Customer fraud is a part of the eCommerce game and you may encounter it at some point in your dropshipping journey.
Scammers are prevalent in the eCommerce space. They prey on newbie dropshippers who lack the experience and knowledge to deal with their criminal activities. As this is a reality in running a dropshipping business, you must learn how to filter out potential frauds from real customers. You wouldn’t want to fall victim to their scamming tactics and lose more money than what you earn, do you? If the flagged orders turn out to be authentic transactions from real customers, you also don’t want to alienate them by canceling outright without first conducting an investigation.
When Shopify or a third-party fraud detector flagged a customer order as high-risk, you have to look into it thoroughly before deciding to fulfill or not. As the business owner, it is you who will make the final decision. Whichever course you take, it’s you who will face the consequences of your action.
Fraud detection is one aspect of your business that you have to research thoroughly. By learning what methods to use in fraud prevention, the countries to possibly commit fraud, and the measures you can take when fraud chargebacks happen, you’ll be able to mitigate the impact of fraud in your dropshipping business.
How do you identify a fraudulent order?
Once you learned which customer order was flagged as high-risk, immediately conduct an investigation. Look for the following red flags of fraud:
- There is inconsistency in order details.
- There are unusually large orders of items especially the same items.
- The order is placed from a different country and being ship to another country.
- The same customer has registered multiple declines.
- The same customer has placed multiple orders using different credit cards.
If you saw any of the red flags, the next step would be to verify the validity of the transaction. Follow all the steps we have provided in our previous article to thoroughly check the high-risk order you received. You can also ask the customer directly to provide a snapshot of the last 4 digits of their card numbers via email. If the customer possesses the credit card, he can quickly send you what you need. However, if the customer stops answering your emails and has blocked your messages, it’s better to give a full refund and move on. It doesn’t matter if it’s your first order or your biggest order ever received.
What are the dangers of fulfilling a high-risk order?
If you fulfill a flagged customer order and it turned out to be fraudulent, you’ll have to deal with disputes, claims, and chargebacks. The chargeback dispute resolution process can be lengthy and complicated. Most customers will go directly to their issuing bank to file a chargeback due to fraud.
When this happens, you’ll only find out about the dispute after the chargeback was filed. This makes the resolution more convoluted and expensive for you. On top of the full refund, you’ll also pay for the chargeback fee. Other losses you’ll absorb are the cost of goods, processing the order, shipping cost, and handling the chargeback. To recoup the loss, you’ll have to sell at least 5 times the same order amount in the soonest time possible.
How to increase your chances of winning a chargeback dispute?
The Shopify platform cannot capture all high-risk orders and some of them can get approved. When chargeback happens, refer to this Shopify post to know what documentation to include in your response to chargeback disputes. As 71% of chargeback losses can come from chargeback fraud and friendly fraud, you can still win the chargeback by submitting a response and attaching the necessary documents.
What countries are most likely to commit fraudulent transactions online?
You must watch out for countries that have been reported for high online frauds. From spam clicking Facebook ads to stealing bank information from online shoppers and using them to purchase products online, these countries are considered hotspots for attempted online fraud.
While it’s fine to dropship internationally, pay attention to where your orders are coming from. Take this into consideration when researching for countries and regions to focus your marketing efforts.
Scammers are everywhere and they will not cease trying to steal from you and your customers. By dropshipping products, you are exposing yourself to fraud attacks. When you know how to spot them and filter them out, you can reduce the risk of losses that may arise with fraudulent transactions. If chargeback disputes are filed for fraud reasons, respond immediately with the appropriate documentation. You might still lose with true fraud chargebacks but, you can increase your chances of winning chargeback fraud and friendly fraud.