Every store, be it eCommerce or brick-and-mortar, has faced fraudulent purchases, which impacts your bottom line and can hurt your reputation. But did you know that Shopify has ways to help keep your business safe from fraudulent purchases? Read on to learn how to protect your Shopify business from common frauds. 

Common Types of Fraud

Before we can talk about fraud protection, we need to understand what are the most common types of fraud that stores face. 

  • Chargebacks
    • Perhaps the most common type of fraud, chargebacks (aka ‘friendly fraud’) occur when a customer buys a product or service, and then tells their credit card company that it was a mistake/product wasn’t received/they don’t recognize the charge and ask for the money back. 
    • This can be done intentionally by the card holder, or done by the cardholder when someone has stolen their card to make the purchase. 
    • Regardless of if the chargeback was done purposefully or accidentally, the bank will charge your business a chargeback fee. 
  • Refund Abuse
    • Refund abuse occurs when a customer returns a broken, damaged, or stolen item back to the merchant. 
    • While refunds don’t automatically mean fraud, a customer that repeatedly does this or returns stolen items can be concerning.
  • Payment Fraud/Credit Card Testing 
    • While these are slightly different, both use a stolen card. 
    • In credit card fraud, scammers steal a credit card and make a small purchase (typically less than 5-10 dollars) to verify that they have money on the card.
    • When a scammer has determined that there is money on the card, they will use it to make a big purchase. 
    • When this happens, your store can be subject to fees, including chargebacks.

Now that you know the basic types of fraud, let’s look at how to protect against them. 

Protection Against Common Types of Fraud 

Knowledge is power, and in this case it is key to keep your store safe from fraud. So how can you protect your Shopify store against common fraud? 

  • Shopify Protect 
    • Used for overall fraud protection, Shopify Protect is a free app that uses Shop Pay to protect your shop against fraud.
    • When a customer buys through Shop Pay, it protects eligible products from fraud and chargebacks. That means that you will be reimbursed for any chargebacks on eligible orders.
    • Only applies to physical items, not digital, must be in the United States, must be fulfilled within a week and must be shipped with a shipping tracking number from a supported carrier. 
  • Proactive Steps 
    • Decline high-risk orders 
      • Shopify Fraud Analysis will flag orders that are high-risk, meaning higher change that the order is fraudulent. Declining these orders will help protect against fraud.
    • Require CVV on all card purchases
      • Requiring the CVV means that even with the card number, a scammer can not complete payment
    • Avoid shipping to PO boxes
      • Many scammers use PO boxes to receive packages without drawing attention to the fact the shipping and billing addresses are different. Also, only USPS can deliver to PO boxes, so you may not be able to send orders regardless. 

The Bottom Line 

While the threat of fraud can be scary for many Shopify Merchants, there are steps you can take to keep your store safe, protect your bottom line, and keep your reputation damage free. 

If you are not in a Shopify store and would like to see if it’d be a good fit, you can connect with Fyresite using this affiliate link.