Protecting your Online Business From Fraud

As an entrepreneur, one of your biggest priorities is protecting your online business from potential threats. While building trust with customers and delivering an excellent shopping experience are top priorities, fraud prevention should not be overlooked. Fraud can seriously damage your bottom line through lost or stolen funds. It can also hurt your brand reputation and customer trust over time.

Fortunately, e-commerce platform Shopify offers robust fraud protection capabilities through its payment system. In this post, we’ll explore the key features of Shopify payments and how they work to guard against fraudulent activity in your store. By understanding these security measures, you can feel confident running your business on the platform while still providing customers with a seamless checkout process.


Understanding E-Commerce Payment Fraud

Before diving into Shopify’s fraud tools, it’s helpful to understand the types of fraudulent behaviour that commonly impact online sellers. The three main categories to be aware of include:


Card Testing: Criminals attempt multiple small purchases with stolen or fraudulent payment details to test if a card number works before engaging in larger fraudulent transactions.

Friendly Fraud: Also known as non-receipt fraud, this occurs when a customer claims they did not receive an order and demands a refund, even though the order was delivered correctly.

Identity Theft: Thieves use stolen identities, names, addresses, and payment information from data breaches to place large orders for resale or personal gain. They disappear before the fraudulent activity is detected.

Each of these negatively impacts your bottom line through refunded or unpaid orders. They also demand your time and attention to process disputes and investigate claims. Fortunately, Shopify’s payments platform incorporates advanced fraud screening tools to help block these common types of fraudulent activity from impacting your business.


Key Features of Shopify Payments Fraud Protection

Let’s take a closer look at some of the powerful fraud screening capabilities built into Shopify payments:

Device Fingerprinting: Shopify can identify devices and browsers used during the checkout process. If an anonymous or known fraudulent device attempts another purchase, it will be automatically declined.

Velocity Checks: Limits are placed on the number of orders that can be placed within a certain timeframe from an IP address, email, name, or device. This helps flag suspicious bulk purchasing activity.

Billship Address Checking: The billing and shipping addresses entered are checked against known fraudulent address lists. Partial or non-matching addresses are more carefully scrutinised.

3D Secure Validation: For Visa and Mastercard purchases, Shopify implements 3D Secure authentication. Customers must pass additional cardholder verification, like entering a one-time passcode from their bank, before an order is finalised.

Machine Learning: Shopify leverages transaction details and payment history, along with constantly updated fraud databases, to train highly accurate machine learning models. These get smarter over time at flagging risky activity based on patterns.

Manual Order Review: For orders automatically flagged as potentially fraudulent, Shopify staff can manually review details and place holds as needed until merchants can verify legitimacy with customers.

This multilayered approach that combines technical screening with human review is very effective for catching both subtle and overtly fraudulent purchase attempts on your store. Merchants don’t need any specialised security experience; it’s all handled behind the scenes through Shopify’s payments system.

Responding to Potential Fraud and Disputes

No fraud detection solution catches 100% of all bad actors. So it’s still important for merchants to monitor their stores and the orders placed. If Shopify flags an order as potentially fraudulent, you will be notified through an order status in your admin.

Some recommended actions in response include:

Contact the customer by phone or email to verify order details before fulfillment.Beware of responses only by automated reply.

Cross-check the billing and shipping addresses and names against any previously known fraudulent activities in your store.

For high-value items, consider requesting additional identity verification, like a photo ID, before shipping.

If still suspicious, you can cancel the order with a “fraud” or “risk of fraud” reason to prevent any chargebacks later on.

Customers who attempt to dispute charges or claims of non-receipt can also be carefully evaluated. Work with Shopify payments support staff as needed by providing all available evidence, like tracking numbers and communication records. Standing up to clear cases of fraudulent behaviour helps protect your bottom line over the long run.

Alternative payment methods

For added protection, Shopify allows merchants to selectively require alternative payment methods for higher-risk countries or orders. Examples include:

PayPal: Many see PayPal as more secure since it abstracts direct card details during checkout. However, it’s still possible for some fraud to slip through.

Invoice: Placing suspiciously large orders requires settling payment by bank transfer or check before fulfilment to reduce chargeback potential.

Deposits: Adding a non-refundable percentage deposit upfront for high-value products protects your inventory costs if fraud is later confirmed.

Blacklisting: You can also choose to decline all orders from certain regions, names, or other attributes known for increased fraud rates on your store to further reduce risks.

Some businesses prefer a mix of standard card payments alongside these alternatives to achieve the right balance of fraud protection versus still allowing the widest set of customers to shop at their store conveniently.

Ongoing protection requires vigilance.

While automated fraud screening helps catch the majority of attempts, no system is foolproof. You should still monitor order details, customer communications, and chargeback/dispute activity with vigilance. Be on the lookout for patterns that could indicate an emerging new fraudulent tactic impacting your business.

Reporting such findings and unusual activities to Shopify allows their security teams to stay ahead of evolving criminal techniques over time through ongoing system optimization. A collaborative relationship helps safeguard not only your store but the broader Shopify network of merchants as well.

In Summary

Understanding the specific fraud defences available through Shopify payments gives online sellers valuable confidence in their ability to safely accept cards and payments from anywhere in the world. The multi-layer fraud screening, machine learning techniques, and human review capabilities significantly reduce risks compared to many other platforms.

By educating yourself on potential threats, how Shopify detects and responds to them, and best practices for handling suspicious customers or disputes, you can better protect both your funds and brand reputation over the long run. An awareness of both technical and manual fraud controls reinforces why Shopify remains a leader in securing the e-commerce ecosystem for merchants large and small alike.

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like