How to Handle High-Risk Orders on Shopify in 2024

I’ve dealt with a fair number of high-risk orders and chargebacks on Shopify and have prevented many instances of fraud. I want to help you do the same.

I’ll help you identify high-risk orders and let you know how to deal with them. There’s not much else to it.

Let’s protect your business from fraud.

Key Takeaways

• 95% of high-risk orders can become chargebacks.
• Identify high-risk orders through Shopify’s fraud analysis tool.
• Cancel and refund high-risk orders that you can’t verify.
• Contact the customer to verify their information.
  • Calling and speaking with them is, in my experience, a good idea. 
• High-risk orders can lead to fraudulent chargebacks if you fulfill them.

What’s a High-Risk Order on Shopify?

High-risk orders on Shopify are purchases that Shopify could deem as “suspicious” through their fraud-flagging software. For instance, you might have a high-risk order if an order has a different billing and shipping address.

If this were a fraudster, they might use the customer’s billing address and their own shipping address.

I can’t provide personal experience of how many high-orders are fraudulent.

However.

Some random business owners have claimed that almost 95% of high-risk orders resulted in chargebacks. Others have claimed that 20% of such orders end up as chargebacks [1].

Summary: High-risk orders are transactions that Shopify’s fraud-flagging software deemed suspicious.

How Do You Identify High-Risk Shopify Orders?

You’ll go into the order in question’s page and check the fraud analysis tool. Scroll down until you see the Fraud analysis card on the right side. From there, click on View full analysis.

You’ll see one of 3 ratings: low, medium, or high. If you’re subscribed to the Basic Shopify plan and don’t have Shopify Payments, you’ll just see indicators like this (and not the ratings):

Here’s what the different-colored dots mean:

• Red: Indicators usually seen on fraudulent orders.
• Green: Seen on legitimate orders.
• Gray: Provides additional information for you to consider.

If you have the higher-tier Shopify plans, they’ll use the following factors to determine whether a transaction is high-risk:

• Multiple failed purchase attempts.
• Multiple orders were made quickly after one another.
• Large purchases from new customers.

I’ll explain what to do with this information in a second. This section is here to show you how to identify it.

Summary: Identify high-risk orders by clicking on the order and looking at the fraud analysis tool.

What Do You Do When There’s a High-Risk Shopify Order?

Shopify will give you 3 options with a high-risk order:

• Verify it
• Cancel and refund the order

Shopify and I recommend refunding the order if you’re unsure whether it’s high-risk. Otherwise, you’ll waste a lot of time investigating something that could result in a chargeback.

If you have the extra time, and don’t see any obvious red flags, consider verifying the order.

To verify the order, you should first check the IP address.

Look out for these signals:

• Whether the IP address is close to where the customer claims to be.
• If the IP is a proxy or virtual private network (VPN).
• Is it from a web hosting company?

Are those good? Yes?

Now, call the customer. Ask them simple questions about the order and see how they respond. If they ignore you, don’t give you answers, or seem suspicious, it’s safer just to cancel and refund the order.

You can also use tools like 411.com to type in the phone number and see who it belongs to.

Then, check the billing and shipping addresses on Google Maps (if they’re different). See if they’re far away from each other. However. Sometimes customers will use virtual addresses — mail forwarding services in different cities. Thus, it can be hard to gauge this flag.

If the verified information you reviewed before this is suspicious, then reconsider.

The buyer might also be buying a gift for someone else. Thus, they’ll use different addresses. Amazon has flagged me for fraudulent transactions before because I was trying to have a gift shipped to my sister’s home.

And if that’s the case, check if multiple orders have different billing addresses, but the same shipping ones. 

Now you’ll need to decide whether to fulfill or cancel the order.

If you’ll fulfill it, ship it normally.

If you want to cancel it, go into your order page, click More actions, then click Cancel order. When canceling, select Fraudulent order as your reason for cancellation.

