly powerful tool for automating fraud prevention. You can set up rules to automatically cancel high-risk orders, tag them for manual review, or even send you notifications.
For example, I’ve set up Flow to automatically cancel any order with a ‘high’ fraud risk and a billing/shipping address mismatch. This saves me time and prevents potential losses.
Encouraging customer accounts can also help. When customers create accounts, they build a purchase history, making it easier to identify legitimate repeat customers versus one-off fraudulent attempts.
If you’re experiencing a high volume of fraud from specific countries, you might consider limiting shipping to those regions temporarily. This is a drastic measure but can be necessary in extreme cases.
For high-value items, always consider requiring a signature upon delivery. This provides proof of delivery and can help dispute chargebacks where the customer claims they never received the item.
It’s also good practice to document any suspicious activity or communication. Keep records of your manual reviews, reasons for cancellation, and any customer interactions related to potential fraud.
Ultimately, trust your gut. If an order feels off, even if the fraud analysis is ‘medium,’ it’s worth investigating further. A few minutes of due diligence can save you a lot of headaches and money.
Balancing robust security with a smooth customer experience is key. You don’t want to deter legitimate customers, but you also can’t afford to be complacent about fraud.
What do you think about this article? Have you implemented any of these strategies, or do you have other tips to share?
Fraud is an evolving threat, and staying informed and proactive is your best defense. By implementing these essential Shopify anti-fraud settings and practices, you’ll significantly strengthen your store’s security and protect your bottom line.
