There is perhaps no greater threat to an online store’s success than fraudulent activity. Customers want a safe experience when shopping, and merchants need to protect their inventory and profits. As the leading e-commerce platform, Shopify merchants face a constant battle against fraudulent orders, chargebacks, and digital theft. However, with the right preventative measures, strategies, and tools, even small businesses can achieve a high level of security.
In this comprehensive guide, we’ll explore the different types of fraud that target Shopify stores, how to identify suspicious activity, and the most effective technical and manual prevention techniques. By understanding the risks and implementing multi-layered defences, merchants can give customers peace of mind while curbing losses from criminal behavior. Read on to learn how to build a fraud-resistant online business on the Shopify platform.
Recognising the Signs of Fraudulent Activity
Before diving into specific strategies, it’s important to first understand common signs that indicate a fraudulent or suspicious order. Being aware of red flags will help merchants monitor their stores and catch criminal attempts early on. Some common tell-tale signs include:
Invalid Shipping/Billing Addresses: Orders with nonexistent, incomplete, or distorted addresses (e.g., “123 Main Street” instead of a full address). Criminals often use fictitious information.
Multiple Orders to the Same Address: Related orders or accounts tied to the same billing or shipping locations are a warning, especially if they involve high-value items.
New Customers with Large or High-Value Orders: First-time buyers ordering expensive products or large quantities raises suspicion of fraud.
Gift Card Purchases: Criminals often try to liquidate stolen gift cards for tangible goods they can resell. Be wary of gift card-only transactions.
Incomplete Checkout Flow: suspicious if a customer abandons the cart partway through or bypasses normal checkout steps to place an order.
Invalid Payment Methods: Declined payments, errors processing cards, or non-matching billing or payment details indicate potential stolen credit cards.
Guest Checkouts: While normal for some stores, high volumes of orders from unregistered guests merit closer review for fraud patterns.
By adopting a policy to manually review any order displaying one or more of these traits, merchants can catch the majority of attempted fraudulent activity before it slips through. The following section covers technical tools that automatically screen orders.
Leveraging Shopify’s Built-in Fraud Protection Tools
Shopify has invested heavily in fraud prevention technology integrated directly into the platform. Merchants on basic plans have access to core fraud screening features at no additional cost. Some of the key tools include:
Address Validation: Checks shipping and billing details against verified address databases to flag incorrect or fabricated information.
Velocity Checking: Monitors the rate and quantities of orders from individual customers, IP addresses, and payment methods and alerts of suspicious spikes or repeating activity.
3D Secure Card Validation: This requires additional authentication from supported credit cards to verify the cardholder during checkout. reduces the risk of stolen numbers.
Order Risk Score: assigns a risk value to new transactions based on factors like customer history, payment details, order contents, and more. flags high-risk orders for review.
Decline Rules: Merchants can set custom rules to automatically cancel transactions meeting set criteria like shipping to high-fraud countries, payment methods, order quantities, etc.
Purchase Limits: Restrictions on order or product quantities or total order values help curb bulk fraudulent purchases of entire inventories.
These automated tools catch the vast majority of clearly fraudulent orders before payment is even processed. However, some sneaky attempts still require human analysis of warning signs. The next section outlines additional layers merchants can employ.
Advanced Fraud Prevention Strategies and Tools
While Shopify’s built-in protection catches many suspicious orders, dedicated fraud prevention tools offer even stronger defences.
External Fraud APIs: Services like Chargeback.me, Riskified, and Kount integrate directly with Shopify to apply thousands of tailored rules, leverage massive historical fraud datasets, and offer automated chargeback guarantees.
Two-Factor Authentication: Requiring an additional login code via text or email makes accounts much harder for criminals to access and place fake orders from hacked profiles.
Address Verification: Third-party services like MaxMind provide address validation beyond what Shopify offers to identify fabricated shipping locations.
Device fingerprinting tracks devices placing orders to detect duplicates, Tor/VPN use, inconsistent browser data, and alerts of high-risk devices.
Order/Payment Screening: Manual review of high-risk or flagged orders and testing of declined payment methods to uncover issues missed by rules
Refund Policy Enforcement: Strict no-refund or exchange policies deter “wardropper” fraud, where criminals force chargebacks after receiving goods.
Purchase Limits by Item: In addition to order and customer limits, restricting quantities of individual products helps curb bulk fraud.
Account Verification: Requiring personal information from customers and verifying identities makes anonymous orders more susceptible to fraud.
By utilising layered fraud defences—both automated tools and active merchant monitoring—even fast-growing stores can achieve payment approval rates above 97% while blocking the vast majority of illegitimate attempts.
Optimising Shopify Settings for Fraud Prevention
In addition to third-party services, merchants have direct control over important Shopify settings that influence fraud risk. Careful configuration and policies can make your store less appealing to customers.
Password Strength: Require a minimum of 8 characters, including symbols and numbers, to secure customer and staff accounts.
Login Attempts: Limit unsuccessful sign-in tries to 5 before locking out accounts and alerting of potential breaches.
Two-Factor Authentication: As mentioned, enforcing extra security for staff logins offers strong protection.
Strong Admin Policies: Restrict website access and ordering privileges to specific trusted employees only.
Clear Return/Exchange Policy: Publish your no refunds or changes terms prominently to deter “testing” of stolen cards.
Approved Countries: Restrict shipping/billing addresses and payment sources to trusted locations with lower fraud rates.
Request Billing Address: Even if not required, prompting for billing details optimises fraud screening and liability shifts.
Force SSL Encryption: Enable HTTPS to protect order and payment transmissions from potential interception.
Deactivate Debug Mode: Disable debug tools that can expose internal store workings if your site is compromised.
With the right optimisation of security controls within Shopify, you actively reduce the appeal and viability of your store for those seeking to commit payment fraud.
Ongoing monitoring and incident response
Beyond prevention, merchants must remain vigilant with ongoing monitoring for suspicious activity and be prepared to take action.
Review New/High-Risk Orders: Manually inspect flags, chargebacks, refusals, and orders meeting screening criteria daily.
Monitor Login Attempts: Check for multiple lockouts, changes to staff accounts, or failed attempts from new IPs or locations.
Review Staff Activity: Keep tabs on employee logins, inventory management, and suspicious order fulfilment or modification.
Track suspicious accounts: Be on alert for repeat “guests,” accounts with tied orders or addresses, or rapidly testing many payment methods.
Prepare communication templates. Have pre-written notices ready to inform customers immediately of unauthorised access or orders placed after a breach.
Process Chargebacks Quickly: Respond timely and decisively to disputed transactions with evidence to reduce fraud liabilities.
Consider product disabling: temporarily remove high-value or bulk target items if a spike in attempts involving them occurs.
Contact Support Immediately: Reach out to Shopify immediately if you suspect an active breach or compromise of your store or customer data.
Staying vigilant, catching emerging patterns, and responding to incidents swiftly is key to protecting against evolving criminal tactics on the platform. Successful merchants treat fraud prevention as an ongoing commitment rather than a one-time set-up.
Conclusion
Building an e-commerce business requires sensible precautions against the constant threat of fraudulent activity. By understanding the risks and strategically leveraging Shopify’s native fraud protection along with recommended third-party tools and best practices, merchants of all sizes can achieve a high level of online payment security. An integrated, layered approach involving both automated screening and active merchant monitoring creates formidable defences against sophisticated fraudsters while assuring customers they can shop with confidence. With diligence and the right prevention strategies, online sellers can curb losses from digital crime and optimise approval rates to focus on legitimate growth.
That concludes our comprehensive guide on understanding different types of fraud targeting Shopify stores, how to identify suspicious activity, and the most effective technical and manual prevention techniques. If you have any other questions about building a fraud-resistant online business on Shopify, please feel free to reach out. With the multi-layered approach outlined here, merchants can give customers peace of mind while transacting safely online.
