7 Shopify Fraud Prevention Apps to Easily Secure Your Store

With over 1.75 million merchants in 175 different countries selling on Shopify, the ecommerce platform has grown exponentially since its IPO in 2015, which raised a total of $1.27 billion.

Yet, as the platform continues to grow in stature, so does the risk of cybercriminals attacking merchants with unauthorized transactions that often result in a chargeback request. Unfortunately, Shopify fraud is rampant.

Today, we’ll look into the different types of Shopify fraud of concern to merchants and the different tools available to help your business. 

List of Shopify Fraud Prevention Apps

• SEON: Complete End-to-End Prevention via API
• Signifyd: Chargeback Guarantee and AI
• ClearSale: Automated Decision Making
• Kount: Shopping Trend Analysis and Chargeback Guarantee
• Sift: Automatic Transaction Reviews
• NoFraud: High-Volume Chargeback Guarantee
• FraudLabs Pro: SMS Verification and Custom Rulesets

What Is Shopify Fraud?

Shopify merchants face many types of fraud that target any typical ecommerce business, the core components being a risk of use of stolen card details, account takeovers (ATO), and the ever-dreaded issue of chargebacks.

A chargeback takes place whenever a customer disputes a transaction directly with their issuing bank. The issuing bank will then work with any evidence before reassigning the chargeback expense to the merchant via the card network.

Chargebacks cost ecommerce businesses upwards of $40bn a year and their typical reasons include the below:

• the item was not received by the customer 
• double-billing
• incorrect amount charged
• unrecognized purchases
• customer dissatisfaction with the item(s)
• malicious fraud (ATO, stolen goods) 
• friendly fraud

Merchants that use Shopify Payments might see the chargeback amounts subtracted from their next payout instead of being debited from merchant account funds, in addition to the loss of inventory.

It’s worth noting that Shopify is Level 1 PCI DSS compliant, which means the company already follows a level of protection through standards that include: 

• maintaining a vulnerability management program
• actively finding and patching any vulnerabilities
• monitoring and testing its network regularly
• strong access control measures
• an information security policy
• protecting cardholder data

The opportunity for fraud also extends from merchant to customer, as fake stores on the platform are not an uncommon sight.

In 2021, using a research pool of 124,044 stores, Fakespot estimated that almost 21% of Shopify stores are in some form fraudulent or dangerous for consumers, according to Business Insider.

7 Shopify Fraud Prevention App Reviews

As mentioned, there is the opportunity for Shopify merchants to add easy-to-use free upgrades as well as enterprise-grade fraud prevention products to their arsenal, to maximize revenue. 

Below are some of the best options available on the market today. 

SEON – Complete End-to-End Fraud Prevention via API

October 2021 saw the launch of SEON’s own Shopify fraud detection app, which uses all of our best features to help merchants fortify their business with enterprise-grade software.

The robust scoring engine helps spot potential bad orders automatically as well as uncover fraud patterns through flexible rules. Machine learning algorithms will continue to offer recommendations to improve these rulesets, based on your business requirements. 

SEON also scans 50+ digital and social signals in real-time to help verify that the person placing the order is in fact who they say they are.

SEON Pros

• Automation: Enterprise-grade solution redesigned for Shopify merchants that automatically approves transactions and increases your conversion rate. You can auto-cancel and refund transactions without any input needed.
• Unique real-time data: Live email profiling acts as further verification on top of the machine learning engine to create better profiles of your customers.
• Approve more transactions: SEON does not use a chargeback guarantee model, which means merchants will avoid false positives and accept more transactions deemed “risky” by other providers – without risking security.

SEON Cons

• Separate products: At present, SEON’s Shopify app packs most of the end-to-end product’s capabilities but not all of them.

SEON Pricing

• Pay-per-API system from $299 per month. A 14-day trial is available as well, with no commitment or contract.

Choose SEON If:

• You want to stop fraud without incurring false positives, so you can complete more sales.

Signifyd – Chargeback Guarantee and AI

Founded by two former PayPal employees, Signifyd is an ecommerce-centric fraud prevention platform that looks to tackle the majority of the heavy lifting for merchants when it comes to anti-fraud. The firm is heavily focused on ecommerce, working with reputable brands such as Samsung, Philips, and Omega.

The platform focuses heavily on automation – a competitive advantage if your business handles masses of transactions – and offers chargeback guarantees against Shopify fraud on approved orders that turn out to be fraudulent and item-not-received (INR) claims.

