It is never a pleasant experience to open your Shopify admin only to discover there has been a chargeback due to a potentially fraudulent order. Chargebacks are a part of doing business online. However, Shopify does offer a Risk Analysis tool that can help merchants minimize the risks by flagging orders that look as though they could be fraudulent.
Shopify customers on the Basic plan and who are not using Shopify Payments have access to what is known as the basic risk summary. The enhanced risk analysis is available to all other users.
You can tell an order has been flagged as potentially fraudulent simply by going to the ‘Orders’ page in the Shopify admin. Any order with a yellow triangle and exclamation point next to it has been flagged. It is then up to you to further investigate before you decide whether to fill the order or not.
If you are not taking advantage of Shopify’s risk analysis, here are three reasons you should reconsider:
1. Verification of Addresses
When a customer places an online order with a credit card, the Shopify system compares the numerical information entered with that on record with the credit card issuer. This information includes street addresses and postal codes. Records that do not match could indicate the credit card was stolen. The credit card thief would not necessarily have the home address of his or her victim, leading to mismatched addresses.
Delivery addresses are also checked against postal records to make sure they are valid. This makes it harder for thieves to order merchandise and have it sent to post office boxes or other unverifiable locations.
2. Verification of Credit Cards
The point of having the CVV (card verification value) number on the back of your credit card is to authenticate that card before a charge. Once again, Shopify’s risk analysis tool compares the CVV number entered by the customer against the issuer’s records. If the numbers do not match, there is a good chance the card was stolen. At the very least, the card may not be in the possession of its rightful owner at the time of sale if the numbers don’t match.
3. IP Address Verification
Last but not least is IP address verification. Every computer online at any given time has a unique IP address with an approximate location attached. The Shopify system can verify that the IP address linked to a given transaction is in the same general area as the customer allegedly making the purchase.
If you were to get a risk analysis warning about an IP address, it could mean that the address in question has already been flagged for fraudulent activity or the customer who allegedly placed the order is not in the same general location as the postal address entered.
Shopify’s risk analysis tool is designed to protect vendors from chargebacks related to fraudulent transactions. If you are not using the tool yourself, you really should be. There is no good reason for not using it.