Shopify Fraud PreventionWhat’s Better Than Getting Reimbursed for a “Fraud” Chargeback? Getting No Chargebacks At All.
Shopify Fraud Prevention: Tips & Tactics for Merchants
If you receive a fraud-related dispute, then Shopify Protect may cover you for the cost of the order.
Two issues with that, though. First, Shopify Protect only covers purchases under very specific circumstances. Second is the fact that the chargeback still happened in the first place. Your chargeback ratio still takes a hit, even though you got your money back.
The takeaway here is that relying on Shopify Protect in isolation still leaves you vulnerable to fraud. Therefore, Shopify fraud prevention best practices are the only way to protect your business long term.
Shopify Chargebacks
If you sell on Shopify, you’ll want to know how chargebacks work on the platform ahead of time. Don’t wait until you receive a Shopify dispute to find out. In this Knowledge Guide, we’ll run down everything you need to know about Shopify chargebacks, from statistics and benchmarks to response and prevention strategies.
Built-In Shopify Fraud Prevention Tools
Shopify offers built-in fraud detection tools including AVS checks, CVV validation, IP address validation, device fingerprinting, and velocity limits. They also use Shopify Network Intelligence to identify known scammers.
Shopify itself has a bunch of on-platform tools to help you prevent fraud, most of which help harden the checkout flow against fraud. Examples include:
What is Shopify Flow?
Shopify Flow is an end-to-end workflow automation app for Shopify sellers. This tool plays an important role in Shopify fraud management.
In late 2022, Shopify launched Shopify Flow, a workflow automation app that enabled sellers to automate a variety of processes, ranging from order and return processing to email responses and fraud prevention flows.
For example, sellers using Shopify Flow can configure a process to auto-capture payment for low-risk orders, while triggering manual review for high-risk transactions. Doing so allows merchants to siphon off suspicious orders into a review queue while minimizing friction for legitimate, repeat buyers.
Shopify doesn’t keep its built-in fraud prevention tools static; they’re constantly innovating. For example, the platform’s Fraud Filter app was sunsetted on January 31, 2025, requiring users who wanted to maintain their anti-fraud workflows to migrate to Shopify Flow. However, fraud analysis indicators remain in Shopify admin via the Fraud Control app.
Don’t Rely on One Tool to Stop Fraud.
You need a multilayer strategy to address diverse threat sources.
Request a Demo
Shopify Fraud Indicators
You can view fraud indicators associated with an order in the Order risk section of your order page in Shopify admin. Each fraud indicator will be accompanied with a description and a colored dot to the left, which will display one of three colors:
Green: low risk; Yellow: Medium risk; Red: High risk
As for the descriptions themselves, here are some common responses and what they mean:
“AVS check unavailable”
The card issuer’s system did not return a response to the address verification request. This is sometimes triggered when buyers use cards issued by international or smaller banks. While not inherently fraudulent, it’s a yellow flag that may warrant manual review.
“Billing address doesn’t match shipping address”
The shipping address entered by the buyer doesn’t match the billing address on file with the card issuer. This may happen if a buyer has recently moved, or if they are purchasing a gift. However, it could also be an indicator of fraud, since bad actors will order goods for themselves using stolen cards registered to unrelated billing addresses.
“IP address location doesn’t match shipping address”
A buyer’s location, as signaled by their device, is far from their shipping address. This could mean that the buyer is using a proxy or VPN to hide their true location, or that a remote hacker is using a stolen card to ship items to a different country.
“Multiple failed payment attempts”
This indicator shows up when a customer’s card was repeatedly declined. This is a fairly clear sign of fraud, since bad actors may repeatedly guess CVVs or cycle through a list of stolen card numbers until one works.
Preventing Shopify Chargebacks With “Fraud” Reason Codes
Using Shopify’s built-in verification tools, and watching for known fraud red flags, will help you block most fraud attempts.
True third-party (or “criminal”) fraud, meaning the unauthorized use of stolen payment credentials, is mostly preventable.
Combining Shopify’s built-in verification tools with some third-party offerings can help you filter out the most obvious attacks. Automated measures include the use of all the built-in Shopify fraud prevention tools outlined above, plus 3-D Secure validation.
3-D Secure 2.0 is a frictionless security protocol that hardens the checkout process against fraud. The protocol works in the background to analyze over 100 data points for signs of transaction risk without adding any friction to the buying process for most customers. As a bonus, merchants who use 3-D Secure 2.0 can shift the liability for fraud-related chargebacks to the card issuer.
You’ll also want to look out for suspicious behavioral patterns, like:
Unusually Large Orders From First-Time Buyers
Fraudsters who get their hands on a working stolen card know they’re running against the clock, so they’re not going to bother “warming up” accounts first. Thus, a new customer who immediately purchases high-ticket items or buys in bulk without any prior relationship is statistically riskier than a returning buyer.
Expedited Shipping Requests for High-Value Orders
Because bad actors know they need to act before the actual cardholder notices the theft, they may pay extra for overnight or express shipping. Think about it: a real customer is probably going to be somewhat price-sensitive. If the buyer is indifferent to high shipping costs, it may be because they’re not be spending their own money.
Shipments to Freight Forwarders
While gifts are common, orders shipping to freight forwarders or reshippers should raise immediate red flags. That’s because these services are the tool of choice for international fraudsters who want to route stolen goods out of the country.
IP and Billing Address Mismatches
A customer claiming to live in the US but placing an order from an IP address in Africa is a major discrepancy. Unless there’s a clear explanation, this geographical mismatch is more likely than not a sign of international fraud.
Multiple Failed Attempts
If you see a successful order that was preceded by several declined attempts in a row, you could be witnessing a card testing attack. Even if you notice a successful payment at the end, it’s probably not legit. Rather, it’s just the first stolen card on the scammer’s list that worked.
Requests to Change Shipping Address Post-Purchase
A classic bait-and-switch tactic involves placing a legitimate-looking order to pass fraud filters, and then contacting the seller’s support team to modify the shipping address. In general, approach any post-purchase address changes with skepticism and caution.
Rejecting orders too aggressively can actually hurt your business more than fraud does. In fact, turning away good customers by declining their legitimate orders costs businesses as much as 75 times more revenue than actual fraud itself.
If you encounter an order that raises any of these red flags, pause fulfillment immediately — but don't panic. Instead, consider these best practices:
- Conduct Manual Reviews: Many “high-risk” transactions are false positives, so it’s better to manually review most flagged orders instead of auto-canceling every flagged order.
- Hold Off on Shipping: Consider delaying fulfillment by 24–48 hours. In the meantime, you can reach out to the buyer via email or phone to confirm order details.
- Verify the Customer’s Identity: Request a photo of the buyer’s credit card with only the last 4 digits visible, or a government ID that matches the name entered by the buyer at checkout.
- Cancel When Appropriate: When in doubt, provide a refund. If the customer fails to verify their identity or the email bounces, cancel the order and issue a full refund immediately to avoid a chargeback.
