Sourcing: Reddit Author: TheEcomZone
A Guide to Prevent Fraudulent Chargebacks for Fast Dropshipping Success with Shopify Payments [2FA]
Running a dropshipping business is all about providing fast shipping and finding the right fast dropshipping supplier. However, one of the biggest challenges you might face as a dropshipper is dealing with fraudulent chargebacks. This guide is designed to help you, whether you’re focused on fast delivery dropshipping suppliers or working to streamline your dropshipping with fast shipping.
I've discovered a simple yet effective way to prevent scammers from exploiting your dropshipping store with fraudulent chargebacks. This guide is for anyone using Shopify Payments to manage transactions and wants to keep their business secure.
Setup Guide for Chargeback Prevention in Dropshipping
Here’s how you can set up a method that could save your dropshipping business thousands in chargebacks:
- Open your Shopify Dashboard.
- Click on ‘Settings.’
- Click on ‘Payments.’
- Click on ‘Manage’ for Shopify Payments.
- Scroll down until you find the 'Customer Billing Statement' section.
- Add your ‘Company Name’ + 'Number Code' in the Customer Statement Descriptor (e.g., 'SP * Ecom Zone 8426').
- Update this code periodically to keep it effective.
Implementing this strategy is crucial, especially if you're working with fast shipping dropshippers. Ensuring smooth transactions with your fast dropshipping supplier can enhance customer trust and reduce the risk of disputes.
How It Works to Secure Your Fast Dropshipping Business
For medium to high-risk orders, it’s essential to have direct communication with your customers to prevent fraudulent chargebacks. For example, you can use the following message when contacting customers:
Dear customer,
Regarding your recent order __
I trust this message finds you in good health and safety.
Regrettably, our system has identified a security concern in relation to your order due to an inability to authenticate your billing address against the registered address associated with your card. Kindly verify the 4-digit code (initiating with X) located on your bank statement after 'COMPANY NAME.' If you require assistance in locating this information, please do not hesitate to inform us, and we will gladly provide guidance.
Additionally, we would greatly appreciate your confirmation of your shipping address to ensure the secure delivery of your order.
We hope you understand the necessity of this direct communication, as ensuring the safety and confidence of all our valued customers at COMPANY NAME is of paramount importance to us. Please be aware that we will withhold the processing of your order until we receive your confirmation.
Most fraudulent attempts involve using stolen credit card details. By requiring the customer to confirm this code, you can deter scammers who don’t have access to the cardholder's bank account. This step is crucial for protecting your dropshipping store, especially when collaborating with fast delivery dropshipping suppliers that prioritize speed in their service.
If the customer cannot verify the code even after you guide them, it’s best to cancel the order. This measure adds an extra layer of protection for dropshippers aiming for fast shipping for dropshipping.
Use Cases for Fast Dropshipping Chargeback Prevention
This chargeback prevention strategy works well in these scenarios:
- Medium-risk orders
- High-risk orders
- Multiple payment attempts
- Mismatched billing and shipping addresses
- Shipping to a different address with another name
- High-value orders
- Orders made through high-risk internet proxies
- Cardholder’s name does not match the shipping address
These guidelines are essential if you're working with fast dropshipping suppliers. Fast shipping can be a double-edged sword, attracting both legitimate customers and potential fraud attempts. Protect your operations by staying proactive and prepared.
Conclusion
As a dropshipper, focusing on speed and reliability with a fast dropshipping supplier is key to maintaining customer satisfaction. However, without proper fraud prevention strategies in place, your business can be vulnerable to chargebacks and scams. This guide provides you with the tools you need to secure your Shopify store, enabling you to continue offering fast shipping dropshippers services while protecting your profits and reputation.
By following these chargeback prevention tips, you’ll enhance your ability to provide dropshipping with fast shipping confidently and efficiently, making your business a trustworthy option for customers looking for quick deliveries.
Comments:
C1
OP
A massive thank you to the mods for pinning my guide, I hope this method helps anyone with a Shopify store. If you have any questions just let me know and I will be happy to help.
Thanks for sharing this with the community! If you don't mind, we would like to add this guide to our documentation/site and share it with our user community as well.
OP
Thank you for reaching out and asking me.
I want to help as many people as possible, so I am more than happy for you to share this guide with your community.
It would be great if you could mention my channel (The Ecom Zone) and a link to my video, which is pinned on this post. Would love to see the final result, so do send me a link.
C2
Holy shit, this just might be the first guide against fraudulent chargebacks that actually works 👀
OP
RIGHT? It's so simple! Been using it for more than over a year now.
Do you use any apps for additional fraud protection or chargeback protection in addition to this process, or have you found this process to eliminate any need for additional apps?
I'm brand new to Shopify, so I don't know what to expect in terms of fraud or how frequent it is, so I'm trying to learn about it before I go live. I saw that there is a service called Shopify Protect, but I'm not eligible for it yet (not sure if that is because I am new, or because I'm in Canada, or some other reason).
Do you have a rough idea of what percentage of your orders are flagged and require these extra steps?
OP
Nope, don't use any additional apps due to their costs. This process will help you identify almost all scammers. It helps in many situations to verify the customer is genuine, so make sure to add this code cause you may need it one day. I would say I usually ask a customer for a code within every 30 orders.
I found this Chargeflow app that only costs you 25% when chargeback disputes go in your favor: https://apps.shopify.com/chargeflow
https://apps.shopify.com/beacon this one also seems cheap at $0.03/order
is that cost not affordable to you? I'm just curious. I'm not affiliated with these apps.
OP
Why pay someone for something that can be solved for free and within minutes? App costs can stack up if you're not careful. It's not about how much you make but also about how much unnecessary costs you can cut.
C3
This is genuis! One more tip is to enable manual payment capture in Settings > Payments > Payment Capture > Manual. This way, if you're dealing with medium and high risk orders, you can cancel and refund them without incurring Shopify Payments fees. You can also set up Shopify Flow to automatically capture payments if risk is low.
OP
I thought about the manual capture setting, do you use it yourself and how many orders do you process a day?
I like how Shopify Flow automatically captures low risk as I didn't like the fact I had to capture all orders if I was the manually capture orders. However, their reviews aren't great and I also don't trust these apps as they basically track everything going on with your store.
I'm not a Shopify store owner but I worked at the Support Team for 2 years so I know my ways. This was my top recommendation when merchants complain about Shopify Payment fees when refunding med or high risk orders. Shopify Flow is free for all plans now, I think, or Shopify and higher and it's powerful. The negative reviews are probably from users who are not creating proper workflows as they do require some technical knowledge. The workflow templates in Flow are a great place to start at.
It works wonderfully for me. Totally a cheat code for someone who are lazy to manual capture payment like me.
Would the method that u/TheEcomZone described here work with manual payment capture though? If the payment hasn’t even gone through how does the buyer verify the four digit code in their card account?
C4
This is genius! Thanks for posting!
This is something that Shopify (and other platforms) should consider adopting with dynamic Number Codes, meaning that they're changed for each order, and the number code for that transaction is provided in the Order Info or the Fraud Analysis, for really true 2FA.
If there is a feature request to Shopify, I would definitely up-vote and provide a comment!
OP
You're welcome! Do check out my video for more details.
Yeah, I was actually thinking of making an app similar to what you described but maybe not as complex as having an unique code for every order
C5
finally someone figured out a simple way to solve this! thanks so much!
OP
You're welcome, glad I was able to help another person out 😎
C6
Quick question -- where does the medium/high-risk orders tagging comes from? Is that a thing shopify provides? Thanks!
OP
This is something Shopify provides.
C7
This has been gold for my store! Scammers beware!
OP
Glad this is helping you! I hope everyone using Shopify payments set this up
C8
Really useful! Thanks for sharing!
OP
Glad you found it useful bro 😎 hope it helps
C9
Oh! I remember someone telling me this last week, maybe it was you.
Thank you! I won't be needing it though - left Shopify as fast as I got my chargebacks. SMH.
OP
Daym that's unfortunate 😭😭
C10
Thank you for this great tip!
If I set my payments to be captured manually will the customer still receive a charge on there statement for me to be able to verify the last 4 digits?
OP
Unfortunately, I've never actually used the 'Manual Capture' setting so I'm not too sure if my method would work with that switched on. Maybe you can try it for us and let us know the outcome?+
I just emailed the customer, ill keep you posted and edit this comment if they were able to verify it!
OP
Awesome and if anyone is wondering, this is an example of what you can send to your customer:
-------------------------------------------------------------------------------------------
Dear customer,
In reference to your recent order _______
I trust this message finds you in good health and safety.
Regrettably, our system has identified a security concern in relation to your order due to an inability to authenticate your billing address against the registered address associated with your card. Kindly verify the 4-digit code (initiating with X) located on your bank statement after 'COMPANY NAME.' If you require assistance in locating this information, please do not hesitate to inform us, and we will gladly provide guidance.
Additionally, we would greatly appreciate your confirmation of your shipping address to ensure the secure delivery of your order.
