If you’re a Shopify owner, you may meet the situation: Shopify fraud and chargebacks. This problem gives lots of merchants a headache. Because when you fall under these circumstances, you’ll have to address the buyer in time. If not, your sales and revenue can be lost and decrease. Besides, your image of the brand will be damaged. Therefore, the topic we want to tell you about is how to deal with Shopify fraud and chargebacks and minimize these risks.
To start with, what is a Shopify Fraud Chargeback?
A chargeback is a reversal of a payment charge to a user’s debit or credit card by a bank. These happen when a customer contests the product charges on their credit card or account statements.
This payment is taken from the seller’s already-credited account and returned to the cardholder’s account once the chargeback procedure is finished. Since refunded payments don’t come from the business directly, this is different from refunds. Chargebacks totally sidestep the merchant.
The seller is held accountable when customers ask their banks to refund money for goods they’ve purchased.
Then, we will answer the question: Why do Shopify fraud occur?
Uncertain or Delayed Delivery: Customers may submit chargeback requests if the delivery of the goods they wanted is uncertain or delayed. Provide realistic timetables and take into account unforeseen delays while providing delivery dates.
Billing Error: Make sure your payment processors are operating properly by checking them frequently. A customer may request a chargeback if they pay for something and discover double billing or a greater payment than expected.
Fraud: Some customers are just plain dishonest. They place good orders with the goal of challenging payment charges. A consumer might, for instance, buy the same product in various colors or patterns, choose the one that fits them best, and then submit chargeback requests for the rest.
The payment wasn’t authorized: This consumer alleges they did not make the purchase and the payment was not authorized. If their card information was taken, this might occur. Another possibility is that they simply forgot, or someone else in the house—like their spouse, for instance—might have used their card without their consent.
The item wasn’t what was expected: The client complains that the product differs from the image that appears on your Shopify store.
Product was damaged during shipping: The buyer alleges their item came damaged because the product was destroyed during transit. There’s a good possibility you’ll receive a couple of these chargebacks if you choose the cheapest shipping option, especially if it’s from China.
Incorrect item sent The client alleges they were given the incorrect order. Errors can occur when sending numerous orders. Before it becomes a chargeback situation, this dispute is frequently very simple to resolve.
As a result, We give you some effects of Shopify Fraud Chargebacks on your business
You might experience any of the following if your store continues to get chargebacks:
Less Sales: You will experience a decline in sales and revenue if customers frequently submit chargebacks against your store. They are less inclined to make another purchase from you. Even worse, they’ll tell twice as many people about their bad experience with your store than they will about their positive one.
Lower Brand Credibility: Due to payment processors’ sensitivity to user concerns, a high number of chargebacks poses a danger. You might be put on a high-risk merchant list or banned, which would restrict your ability to accept payments online.
Business Loss: Merchants’ long-term sustainability may be at jeopardy if payment processors forbid them from accepting payments through their channels.
Are Chargebacks Expensive?
A single chargeback fee might range from $20 to $100, and the Shopify seller is responsible for paying it. And this is only one of the several additional costs that a single chargeback product may have. Entrepreneurs risk losing more money than they wish due to lots of chargebacks . As you can see, you can’t just create a product out of thin air and sell it to a buyer. For every single product, you also have to pay for the production, management, transportation, operation, credit card chargeback insurance, marketing, security, taxes, and other optional costs.
Therefore, you forfeit the product’s net payment if it is challenged. Additionally, every penny you spent on creating, marketing, selling, and shipping that product was for naught.
Banks and retailers typically follow a percentage breakdown of all associated costs for any given goods.
There is an example of how a typical percentage breakdown of all such costs based on the product’s net worth may look:
- Exchange value: Fixed
- Fee for transactions: 3.5 to 4 percent
- Cost of the product: 20%
- Insurance against chargebacks: Variable depending on bank policies
- Operational and administrative expenses: around 20%
- 30 to 40% of marketing expenses
- Chargeback fee: Fixed or ranging from 15% to 40% of the transactional value Combining these costs can practically double or triple the chargeback costs for a single product’s true cost!
