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Fraud Protection in Shopify Payments

July 14, 2020

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Large e-commerce businesses have advanced fraud prevention measures in place to protect both themselves and their customers from online fraud, but smaller businesses don’t have those kinds of resources.

So it’s good to know that if you have a Shopify store, this e-commerce builder can help protect your online store against fraud. Let’s take a closer look at how they do that.

What Is Fraud?

E-commerce fraud occurs when a person leverages some security gap in a website to steal something. They can steal credit card information from your customers, and use it to drain their accounts. Or, their activity may not be directed only at the customer, but at the business as well.

This is the case for fraudulent transactions, where the credit card information of someone else is used to make purchases from your website. The order itself is fraudulent, so when the owner of the card cancels the order, they will get their money back, but you may have lost products that you will only get back if the authorities find the culprit.

So preventing a fraudulent transaction is a big priority for businesses big and small. Let’s see how Shopify helps.

Fraud Prevention with Shopify

Ideally, you should have security measures in place that work toward fraud detection and help avoid the possibility of a fraudulent transaction. If you’ve built your online store with Shopify, the platform has a built-in fraud analysis that uses machine learning algorithms to identify suspicious orders and flag them.

You can then manually review these high-risk transactions and determine whether there is something suspicious going on or not, possibly avoiding any chargebacks.

However, the tool is designed to work with online credit card orders, when Shopify can vary the payment. Orders that Shopify can’t verify, like those that are processed offline, are not analysed.

Fraud Analysis includes the following feature on all the Shopify plans:

  • Indicators
  • Support for third-party fraud apps.

This means that even if you just have the standard pricing plan, you still get enough info on potentially suspicious orders to act. For the Shopify Advanced plan, you will get additional recommendations from Shopify on how to proceed and increase protection.

1. Indicators

Each order will get various indicators from Shopify’s fraud analysis, which you can use to investigate the potentially fraudulent ones. These indicators can include:

  • IP address information
  • If the customer tried to pay for an order with more than one credit card
  • The credit card used passed the AVS checks
  • If the customer entered the correct CVV code, etc.

2. Third-Party Apps

The Shopify App store has some fraud prevention apps you can download and use if you want to go beyond what the fraud analysis can do. You can download them and easily integrate them into your store to help monitor orders for any suspicious activity.

3. Fraud Recommendations

If you’re on the Shopify plan or higher or are using Shopify Payments (meaning you have no third-party way to handle payments), then the fraud analysis services will also provide a fraud recommendation on all your orders paid with a credit card.

You’ll get a risk rating of low, medium, or high risk on credit card transactions which may be subjected to chargeback because the order is fraudulent, or it could be. When an order is classified as a medium or a high risk, it will be flagged on the Orders page. You may even receive email notifications if you enable this feature.

What about Fraud Protect?

You may have also heard about Fraud Protect for Shopify Payments, a special service meant to protect merchants against fraudulent chargebacks. After this feature is activated, orders processed through Shopify Payments are analysed and classified as *protected” or “not protected.”

You will pay a fee for each protected order, and Shopify guarantees its payment. If there is a fraudulent chargeback for that type of order, Shopify will automatically reimburse you the order amount and handle the rest.

Fraud Protect for Shopify Payments is only available to certain businesses in the US, however. If you visit your Shopify admin and there’s a ‘Fraud Protect’ section on the payments page, you can enable this feature if you want, but if your business is based in Australia, the feature isn’t available here yet.

Can We Help?

If you’re worried about preventing fraud and making your Shopify or e-commerce store more secure, we can help. Book a free 30-minute consultation with our Shopify Website Development experts here at Australian Internet Advertising to find out more.

Book in a free 30 minute strategy session
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