Proactively Managing Fraudulent Returns, Managing Payment Scams & Potential Scammers On Shopify

Shopify Discussion

Topic summary

A merchant is experiencing multiple fraud tactics impacting their business:

Common fraud methods reported:

  • Photoshopped bank transfer screenshots (workers hand over items without verifying actual payment)
  • Wrong/damaged items returned in exchanges
  • Used or emptied products being returned
  • Incomplete or counterfeit cash on COD orders
  • Expired products swapped in for refunds
  • False “item not received” claims
  • Abuse of first-time buyer/referral discounts across multiple accounts

Proposed solution:
The merchant wants to develop a Shopify plugin that creates a shared fraud database across stores. Key features would include:

  • Flagging repeat offenders based on return data from all participating stores
  • Real-time alerts when flagged customers place orders
  • Risk levels (yellow to red flags)
  • Customizable merchant controls

Technical concern:
A developer indicated this may not be possible through Shopify’s API and would require a separate system.

Open questions:
The merchant is seeking community input on similar experiences, prevention strategies, and effective Shopify apps or policies for fraud mitigation. The discussion remains open for responses.

Summarized with AI on November 1. AI used: claude-sonnet-4-5-20250929.
1

Hi Shopify Community,

We’ve been facing various fraud tactics that has severely impacted our business, including:

  1. Photoshopped Bank Transfer Screenshots – Customers claim payment but never actually transfer funds. The laborers due to their uneducated background, often hand over the items without checking for actual money transfers. This is despite an approval process in place.
  2. Returning Wrong Products in Exchanges – Sending back a different or damaged item instead of the original.
  3. Returning Used or Emptied Products – Customers use most of the product and then return it.
  4. Less Cash or Fake Banknotes on COD Orders – Delivery riders receive incomplete or counterfeit payments.
  5. Exploiting Expiry Dates – Swapping in expired products from elsewhere to claim a refund or exchange.
  6. False “Item Not Received” Claims – Customers falsely report missing deliveries to get a refund while keeping the product.
  7. Misusing Discounts & Vouchers – Repeatedly using first-time buyer or referral discounts with different accounts.

We were thinking of developing a Shopify plugin to help stores flag repeat offenders based on shared return data from all shopify stores that add this as an application. The application will flag repeat offenders based on shared return data.

Here’s how it will work:

:small_blue_diamond: Merchant Uploads Fraudulent Customer Data – Store owners can input details like Name, Mobile Number, and Address of customers who have scammed them. It can be as simple as Action > Report Order Along With A Reason.
:small_blue_diamond: Real-Time Fraud Alerts – If a flagged customer places an order at another shopify store using the plugin, the store will get an instant warning before processing the order.
:small_blue_diamond: Community-Powered Fraud Prevention – This plugin will act as a shared database across multiple Shopify stores, making it harder for repeat offenders to target different sellers.
:small_blue_diamond: Customizable Risk Flags – Merchants can decide what level of warning they want and whether to auto-block high-risk customers.

The application can flag customers between yellow (be careful) to red (outright scam).

One of our developers told us howver, this is not possible via Shopify API and requires an altogether new system. Is this true?

Also, I’d love to hear from other merchants:

  • Have you encountered similar fraud tactics?
  • How do you prevent or mitigate these issues?
  • What Shopify apps, policies, or security measures have worked for you?

Looking forward to your insights! :rocket: