Preventing fraudulent orders is an extremely important issue for any online store run on Shopify. Fraudulent orders are deceptive orders placed using stolen personal information or credit card details, and they can have a major impact on your finances and the credibility of your business. In this article, we'll take a detailed look at the characteristics of fraudulent orders on Shopify, how to detect them, and how to deal with them.
What Is a Fraudulent Order?
In an online store, a fraudulent order refers to a deceptive order placed by a malicious customer using stolen personal information or credit card details. This is a serious problem that poses significant financial risk and operational challenges for store owners.
Disadvantages of Fraudulent Orders on Shopify
When a fraudulent order occurs, a shop faces several serious consequences.
Chargebacks Occur
First, chargebacks result in financial loss.
The credit card company reverses the fraudulently used transaction, and the store must not only refund the sale but also bear additional fees.
We go into more detail about chargebacks in the blog article below. Please take a look.
Shipped Items Are Not Returned
In addition, items shipped for a fraudulent order are not returned, resulting in a double loss of both inventory and shipping costs.
How to Determine Whether an Order on Shopify Is Fraudulent
Use Shopify's Fraud Analysis
Shopify has a feature that automatically performs fraud analysis. For orders with a high fraud risk, a red warning mark is displayed on the order list screen, and the fraud analysis section on the order detail screen also indicates a high fraud risk.
Check the IP Address
If you suspect an order might be fraudulent, checking the IP address is one way to find out.
By investigating the IP address, which represents an address on the internet, you can determine the approximate location of the person who placed the order. For example, if the shipping address on the order and the location determined from the IP address differ significantly (such as being in different countries), the order may be fraudulent, and you should contact the customer to confirm that it is not.
You can easily look up an IP address using a free service such as "WhatIsMyIp.com."
Search for the Email Address on a Search Engine
One easy way to check for fraudulent orders is to search the email address used in the order on a search engine like Google.
If that email address has been used fraudulently in the past, you may find warnings or reports about it posted online.
If an order seems suspicious, we recommend starting by searching the email address. An internet search is a convenient way to easily check for signs of fraud.
Check the Cardholder's Name Against the Customer's Name
Another quick way to check for a fraudulent order is to compare the cardholder's name on the credit card with the customer's name.
On Shopify's order detail screen, you can check both the credit card holder's name and the customer's name. If the names don't match (especially if the last names don't match), the order may be fraudulent, and you should contact the customer to confirm that it is not.
Call the Customer Directly
Finally, calling the customer directly is an effective way to confirm a fraudulent order. This is a useful final check once the methods described above have raised suspicion of fraud.
Since many fraudulent orders use fictitious phone numbers, being unable to reach the customer by phone is a good reason to suspect fraud.
There are also cases where someone else's phone number is being used fraudulently, so if the call does connect, ask the customer a few simple questions about the order and check their response.
For example, try confirming the following information:
- The phone number used when placing the order
- Email address
- Shipping address
- The customer's name
- The number of items purchased
It's important to check whether the customer can answer these questions smoothly.
3 Ways to Detect Fraudulent Orders on Shopify
Create a Workflow in Flow to Detect Fraudulent Orders
By using Shopify Flow, you can send an email notification whenever an order is flagged as high-risk by fraud analysis. Setting up a workflow to notify you of fraudulent orders reduces the risk of accidentally overlooking one.
Use a Shopify App for Fraud Prevention
Next is the method of using a Shopify app.
Using a Shopify app can help you detect fraudulent orders that Shopify's built-in fraud analysis feature can't catch, and can also help block users who repeatedly attempt fraudulent orders.
You can find Shopify apps for fraud prevention using the link below.
Fraud Prevention Apps | Shopify App Store
Signs You Should Suspect an Order Is Fraudulent on Shopify
The Order Amount Is Unusually High
If an order far exceeds your typical order value, it may be fraudulent.
People who commit fraud are always aware of the risk of being caught if discovered.
To make that risk worthwhile, they tend to target expensive items in a single order.
While an increase in sales is welcome, it's important to check carefully, since a fraudulent order can result in a significant loss.
The Billing Address and Shipping Address Don't Match
If the customer's billing address and shipping address don't match, the order may be fraudulent.
Be especially cautious if the two addresses are far apart, such as a shipping address in Japan and a billing address in the United States.
That said, there can be legitimate reasons for different addresses, such as gift orders, so if you're unsure, we recommend confirming with the customer.
The Billing Name and the Credit Card Holder's Name Don't Match
If the billing name on the order and the name of the credit card holder don't match, fraud may be involved.
Suspicion of fraud is especially strong when the names are different.
That said, there are cases where someone purchases on behalf of a family member or friend, so it's important to review such cases carefully and confirm with the customer if needed.
How to Respond to a Fraudulent Order on Shopify
Cancel the Order
If you determine an order is fraudulent, we recommend canceling the transaction promptly.
However, please note that only orders in the following two states can be canceled:
- Payment has not yet been collected
- Payment has been collected, but the item has not yet been shipped
If you cancel an order for which payment has already been collected, a refund will be processed.
Please also refer to the blog article below for how to cancel an order on Shopify.
How to Automatically Cancel High-Risk Orders with Flow
By using Shopify Flow, you can automatically cancel high-risk orders and restock the inventory from the canceled order.
Shopify Flow has a template with a workflow that does exactly this, so you can set it up easily just by using the template.
Setup
(1) Open the Shopify Flow app
(2) Click "Browse templates"
(3) Enter "Cancel high-risk orders" in the search box
(4) Click the template named "Cancel high-risk orders"
(5) The template workflow is displayed, so click "Install"
(6) Select the "Send internal email" action in the installed workflow
(7) Enter the notification recipient for when a high-risk order is canceled into "Email Address"
(8) Click "Turn on workflow"
How to Test High-Risk Order Detection
As mentioned above, if you've set up an action to trigger on high-risk orders using Shopify Flow or similar tools, you may want to confirm that the action you set up actually works.
In this section, we'll introduce a way to intentionally trigger a high-risk order.
Testing Method
(1) Add an item to the cart and proceed to checkout
(2) Enter "shopify.test.high@shopify.com" as the contact
(3) Select Shopify Payments as the payment method and place the order
Additional Notes
- The order total must be greater than 0
- The Shopify Payments gateway must be set to test mode
- You can test orders of different risk levels using the following contact addresses:
- shopify.test.high@shopify.com: high-risk order
- shopify.test.medium@shopify.com: medium-risk order
- shopify.test.low@shopify.com: low-risk order
Conclusion
Preventing fraudulent orders is an unavoidable and important challenge in running an online store. Shopify comes with a built-in fraud analysis feature, and by also making use of Shopify Flow and third-party apps, you can build an even stronger line of defense.
Here are the key points for effective countermeasures:
- Don't miss the signs of a fraudulent order (checking IP addresses, searching email addresses, comparing the cardholder's name with the customer's name, etc.)
- Actively confirm suspicious orders (such as by phone)
- Build an automated monitoring system using Shopify Flow
- Introduce a specialized app if needed
By combining these measures appropriately, you can minimize the risk of fraudulent orders. That said, it's also important to strike a good balance so that you don't over-restrict legitimate orders.
