Consumer chargeback risk

[AUConsumer]

I tried to find a regular channel to ask this question but ended up here.. 

I made a legitimate purchase recently via an AU based online store and the store subsequently informed me that shopify had flagged the transaction for a high risk of chargeback. All personal details associated with the purchase and from a card perspective are matching (e.g. address associated with the debit card used in the purchase match those used in checkout). The email address used in the transaction however, is a secure proton address used specifically for online transactions. As someone who transacts often online and have never had any issues like this, how do I find out why this was the case? 

Shopify seems to have no channel for consumer support.

As an aside, I've purchased elsewhere as a result of the friction caused here by overzealous fraud and CB protection mechanisms..

[dylanpierce · Accepted solution]

Hi,

First off, sorry to hear your order was falsely flagged as high risk.

Unfortunately modern anti-fraud detection systems are black boxes. They're mathematical models that use details from the order, such as your IP address, billing details, shipping details, your email address, etc.

These anti-fraud systems attempt to detect the potential of stolen credit card usage, because criminals using them would not have matching details. For example, a bad actor with a stolen credit card must likely won't be shipping the good to the the real card holders address.

So therefore, the anti-fraud model will skew towards flagging orders that don't have matching addresses. Same goes for the customers IP address at the time of the order, if it's a far distance away from the billing address, that could raise a flag.

But there are real scenarios where details don't match up and the order is completely legitimate, such as buying a gift for a friend or relative. Or perhaps making a purchase while away from from home on a mobile device.

These tools are intended to only give a signal to manually review an order and contact the customer for additional proof. But unfortunately merchants are so afraid of chargebacks, there's a real tendency to refund and cancel just to avoid the chargeback.

Why do merchants hate chargebacks so much? One, if their account has too many chargebacks, then their payment processor will suspend or drop their account, which effectively kills the merchant's cash flow for a long period of time. Two, disputing a chargeback takes time, the merchant has to gather evidence, organize it, and add it to a dispute. The dispute can take weeks or months to resolve, which locks the funds during this time. So the merchant doesn't have any means of using that money until the dispute is resolved.

Merchants can save orders like yours by collecting KYC (Know You Customer) evidence such as confirming your email and phone number or collecting additional information such as a utility bill or ID that proves your identity, just in case a chargeback occurs that will quickly prove if a transaction is fraudulent due to a stolen credit card. However, some merchants are not aware of this option and just choose to cancel all high risk orders, which my estimates means that merchants are losing a substantial amount of sales due to false positive fraud alerts.

I hope this sheds some light on why you were still rejected even after communicating with the merchant directly. Again I'm really sorry this happened to you.