Signifyd Pros

• Peace of mind: Signifyd automatically reviews the order and informs you whether to ship it or not, with its own manual review process offering more insight into orders, without input from the merchant until necessary approval.
• Third party data: Signifyd’s machine learning algorithm leverages data from third parties to approve good orders faster than merchants who might typically review manually.
• Will cover chargebacks: It takes the liability off merchants’ shoulders through chargeback guarantee.

Signifyd Cons

• Potential for more false positives: The chargeback guarantee model incentivizes any vendor that offers it to err on the side of caution – which means fewer transactions are approved. Read more about the differences between micro fee models and chargeback guarantees.

Signifyd Pricing

• Contact the sales team directly for a quote.

Choose Signifyd If:

• You prefer a set-and-forget solution to your fraud concerns.

ClearSale – Automated Decision Making

ClearSale helps over 6,000 merchants with managing their risk and fraud levels across more than 160 countries. The company has offices in Brazil, the US, and Mexico. 

ClearSale combines machine learning technology with a large in-house analyst team who will review transactions that have been flagged by the system, without the Shopify merchant’s input. 

They offer both a chargeback guarantee and a proprietary protection scheme to balance business KPIs with what they deliver. This means that if targets are not met, your business will receive a discount. 

ClearSale Pros

• Protection schemes: Chargeback guarantee and protection schemes are both in place to protect merchants against Shopify fraud. 
• Consultancy services: An in-house team combined with automated decision making lets merchants focus on their core business rather than worrying about risk and fraud.
• Extra intel available: ClearSale also offers analysis on aspects beyond fraud such as a Shopify store’s most profitable products, most valued customers, and target market analysis.

ClearSale Cons

• America-focused: Because this company primarily targets the Latin American and North American markets, they are not as likely to be quick to address new EU legislation and other markets’ particularities as fast as some other vendors.

ClearSale Pricing

• N/A. Contact sales. 

Choose ClearSale If:

• You value automation and want to receive discounts if it works against your KPIs and chargeback ratio.

Kount – Shopping Trend Analysis and Chargeback Guarantee

Kount is a US-headquartered fraud prevention company with an AI network that is built on risk signals from over 32 billion annual interactions globally. Similar to ClearSale, the company has built its tech with ecommerce merchants in mind. 

The Kount Command product is available for Shopify merchants, automating the process of the approval or decline of orders based on the merchant’s requirements.

Kount Pros

• Customization: Kount allows merchants to customize their ruleset to their requirements, with analysis from both macro trends and individual transactions.
• Real-time data: The company calculates risk through a fraud scoring system based on data from 32 billion annual interactions and in real-time.
• Chargeback guarantee: Kount offers a chargeback guarantee to help automate risk decisioning and lift the burden of Shopify fraud off merchants.

Kount Cons

• Chargeback guarantee: Admittedly, chargeback guarantee is both a pro and a con, as it is likely to block those suspicious-but-not-quite-certain customers, thus resulting in false positives.

Kount Pricing

• N/A. Contact sales. 

Choose Kount If:

• You run a US-based or Latin America-based store and would appreciate a chargeback guarantee model.

Sift – Automatic Transaction Reviews

Another enterprise-grade fraud detection solution is Sift, which works with companies including Wayfair, StitchFix, Harry’s, and Everlane.

All customer data, from account creation to login and the order itself, is automatically sent to Sift, which then analyzes the data provided with its machine learning technology and insight from its own proprietary global data networks.

With added insights from Sift’s global data network, the company’s machine learning models deliver accurate risk assessments with the aim of enabling Shopify merchants to confidently block and accept orders or route cases to manual review based on their individual business processes and priorities.

Sift Pros

• Artificial intelligence: On offer is blackbox machine learning with the availability of custom models to automate transaction reviews. You can also manually review orders if needed. 
• Global merchant network: Real-time risk scoring based on over 16,000 signals and a global data network of 34,000+ merchants.
• Dedicated dispute management: Sift offers a specific Dispute Management module that focuses on the issue of chargebacks specifically. It looks to both prevent and win disputes by automatically selecting evidence based on industry and the chargeback reason code.

Sift Cons

• Opaque decisioning: Because the AI employed by Sift is blackbox, you will not know the exact reasons why someone has been blocked, and thus will not be able to catch false positives as easily, or train it to avoid them.

Sift Pricing

• No pricing information is available online for Sift.

Choose Sift If:

• You’re an established Shopify merchant who also needs a convenient platform to manage disputes.

NoFraud – High-Volume Chargeback Guarantee

NoFraud is a Shopify-centric company that offers a fully automated product that is managed in-house, with no input from the merchants. 

Transactions are sent to NoFraud once an order has been placed and then they provide a basic actionable response with no risk score – just a pass or fail metric from NoFraud’s side. 