We hope you understand the necessity of this direct communication, as ensuring the safety and confidence of all our valued customers at COMPANY NAME is of paramount importance to us. Please be aware that we will withhold the processing of your order until we receive your confirmation.
With kind regards,
NAME
C11
Perfect and simple idea!
BTW, it can be attacked if someone makes two purchases: one is from the stolen card, and one is from a legitimate card. It's better to generate a hash from card details for each purchase and then take the last four figures. Yes, it's easier to implement with automatization.
OP
Yup, it's simple and 99% effective.
They could do, but why would I email the legitimate order for the 4 digit code if it's legitimate.
C12
This is brilliant.. was looking into other payment providers but this sounds like the best FREE option out there!
OP
Yeah it's pretty much scam proof. Glad my method was able to help! Happy holidays 🎉
C13
Is this such a huge issue with Shopify? Are there no safeguards against these scams if we use Shopify as the payment processor?
OP
They have their fraud analysis feature, but it sucks. There are apps but you have to pay. My method is pretty much the only method out there that is free and does the job 99% of the time. I've yet to receive a chargeback on verified customers, so it's 100% for me right now.
What are you major issues with it. I think it does a very good job at flagging potential issues that I would otherwise need to look at manually. You must find it reasonably decent otherwise your tip would be useless. It flags the potential issues and then you apply your own methodology. What more would you want from it?
I run a 7 figure ecommerce store and see maybe $500 in chargebacks a year, almost all of them from situations where their fraud analysis caught it but we shipped the product anyway. The fraud analysis feature is actually quite good.
C14
Does this work for orders that have already been placed? I found this tip AFTER receiving a medium-risk warning on an order.
OP
Sadly not, it's a code that appears on the bank statement when they place an order.
C15
It seems Shopify has a built-in alert. I recently had a big order red-flagged. I wrote to the customer and asked if they had a different credit card. The response from them was defensive and pushy. Glad I canceled the order.
OP
Red flag, high risk, medium risk, it's great that Shopify has this alert, but you can't fully verify the customer unless you ask them for a photo of the gov id, bank card, bank statements, etc. Which I try to avoid in the past before figuring out this trick.
My method will allow you to verify any customer, any time, and any scenario. Some orders may not even be flagged as medium or high risk, but you may need to verify the customer.
C16
It's not a bad idea but requires effort from the 99% of the people who are not scammers to make an effort which is not so good. It also delays shipments and some of your customers don't check emails at all or might miss it.
While that's true, what's the alternative? Ignore the risk assessment and ship it anyway? At the scale of my store, that's exactly what I do because most of the time the orders are legitimate even when flagged and the added cost of adding a manual element would cost me money.
However, if I was running a smaller shop with high average order values I would gladly spend the time to manually verify the orders. Taking a huge loss at small scale must be gut wrenching.
C17
Hi, thank you for this guide! I have had issues with fraudulent orders but as they have increased lately more have slipped through the cracks and I just received a notification from Shopify saying that I am "currently not eligible to sell on Shop app because I have a chargeback rate of more than 1% in the last six months". To provide context, around 35-40% of my revenue came from Shop app, so I am kind of forced to find a way to turn this back on and become eligible again. Does anyone know when Shopify will review my chargeback rate again?
OP
That sucks, I never even knew that was a thing. I think it's best to contact their support team directly as I am unsure about this.
C18
This is very smart, thanks for sharing.
Do you know if this works with captured payments, that only process when the order is fulfilled?
OP
It works wonders. I don't think it works with manually captured payments unfortunately.
Thanks! Yeah I saw your comments about the manual payments, which is unfortunate. But this is such a simple and helpful way to verify risky orders otherwise.
I prefer to use the new capture & process-upon-fulfillment, as it prevents payment processing fees for possible refunds.
Good to know this method works even at the payment capture stage.
C19
Mans tripping
You will win if you provide all evidence Hell nah.
Merchants win 1 in 8 chargebacks Because the stupid credit card companies side with the client not merchant regardless Unless u have ridiculously crazy good evidence but even then they sometimes Cba to even look at it
So no u probably won’t win chargebacks Especially credit cards Debit cards maybe easier to win as a merchant
C20
How do you know what number code to put?
OP
You just think of your own 4 digit code. If you put 6789, the customer will see 6789 in the bank charge. They sometimes may not see it due to the banking app they use but this rarely happens.
C21
is this still up2date? cant find the option.
OP
Yup just checked and the setting is still there. Do you have Shopify payments and have you seen my video for the tutorial?
C22
I don't see this option available. I am on the basic account. Do I need a higher tier account?
