Chargebacks are one of the biggest challenges Shopify stores can face. Not only do you lose money from the order, but often also the product that was fraudulently purchased. In this article, weāll take a look at how chargebacks work and how to effectively avoid them.
A chargeback is a process where a cardholder asks their bank for a refund on a transaction they consider unauthorized, disputed, or incorrect. This often happens when fraudsters use stolen credit or debit card detailsāfor example, obtained from illegal sources like the darknetāto make online purchases.
The actual cardholder then notices an unfamiliar charge on their statement and contacts the bank to dispute it. The bank typically refunds the money to the cardholder, while the online store loses not only the payment but often also the product itself. This mechanism serves as consumer protection but poses a serious financial risk for online merchants.
Hereās an example of how to set up Shopify Flow to prevent chargebacks.
In Settings > Payments, change the payment capture method to āManuallyā. This way, payments are authorized at the time of order but only captured after your review. If you detect a suspicious order, you can cancel it without any fees.
If you donāt want to review every order manually, you can automate the entire process with Shopify Flow completely free. Automation ensures that high-risk orders are automatically canceled while safe ones are approved without manual intervention. This reduces fraud risk and saves you time.
Get started with Shopify Flow automation: Download the template here.
Go directly to your Shopify Payments settings and add a unique four-digit code to your bank statement. Add your Business Name + Numeric Code in the Customer Billing Statement section of Shopify Payments. For example: SP * Appfleece 4376. Update this code regularly.
Fraudsters usually only have stolen credit card details but lack access to the bank account associated with the card. By asking the customer to verify a unique four-digit code from their bank statement, the real cardholder can easily provide it, while a fraudster cannot. This simple step helps you reliably detect fraudulent orders and protect your online store.
If a customer decides to initiate a chargeback despite all the above precautions, you will have strong evidence to resolve the dispute successfully. The bank will require the following information:
This evidence significantly increases your chances of successfully resolving a chargeback. Preventing chargebacks is crucial for the long-term stability of your online store and protection against fraud. By consistently using these methods, you can minimize the risk of fraudulent transactions and safeguard your business from unnecessary financial losses.
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