Spot Fraudulent Transactions in Your Dropshipping Store in 5 Ways

Trixia Barrientos

Trixia Barrientos

6 min read

Selling online exposes you to fraudulent credit card transactions. This is a common problem that all eCommerce businesses, dropshipping or not, faces every time they receive an order. As you will not be able to check the actual credit cards in an online transaction, validating the real customer can be very difficult. If you don’t have security measures in place, you’ll end up losing the sale on your products and incur additional losses to the chargebacks of the credit card companies.


Common eCommerce Frauds to Watch Out For

Friendly Fraud

This is a kind of fraud committed by real customers without malicious intent. This happens when they don’t recognize the merchant name printed in their receive their monthly credit card statement. They then call their card issuer to initiate a chargeback. Another scenario is when customers didn’t get their packages within the delivery time you stated in your shipping policy, they might assume that the packages are lost and file chargebacks to recover their money from you.

Chargeback Fraud

It is considered to be one of the simplest kinds of fraud that customers commit to getting free products from drop shippers. The customer will order products from you and provide a legitimate debit or credit card details on checkout. Once the package was shipped and the tracking number was emailed to him, the customer will file a chargeback with his bank with the reason that his identity was stolen. As a result, he will be able to recover his money and keep the items for himself. You’ll end up losing more money when this occurs because you’ll be paying chargeback fees as well.

Another way that the customer can accomplish chargeback fraud is to file a claim with the credit card issuer stating that the product was never received. Although this can be disputed after presenting the proof of shipping showing the product has been delivered to the customer’s mailing address, this can still hurt your merchant account. Funds are usually placed on hold during the chargeback review period.

Identity Theft

Identity theft is the most popular eCommerce fraud that many drop shippers is highly concerned for. Cybercriminals stole the confidential data of another person and use it to conduct fraudulent transactions online. These transactions are usually paid for by drop shippers when the credit card company of the true owner initiate a chargeback. You’ll not be able to get back the products and prosecute the criminal but you’ll have to pay back the card owner as well for the whole amount that was charged by the criminal to the credit card.

To help secure your dropshipping store from eCommerce frauds, learn how to spot fraudulent transactions by following this guide.


How to Determine Fraudulent Transactions in Your Dropshipping Store

You can protect your dropshipping business against fraudulent transactions by watching for the following red flags and taking essential steps of verifying them.

Order data is inconsistent.

Typos do happen with real customers but with fake ones, there will be inconsistent data that can be provided when they place orders. The city and zip code may not match up, the email and IP addresses don’t align, the billing address is different from the shipping address are just some inconsistencies that you have to verify first before fulfillment process.

There are unusually large orders of items especially same items.

Beware of large orders which are not typical of your customers. Scam artists will not hesitate to charge huge amounts for purchases because they want to get as many items as they can out of other people’s credit cards. If they want the shipping expedited that’s another red flag for you. Because scammers are always on the rush to get the products shipped to them before they got caught, they’d want everything expedited even if the shipping fee will cost higher than the total cost of the products. This is more of a red flag for you.

Order is placed from a different country and being ship to another country.

Although this might be possible when the product is being purchased as a gift by a real customer who wants to have it shipped directly to the address of the person the products is being bought for, this will be odd for large orders. Large orders for dropshipping products which are already available in the purchaser’s country yet they are ordered online with a shipping address of another country is a red flag.

The same customer has registered multiple declines.

A real customer can easily check his credit card during the initial decline and will be able to provide the correct data on the next payment attempt. Meanwhile, a fraud can commit several declines if he can’t guess the numbers right.

The same customer has placed multiple orders using different credit cards.

Many consumers have two or more credit cards so watch out for transactions made in a day or over a long period by the same customer but with different credit cards. The shipping address might be the same for all transactions or have the same billing address but being shipped to different addresses.

How to Verify the Validity of a Transaction

Once you encounter any of the red flags mentioned in this article, these are the steps you can take to check the validity of the suspicious transactions.

Verify the buyer’s IP address.

Use free tools to check the IP address with the help of free tools like What Is My IP and Info Sniper. Is it a proxy service IP address? Is the IP address located in an area different from where the customer claim to be when he made the transaction? Or, is it an IP address of a web hosting provider? If the answer is “Yes” to any of these questions, it’s time to contact the customer to ask for documents like captured images of the front and back of the credit or debit card, cardholder’s ID, and other proof of identification.

Check the customer’s address in Google Maps.

If the address provided is fake, Google Maps will show you a vacant lot or a package forwarding service.

Google search the provided phone number or email address.

Perform the search by placing the phone number or email address in between quotes (ex. “899-565-7213”)to come up with exact results. You can also lookup their social media pages to check if the info corresponds with the one provided by the customer including the phone number.

Contact the customer through the provided email address.

If the customer responds using the same email, it’s a good sign that it is now a fraudulent transaction. Scammers often use fake email addresses or if they do use real ones, they won’t have time to check all the email accounts that they use for their cybercriminal activities.

Call the phone number used by the customer’s when placing order.

If it’s an authentic phone number, the one who answers the phone can establish the identity of the customer. If it’s a disconnected phone number, verify validity using other means stated in this article.


Final Thoughts

There are more ways to spot fraudulent transactions in your dropshipping store and block them. Verification will take time, yes, but the risk is reduced for suspicious transactions. By putting up security measures, you’ll prevent the probability of a huge loss that eCommerce frauds can cause your dropshipping business. Contacting the customer is the best way to confirm if the transaction made with your store is valid or not. By doing so, you can verify if they have their credit cards with them by asking photos. In case they are shipping to a different address from their billing address, you can ask them photos of any government-issued identification cards that can establish their residency on their given shipping address. Some of them might be uncomfortable with this, but it’s something you have to do because your dropshipping business is at stake for fraud here.



Want to learn more?

Single Payment Gateway or Multiple Payment Gateways for a Dropshipping Business?

How to be Successful with Dropshipping

5 Ways to Add Value in Your Dropshipping Business



Trixia Barrientos

Trixia Barrientos

Leave a Comment