From there, you’ll refund the customer and the order will be over with.

Here’s a video explaining everything I said:

Do you think that you’ll be canceling a lot of high-risk orders?

Yes? Okay, now do you think you’ll want to deal with everything manually? If not, you’ll want to consider creating a flow trigger to automate this process.

Shopify Flow allows you to set a trigger that analyzes an order risk and automatically cancels it if the risk level is equivalent to “High.”

Here’s an example of what that cycle would look like:

Shopify has more information about creating flows in their Help Center.

Summary: If you have a high-risk order, investigate it then decide whether to cancel or fulfill.

How Do You Prevent High-Risk Orders on Shopify?

You can’t generally prevent fraudsters from visiting your website. You can ban IP addresses from countries where fraud is prevalent (e.g., Brazil and Pakistan) [2].

Or you can create customer blacklists.

To do this, you’d go into the risky customer’s information, go to the Tags section, then enter the tag “Blacklist.” You can set up automated reviews from there to automatically reject the customer’s purchase.

I recommend setting up a flow to set up a manual review, though. Because what if the authorized cardholder gets access back to their account and wants to make a purchase later on?

You could also opt for third-party Shopify apps to help identify and prevent high-risk orders. Such examples include:

• Signifyd
• ClearSale Fraud Protection
• NoFraud Fraud Protection

I can’t guarantee how well these tools will do. They also come with additional fees that go on top of your Shopify subscription and payment processing fees.

But if you’re wondering how much to spend on fraud protection, here’s a statistic. Small businesses spend around 6% of their annual revenue on fraud prevention [3]. Medium-sized companies spend around 11%.

Fraud prevention is important because it can lead to a loss of 5% of a businesses revenue each year. Moreover. It can result in customers losing trust in your business and the loss of access to particular payment processors.

For instance, if you have too many Shopify Payments chargebacks, Shopify will revoke your ability to use it. And without that processor, you can’t accept payments. And without that, you lose your ability to make money.

Other investments you could make toward preventing fraudulent orders include:

• Training your team to recognize signs of fraud.
• Regularly update policies to include more measures against fraud.
• Add two-factor authentication to accounts to prevent account takeovers.

I discuss more about fraud prevention in a separate guide. Check it out.

Summary: Prevent high-risk orders by blocking IP addresses from certain countries, using third-party tools, and educating staff.

Here’s Why You Should Consider Shopify Fraud Protection

Shopify Fraud Protect is a tool that helps online stores fight fraud. It looks at each sale to spot anything fishy going on. The system checks things like where the buyer is and what they've bought before. If something looks off, it warns the store owner right away.

This early heads-up lets sellers act fast to stop possible fraud. They can cancel orders or gather more info to prove the sale's legit.

If a chargeback happens, Shopify might cover the costs for eligible purchases. This includes the chargeback fee and the disputed amount.

The system also helps fight false claims by providing data to back up legit sales. It's always learning and getting better at spotting new fraud tricks.

Fraud Protect works for physical products bought through Shopify Payments or Shop Pay. Orders must be marked as "fulfilled" and have valid tracking info.

Only US merchants with Shopify Payments can use this feature. There are also some rules, like shipping orders within 10 days.

It doesn't cover digital goods or in-store pickups. The protection is just for true fraud chargebacks.

Summary: Shopify Fraud Protect guards against chargebacks, reimbursing eligible losses for US merchants.

Wrapping Up

If you encounter a high-risk transaction on Shopify, there’s a high chance it’s fraudulent. Thus, I recommend reviewing and likely refunding it. This will reduce the possibility of a chargeback.

Fraud isn’t the only type of chargeback, though. That’s why you need tools to help you prevent other types of chargebacks. We can help you by offering you chargeback prevention alerts. Try them for free today.

Sources

• [1] Shopify Community. High volume of risky orders
• [2] Sanctions Scanner. Top fraud countries
• [3] Snappt. Fraud cost