Next, we’ll suggest for you some tips: How to handle high-risk orders
Traffic originated via a search engine: Fraudulent orders typically result from search traffic that was brought about by a search engine. It’s doubtful that scammers will see your Facebook advertising and decide that this is a chance to exploit the card information they obtained. Instead, people are looking for particular goods.
The shipping address is far from the billing or IP address: This one will be flagged for you by Shopify’s excellent built-in fraud detection system. It could simply be someone sending a present to a friend abroad, but it could also be a sign that credit card information has been stolen.
Modifications to the shipping address: Many fraudsters are aware of the payment gateways’ safeguards. Thus, they frequently use similar billing and shipping addresses when starting an order. After that, get in touch with customer service to modify the mailing address and avoid the pop-up warning.
Phone orders: Scammers frequently aim at retailers who accept phone orders because doing so eliminates the need for them to disclose personal information like their IP address and enables them to persuade businesses to fill their purchases without using the customary security measures.
Orders that are unusually large: If your store’s AOV is $45 and an unexpected consumer orders $4,500 from you, there’s a good likelihood the order isn’t real. Large orders are possible and frequently occur, but if the ‘client’ hasn’t gotten in touch with you before, approach with care.
Multiple tries to finish the order: Of course, none of these warning signs automatically indicate that an order is false. Customers frequently make mistakes. For instance, we have all input wrong card information. However, if you see one of these peculiar traits (or if you notice more than one), you shouldn’t carry on as usual.
Last but not least, How do you avoid Shopify Fraud on your Shopify store?
Trust Shopify’s Fraud Analysis Tool
Fortunately, Shopify has a very effective fraud detection system built in that rates orders as low, medium, or high risk. A caution icon is next to the order number on the Orders page if an order has a medium or high risk.
You may view Shopify’s comprehensive set of indicators from the Shopify backend. While red signs advise you should look into a certain area, green indicators let you know nothing is wrong. Generally speaking, any order that carries a medium, high, or especially high level of risk must be thoroughly investigated. It could be best to simply cancel any high-risk orders to be cautious and instead focus your attention on researching medium-risk orders.
Follow-up with The Customer
When you’ve identified a possible suspect order, the next step is to contact the customer and get a copy of the following:
- A government-issued ID, such as a passport or driver’s license.
- An image of the payment card that was used to place the order (details can be hidden except for the name and last four digits)
- A picture of a newspaper, magazine, or similar publication should go along with it as proof of the date.
If the order was placed by a real consumer, these requests could seem a touch excessive. But if you want to ultimately succeed in a chargeback, you must have these three files.
So, make an effort to be as friendly as you can when informing the client of the circumstances. Inform them of the reason your order was deemed unsafe. Genuine customers will typically be able to relate to your anxiety.
Before obtaining the full set of papers for an order that poses only a moderate amount of risk, you can use the following two less direct approaches to ascertain the order’s authenticity:
- Dial the customer’s supplied number: Scammers frequently utilize phony phone numbers. If the consumer picks up, use your best judgment and ask them a few straightforward questions, such as what they ordered and where they reside.
- Google the used email address: This can demonstrate whether the email address has been used in prior fraud attempts or reveal potential relevant social media profiles.
Automate Order Verification
You can get away with following up with consumers personally if you only have one or two high-risk orders per week. But as soon as you start selling in bulk, the amount of time spent examining each dangerous order will quickly become quite costly. Automation can help in this situation.
You can apply this as a trigger to launch automations that save you a ton of manual work because Shopify can typically detect high-risk orders. ReConvert can be application, for instance, to display a unique thank-you page message to clients who have placed high-risk orders. Customers can get an explanation of what went wrong and learn what more checks must be necessary . Utilizing automated SMS and email messages is an additional strategy. Make sure to inform customers once again that their order won’t be ready for dispatch unless they abide by your security requirements.
Last but not least, if you have Shopify Plus, you can utilize Shopify Flow to set up an automation that would automatically cancel orders from clients who haven’t gotten back to you within a specified time range.
Order Tracking
Customers who shop at your store should know a summary of what’s happening with their packages. You can do this by giving them access to the workflow of their orders, from packaging to shipment to delivery.