OP
Hmm have you followed my YouTube tutorial to see if you have it? I'm not sure if this is a plan related thing as it's Shopify Payments. Pretty sure everyone has the features within it no matter the plan.
I don't see a youtube link in your post.
OP
I can't plug it into the post. Should be top comment by the mod team.
Alternatively, go to my channel and search 'Prevent Fraud'
I watched the video today because yesterday I got a $380 order that was high risk. I have added a 4 digit code as the video suggested however I do not know how to make it show on the customer's bank statement since it's after the purchase has been made. Do I have any other options?
OP
Sadly there's nothing you can do with that order. However, you can make a $1 product and ask the customer to place another order with that $1 product to verify the code and then you can refund the $1 once verified.
C23
Is it possible that the fraudulent customer actually has access to the bank statements? I received an order from a customer that I'm 99% sure is a scammer (flagged as "high risk" by Shopify), but he was able to show me the bank statement with the number code. :/
OP
If a scammer has access to the customers bank account then that's kinda insane. Usually scammers do not have access to bank accounts and even if they did they wouldn't order something online, and then access the account without knowing that you will email them to ask for the 4 digit code. They would have also just taken all the money out if they had access.
I've shipped high risk orders out after verifying customers with the 4 digit code and have yet to receive a chargeback.
What is the fraud analysis. Can you copy and paste it here.
Sure. This customer actually ordered twice (the first time I cancelled immediately, second time I waited until he replied and then refunded). The first order was "high risk", and second order was "medium risk".
First order:
Indicators
Negative
Characteristics of this order are similar to fraudulent orders observed in the past
Negative
Shipping address is 7720 miles from location of IP address
Negative
The billing address is listed as United States, but the order was placed from India
Negative
A high risk internet connection (web proxy) was used to place the order
Neutral
Location of IP address used to place the order is New Delhi, National Capital Territory of Delhi
Positive
Card Verification Value (CVV) is correct
Positive
Billing street address matches credit card's registered address
Positive
Billing address ZIP or postal code matches the credit card's registered address
Positive
There was 1 payment attempt
Positive
Payment was made with 1 credit card
Additional information
Positive
This order was placed from IP address 91.237.105.90
Second order:
Indicators
Negative
Shipping address is 327 miles from location of IP address
Neutral
Some characteristics of this order are similar to fraudulent orders observed in the past
Neutral
Location of IP address used to place the order is Anaheim, California, United States
Positive
Card Verification Value (CVV) is correct
Positive
Billing street address matches credit card's registered address
Positive
Billing address ZIP or postal code matches the credit card's registered address
Positive
There was 1 payment attempt
Positive
Payment was made with 1 credit card
Positive
Billing country matches the country from which the order was placed
Positive
The IP address used to place the order isn't a high risk internet connection (web proxy)
Additional information
Positive
This order was placed from IP address 68.95.124.60
OP
Oh looks like he just used a VPN, happens often for me. Shopify recommends to refund but this is where my 2fa verification tells me I don't need to and I proceed with the order. Totally up to you though but the chances of this person being a scammer is unlikely. Any scammer who has access to the bank account is definitely emptying the bank account not buying things online.
Billing details match as well so not only does he have access he also knows the address of the card.
Hmm, interesting. Thanks for looking into this for me! I've been dealing with a TON of fraudulent orders / chargebacks lately, so automatically assumed this one was the same as soon as I saw "high risk". I'm going to allow the customer to re-place the order if he wants and fulfill it this time. Appreciate the advice!!
OP
Hmmm that's weird, I only get 1 risky customer every 50 orders I'd say. Are you targeting risky countries?
C24
Thank you, thank you 🙏🏻 This seems like an excellent idea! I have just added 4 numbers to my shopify customer description. Such a good idea! Thank you for sharing.
C25
Does this also work for a order that was made before I put that code in??
OP
Sadly not that's why I want everyone to set this up as soon as they open their store on Shopify
I’ve got a medium risk order and wanted to try that+
OP
Unfortunately, for this order it won't be able to help you. Just check the fraud analysis and name on the card used.
Everything seems fine with the card name and address. It was just about the IP address that it was far away. My latest post shows the analysis
OP
AHH cud be that the customer used a VPN or ordering whilst away from home. Can email customer for clarification
C26
Thanks bro . short question: is this about credit card payments only?
OP
Shopify payments only any debit or credit card works unless they go through Shop Pay then it may not show the 4 digit code but they usually send a screenshot of the transaction details.
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A Guide to Prevent Fraudulent Chargebacks with Shopify Payments [2FA]
byu/TheEcomZone inshopify