Users are able to manually review orders that are deemed a “failure” but can also automatically cancel the order – which could lead to an increase in false positives. 

NoFraud Pros

• Flexible reviews: Flexible review process including payment method preferences with merchant managed settings, red and green lists.
• Chargeback guarantee – with a caveat: NoFraud does offer a chargeback guarantee solution to cover any Shopify fraud costs. However, a minimum volume of 50K in monthly sales is required for eligibility.
• Welcome freebies: There are no setup fees or long-term contracts. Free technical support available.

NoFraud Cons

• False positives: Some reviewers have mentioned more false positives than they were expecting, though we were not able to test this ourselves.

NoFraud Pricing

• You pay only for orders NoFraud approves.

Choose NoFraud If:

• You want a solution built with Shopify in mind by a vendor who manages it for you.

FraudLabs Pro – SMS Verification and Custom Rulesets

FraudLabs Pro supports merchants in identifying high-risk transactions and reducing chargeback with its free-to-use fraud screening process.

The company automatically flags any orders deemed high risk as well as automatically emails the customer if the order was canceled. This creates a type of due diligence but also gives the customer opportunity to walk away from the business, which is not ideal. 

Their fraud prevention module also supports SMS verification add-on to authenticate the purchaser’s identity for the merchants.

FraudLabs Pro Pros

• Customizable: Create your own custom ruleset using more than 50 different metrics based on metrics on IP geolocation, proxy, email validity, credit card data, transaction velocity, and more.
• Automated workflows: Automate both high-risk order cancellation and notifications to users.
• 2FA built-in: The software offers SMS verification for orders as part of a MFA approach.

FraudLabs Pro Cons

• Difficult to set up: Some customers report difficulty in initial setup and a steeper than expected learning curve.

FraudLabs Pro Pricing

• Tiered-based pricing ranges from 500 queries per month for free and up to 500,000 queries per month for $1,249.95.

Choose FraudLabs If:

• You want fraud prevention with 2FA integration built-in.

What Is the Shopify Fraud Protect App?

Shopify’s Fraud Protect solution looks to automate order screening and chargeback disputes through classing transactions as either “protected” or “not protected”.

They also offer a fraud analysis solution for basic plan merchants that enables you to see certain indicators and plug in third-party tools, some of which are free. Those on a higher plan can also see automated fraud detection recommendations.

For merchants with lower levels of transactions and operating in markets with less fraudulent activity, this product is perfect for your business as it offers a clear insight into your orders as well as provides actionable results; however, adding an extra layer of defense can ultimately help maximize revenue opportunities.

Only Shopify Payments users can access the Fraud Protect solution. Online orders processed through PayPal or another point of sale solution cannot be tracked with this product.

How Does It Work?

The Fraud Protect solution operates similarly to a chargeback guarantee. The merchant pays a fee on each protected order and Shopify covers any costs/reimbursements as well as handles the chargeback process. 

It can detect obvious signs of fraud such as proxy usage, large numbers of attempts, and disparities between billing and shipping addresses. However, more complex cases of Shopify fraud can easily be missed due to its lack of specialization. 

Those transactions that are deemed “unprotected” and assessed as being somewhat suspicious will have to undergo manual review for inspection, with no real support on why the transaction may be illegitimate.

As well as this, chargeback guarantee models can often harm your revenue because there’s an obvious conflict of interest: They want to keep the levels of risk low but the merchants themselves want to safely sell to as many customers as possible. High false-positive rates can lead to further reputational and customer loyalty issues also. 

Shopify Fraud Protect’s chargeback guarantee model is fine for most merchants but involves a much lower risk appetite – meaning what you may save in chargeback costs, you might be losing in revenue lost to good users who were unfairly deemed too risky!

Tips to Protect Against Shopify Chargebacks

In order to protect yourself against Shopify chargebacks, there are certain measures that merchants can take even before any intervention from anti-fraud products. These safeguards include:

• strong communication with customers about policies, potential delivery dates/delays
• quick responses to complaints
• suspicious orders investigated before anything is processed
• ensuring photos and descriptions are accurate
• making billing statements clear and easily recognizable
• use of e-receipts

FAQ

Sources in this article

• Shopify: Shopify Announces Fourth-Quarter and Full-Year 2020 Financial Results
• Business Insider: About a fifth of Shopify sellers analyzed by Fakespot warrant a ‘caution’ or ‘warning’ label
• Fortune: This is the latest $1 billion tech company to IPO
• Security Magazine: Retail Chargeback Costs Reach $40 Billion Per Year