Poorly handled order processes reveal the merchant’s operational inefficiencies. Customers must therefore inquire about the shipping, packaging, and delivery times of their products.
Customers may submit chargeback requests if the status of an order is unclear. To reduce customer concern, you should be open and proactive about order progress and implement workflows.
Safe Shipment
Shopify makes sure that your products have prompt delivery to prevent exposing them to external dangers. Moreover, they are in protective packaging, and transported by reputable courier services that offer evidence of delivery to the right mailing address.
Provide Proactive Customer Service
One of the simplest methods to win over your customers is to provide proactive customer assistance. Prior to a customer complaining about a problem, you can get in touch with them to see whether they need assistance. This refers to proactive customer care. Customers will feel more at ease talking to you before filing chargebacks about their worries and dissatisfactions if you do this.
You need to develop efficient strategies to offer proactive customer service. Because 90% of customers say that customer service determines whether they’ll continue to do business with a company. These solutions may be automation, such as help desk software, knowledge bases, chatbots, and customer support tickets.
Incorporate Chargeback Protection Apps
Software for chargeback prevention and customer blackmail Shopify offers its merchant community two very useful features: suspicious order identification and Shopify. This aids in the investigation of fraud, verifies the legitimacy of orders, and looks for clients who feel engagement in questionable behavior or have given inaccurate information. By eliminating probable suspicions of fraudulent chargeback filers, the features make it simple to act quickly when something happens.
Maintain PCI Compliance
Another element that aids retailers in avoiding chargeback issues is PCI compliance. PCI compliance is a way to make sure your card details and the details of your customers’ cards are valid. You can prevent both legal and fraudulent chargebacks by following this standard.
Use Protective Packaging For Shipping Products
If a customer’s order is in danger before it reaches them, they can pursue chargebacks. Your bottom line will be in risk if your shipments experience damage in delivery. This is due to the possibility of chargebacks from customers . Besides, you need cover the expense of shipping the item to the buyer and back from them. Loss arises from this. Use safe, damage-resistant materials while packing and delivering customer orders to stay ahead of this. This is really important, especially if you’re shipping or moving delicate products. You can also apply for shipping insurance for your shipped goods if you want to be extra safe.
Deliver Products Promptly
Kount discovered that delivery delays account for 45% of chargebacks. Deliveries on time indicate dependability, and they not only boost customer happiness but also reduce the risk of chargebacks. Food and drink, prescription drugs, chemical samples, and medical products all have expiration dates. Another justification for delivering goods by the deadlines is this. Deliver on time, and let your customers know right away if there are any delays.
State Your Store Policies
You must explicitly state your store policies to your customers in order to create expectations and reduce Shopify fraud. To protect your customers from unpleasant shocks, you should make all of your policies. It includes those relating to security, shipping, and returns—publicly available.
You should reate a page that highlights your policies and incorporate your return policy in every customer touchpoint. It helps ensure the visibility and effectiveness of your return/refund policy. Your home page, product pages, product descriptions, and checkout pages should all take into consideration among these touchpoints.
You must establish shop policies to safeguard your Shopify business from chargeback disputes, even though doing so may deter some customers who are uncomfortable with your standards. Additionally, being clear about your policies can help you attract the correct clients for your company, sparing you the hassles of returns and chargebacks.
Optimize Your Product Descriptions
Chargebacks by customers has significantly influence on your product descriptions. Avoid omitting details or giving inaccurate descriptions that can prompt buyers to request chargebacks. Always make sure your descriptions are true and current. You will simply end up paying for manipulating product descriptions to increase traffic and sales. It’s easy to help online buyers understand what they’re buying by providing accurate information and thorough visuals.
Conclusion
Every Shopify merchant needs to develop the ability to manage high-risk orders. Risky orders can result in numerous chargebacks, harm to your bottom line, if they are left unchecked. You may lessen the likelihood of a Shopify chargeback while still obtaining the greatest percentage of valid orders by implementing an effective risk-mitigation mechanism. Therefore, starting to control your Shopify fraud and chargebacks is easier with our Shopify development service. Contact us to know more information.
