What to do with an UNFULFILLED order if it's already got a chargeback

[LilyOuyang]

Hi dear people,

Thank you in advance for helping. Our Shopify shop got a $3200 order that was marked potentially fraudulent by Shopify. This is the first time we came across this so we didn't do anything for a couple of days (didn't cancel but didn't fulfill it either) and today we got a chargeback from the customer. Besides being deducted $3200, we were also charged a $15 chargeback fee. The fee itself was not too big of an issue besides being annoying but right now we don't know what to do with the order. My question is, if I cancel it now, will we be deducted another $3200? (the chargeback already took $3200 from us). If so, should I cancel the order by choosing "refund later" and just keep the money? If I do so will there be any potential consequence later?

Thank you! Your experience and advice are really needed now!

Lily

[Elias]

Hi, @LilyOuyang.

Thank you for reaching out and bringing this to our attention.

If an order was marked as high risk, then we'd recommend viewing the fraud analysis indicators to determine whether or not you should refund or fulfill the order. Since most financial institutions recommend buyers to wait 30 days before initiating a chargeback, then it's possible that this order was placed using a stolen credit card and the cardholder was able to catch the transaction in order to initiate a chargeback within a few days. As the chargeback has already been initiated by the cardholder and the funds have been withdrawn by the bank, then we wouldn't recommend issuing another refund. Instead, you'll want to follow our guide on 'Managing chargebacks and inquiries'  so that you can add evidence and submit the chargeback or accept the chargeback. 

That being said, if your store begins to experience more high-risk orders or chargebacks, then we'd recommend taking a look at something like Signifyd-Chargeback Protection as these services can help you make real-time decisions on your orders and provide 100% financial guarantee on approved orders. If you need to get help with a third-party app, then the app developer is always available to assist you. Simply get in touch with them using the contact information found at the bottom of their app's page.

I noticed that you're a new member of our Shopify Community! Once you've resolved the chargeback, I'd love to hear more about your business and share some resources to help you get started. 

[LilyOuyang]

Hi Elias,

Thank you for replying. Your insights and suggestions have eased our anxiety a lot. We will follow your advice to look into financial protection Apps and not to cancel the order. I do have a question regarding the latter: say we don't cancel the orders, and submit evidence to Shopify,  if we win, is the chargeback retracted？Then what should we do with the orders? If we lose, do we still get to keep the money from the order (which means what we really lose is financially is the chargeback fee?) 

Thank you!

Lily

[Elias]

Hi, @LilyOuyang.

Thank you for following up.

If the financial institution determines that your store wins the chargeback, then the chargeback fee will be retracted and the funds from the order will be returned to you. After that, you can also cancel the order on Shopify without refunding any funds. However, if your store loses the chargeback, then you will lose the chargeback fee and the funds from the order will also be returned to the cardholder.

If you have any other questions, don't hesitate to let me know.

[LilyOuyang]

Hi Elias,

Thank you for continuing to help. 

"After that, you can also cancel the order on Shopify without refunding any funds." I am a bit confused here. If we win the chargeback, it looks like the order becomes a normal order just like any other order. Then if we cancel the order without refunding any fund, don't we owe the customer money?

"However, if your store loses the chargeback, then you will lose the chargeback fee and the funds from the order will also be returned to the cardholder.” When the customer opened the chargeback, the financial institution already took the fund from our account (plus a chargeback fee). If we lose, do we get taken off another fund? (For example, when the customer open the chargeback, $3000 was already taken away from us. If we submit evidence for the chargeback but fail, do we get another $3000 taken away?)  Or, since the customer paid us previously, and the financial institution withdrew the money from us later, our only financial loss is the chargeback fee?

Also another question (sorry for so many!), will chargeback cases affect our shopify store in the long-term?

Lily

[Elias]

Hi, @LilyOuyang.

Thanks again for following up.

I'd recommend taking a look at our guide on Chargebacks and inquiries as it does go over the chargeback fee and chargeback process. If you win the chargeback, then the funds taken by the bank will be returned to you. However, since I'm not sure what the order status is, then it's likely you can archive or cancel the order in order to remove the order from the Open orders list. 

If your store loses the chargeback, then the funds that were taken back by the bank will be returned to the cardholder whether evidence was submitted or not. In short, the chargeback fee would be the only financial loss. 

There can be repercussion if your store gets too many chargebacks and you could lose the eligibility to use some payment gateways like Shopify Payments. This does somewhat tie back to our original conversation and why we'd recommend refunding and cancelling high-risk orders. 

If you have any other questions on this topic, don't hesitate to let me know.