High volume of high risk orders & chargebacks

Shopify Discussion
1

In the past week, I’ve seen a spike in high-risk orders at our Australian store, all using random ‘hotmail’ email addresses with random names and numbers.

Despite attempts, we can’t reach these customers or get order cancellations. Around 20% of these orders end up in chargebacks, which is time-consuming for us.

Has anyone else encountered this trend? I’m curious if there’s a rise in fraudulent activities affecting smaller businesses and would appreciate any insights.

2

Hello, @Callan-T

I can see your post and I give you some information to resolve your query, Please see the below information and follow step-by-step.

The use of random email addresses and the inability to reach customers are classic signs of fraudulent orders, which can lead to chargebacks and financial losses.

Here are some steps you can take to mitigate the risk of fraud:

  1. Enhance Verification Processes: Implement additional verification steps for orders, such as two-factor authentication or phone verification, especially for new customers or high-value transactions.
  2. Use Fraud Detection Tools: Employ fraud detection services that analyze order information and flag suspicious activity. These tools can help identify patterns that may indicate fraudulent behavior.
  3. Review and Update Policies: Regularly review your store’s policies and update them to include more stringent measures against fraud. Make sure your return and chargeback policies are clear and strict enough to deter fraudulent activities.
  4. Educate Your Team: Train your staff to recognize the signs of fraud and to take appropriate action when they suspect an order may be fraudulent.
  5. Monitor Transactions: Keep a close eye on transaction data for any anomalies or patterns that could indicate fraudulent activity.
  6. Network with Other Businesses: Reach out to other businesses in your industry to see if they are experiencing similar issues. Sharing information can help identify common threats and develop collective strategies to combat fraud.

It’s important to act swiftly to protect your business from these fraudulent activities. Implementing these measures can help reduce the risk of chargebacks and maintain the integrity of your transactions.

My suggestion is helpful for you. If you want more details please tell me.

3

This seems like a card tester, who is likely using a bot to spam credit cards. They use stolen credit card information and test to see which ones will be approved / accepted by merchants.

It is unfortunately a growing trend and aimed towards smaller businesses, since they typically do not have bot protection. I am happy to chat through it if helpful!

4

Thanks for your reply - I agree, it’s definitely bots, as the emails follow a similar pattern as well as the customer names. It’s super frustrating as sometimes these scam orders don’t get picked up as high or even medium risk, so we send out the product, they keep it, and then we get a chargeback weeks later which takes so long to dispute, and sometimes we even lose the dispute which is crazy.

We just continue to monitor and cancel any orders and hopefully this dies down sooner or later.

5

Fully understand that and have lived that point! There is always creating a decline/deny list based on any repeatable characteristics (i.e. name, email domains, addresses) that are a temporary fixes.

6

I am having the same issue in the US. The past two months a high percentage of orders have come through as high risk. I attempt to contact the customer and if that doesn’t work I cancel the orders. My biggest issue is that we use shopify collective and if I have to make a decision on it quickly since a delay could cause the partner to fulfill the order. What steps did you end up implementing?

7

Yeah, we also have to cancel orders within a timeframe to avoid our 3PL from sending out the order.

Unfortunately it’s still a very manual process at the moment.

We set up a Shopify flow to email us if any orders come through with a hotmail email (this was the only unique indicator as med/high risk orders weren’t accurate, they were also coming through via low risk orders). We then assess, and try to contact the customer. If no response, then we cancel the order. We’ve found that cancelling the order at the risk of the customer having to purchase again was worth it compared to chargebacks.

We hope they will stop spamming our store soon!

8

Here i understand your problem. You can try implementing following steps maybe that can help solve your issue.
Try Set payments to “manual” to review orders before capturing payment or fulfilling them. This prevents fulfillment delays through Shopify Collective.
Communicate with Shopify Collective partners to agree on a process for holding fulfillment on flagged orders until they are reviewed.

Use email/phone verification for flagged orders or require additional information (e.g., government ID for high-ticket items).

Block payments from high-risk regions or IPs and enable AVS (Address Verification System) and CVV verification for payments.

To prevent chargebacks, promptly refund orders you suspect are fraudulent after documenting your review process.

By implementing these steps, you can better manage high-risk orders while minimizing delays and chargebacks.

Best Regards;
James Gordan
compass mobile dollar tree

9

One way to reduce chargebacks is to offer alternative payment methods with stronger security, like Pay by Bank Transfer, which uses bank-level authentication and eliminates card fraud risks. This one may not support your region, but could help to start a research of the option.