How to Protect Your Shopify Store from Fraud


Running an online store on Shopify is an exciting venture, but it also comes with the responsibility of safeguarding your business against fraud. With the rise of online transactions, fraudsters have become more sophisticated, making it essential for Shopify store owners to be proactive in protecting their businesses and customers.

Ecommerce fraud has increased by 18% from 2019, which means that the business owners of online stores are now dealing with occasional cases of fraudulent chargeback, as well as fake refund disputes. What is even more important, in 2021 there was a staggering $605 million worth of charge backs around the world. Do you have a plan to prevent these chargebacks?

Let’s learn about some of the most common frauds and effective strategies to secure your Shopify store and maintain the trust of your customers.

Common Frauds in Shopify Stores

As the popularity of Shopify stores continues to rise, so does the risk of encountering fraudulent activities. Being aware of the common types of fraud that target Shopify stores can help you better protect your business and customers. Let’s explore some of the most prevalent frauds in Shopify stores:

1. Chargeback Fraud

Chargeback fraud occurs when a customer makes a purchase using a credit card and then disputes the charge with their card issuer, claiming that the transaction was unauthorized or that they did not receive the goods or services. In some cases, the customer may receive a refund while still retaining the product, causing financial loss to the store owner.

2. Identity Theft

Identity theft is a significant concern for e-commerce businesses, including Shopify stores. Fraudsters may use stolen personal information, such as credit card details or social security numbers, to make fraudulent purchases. This can lead to financial losses, damaged reputation, and potential legal consequences for the affected store.

3. Phishing and Spoofing

Phishing and spoofing scams aim to trick store owners or customers into revealing sensitive information, such as login credentials or financial details. Fraudsters may send deceptive emails or create fake websites that resemble legitimate platforms like Shopify, leading users to unknowingly disclose their information. These scams can result in unauthorized access to accounts and potential fraud.

4. Bot Attacks

Bots are automated programs that fraudsters deploy to carry out malicious activities. In Shopify stores, bots can be used to place fraudulent orders, scrape content, or launch distributed denial-of-service (DDoS) attacks. Bot attacks can disrupt store operations, compromise customer data, and negatively impact the overall shopping experience.

Preventing and Mitigating Fraud

Here are some best practices to mitigate fraud and prevent unscrupulous people from taking advantage of your Shopify store.

Implement Secure Payment Gateways

Choosing a reputable and secure payment gateway is crucial for protecting your Shopify store from fraudulent transactions. Shopify offers a range of trusted payment gateways, such as PayPal, Stripe, and Shopify Payments, that have built-in fraud detection mechanisms. These gateways employ advanced encryption technologies and fraud prevention tools to identify and mitigate fraudulent activities.

Enable Two-Factor Authentication

Strengthening the security of your Shopify store begins with securing your login credentials. Enable two-factor authentication (2FA) for your store’s admin account. This additional layer of security requires users to provide a second form of verification, such as a unique code sent to their mobile device, along with their regular login credentials.

By implementing 2FA, you significantly reduce the risk of unauthorized access to your store.

Monitor and Analyze Order Patterns

Fraudsters often exhibit certain patterns that can be detected through careful monitoring and analysis of order data. Keep an eye out for suspicious activities, such as an unusually high number of orders from the same IP address, large orders from new customers, or multiple orders with different billing and shipping addresses.

Make use of the fraud detection apps and tools available on the Shopify App Store to automate this process and receive alerts for potential fraudulent orders.

Verify Suspicious Orders

When you come across an order that appears suspicious, take the time to verify the details before fulfilling it. Contact the customer directly using the contact information provided, and confirm the order and payment details. Look for red flags, such as inconsistencies in the customer’s responses, generic email addresses, or requests for expedited shipping. Trust your instincts and proceed with caution to avoid falling victim to fraudulent orders.

Employ Address Verification System (AVS)

An Address Verification System (AVS) is a security measure that verifies the billing address provided by the customer during checkout with the address associated with the credit card used for payment. By enabling AVS, you can identify potential discrepancies and reduce the risk of shipping orders to fraudulent addresses. Shopify supports AVS, and you can configure it in your payment gateway settings.

Use CAPTCHA and Bot Protection

To prevent automated bots from placing fraudulent orders or conducting malicious activities on your store, implement CAPTCHA (Completely Automated Public Turing test to tell Computers and Humans Apart) during the checkout process. CAPTCHA presents a challenge or puzzle that requires human interaction to solve, thereby deterring bots.

Also consider utilizing bot protection tools or apps specifically designed to identify and block malicious bots.

Stay Up-to-Date with Security Patches

Shopify regularly releases security patches and updates to address vulnerabilities and protect its platform from emerging threats. Ensure that your store is always running on the latest version of Shopify and promptly install any updates provided by the platform. Keeping your store’s software up-to-date minimizes the risk of exploitation by cybercriminals.

Educate Your Staff

If you have a team working on your Shopify store, it is essential to educate them about fraud prevention measures and best practices. Train your staff to recognize potential red flags, such as suspicious customer behavior, irregular payment patterns, or unusual order requests. Establish clear protocols for handling potentially fraudulent orders and ensure that all staff members are aware of the procedures to follow.

Bottom Line

Protecting your Shopify store from fraud is a continuous effort in maintaining the security and integrity of your business. By implementing the strategies mentioned above, you can significantly reduce the risk of falling victim to fraudulent activities and safeguard your customers’ trust.

Remember to regularly review and update your security measures as new threats and vulnerabilities emerge. Stay informed about the latest trends in online fraud and explore additional security options that can enhance your store’s protection. Use the resources available in the Shopify App Store, such as fraud detection apps, security plugins, and risk assessment tools, to fortify your defenses.

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