Running an e-commerce store can be overwhelming and challenging, with many moving parts requiring constant management. Amid this whirlwind of responsibilities, the last thing a merchant wants is lost time and business to fraudulent orders. 

When bad actors engage in fraud on an online store, merchants absorb this cost, negatively affecting revenue and stealing time away from day-to-day operations. 

It has evolved into a scourge that isn’t easing anytime soon. A study from Juniper Research found that the total cost of e-commerce fraud to merchants will exceed $48 billion globally in 2023, from just over $41 billion in 2022. 

The holiday shopping season is especially ripe for fraudsters to place illegitimate orders. In 2022 with credit cards alone, fraudsters will pull in $5.72 billion from online, phone, and  mail-order transactions according to JP Morgan. Additionally, downloads (apps and music) are targeted by fraud attacks 3x the normal rate.

Further, throughout 2022, online criminals have been taking advantage of the expanding digital market and targeting merchants and brands selling digital products. In fact, downloads are targeted by fraud attacks 3x the normal rate.

Also, when fraud attacks are detected, online merchants face dreaded chargeback fees, which are fees that acquiring banks charge to merchants to penalize them for processing illegitimate transactions.

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Inside the Shopify-Sky Pilot fraud analysis integration

Shopify has long been leading the charge to help merchants detect fraud. Their fraud analysis feature is designed to list indicators for each order which can be used to investigate suspicious orders. The indicators can include information such as:

• whether the credit card used for the order passes AVS checks, which compares the billing address used in the transaction with the issuing bank's address information on file for that cardholder.
• whether the customer provided the correct CVV code.
• details about the IP address used to place the order.
• whether the customer tried to use more than one credit card.

This fraud analysis tool gives merchants a fraud recommendation on all online credit card orders.

The fraud recommendation indicates if an order has a low, medium, or high risk of a chargeback due to fraud. If an order has a medium or a high risk, then it's flagged on the Orders page with a warning symbol next to the order number.

Flagged orders are also highlighted through notification emails, if merchants subscribe to them.

The Shop Circle team recognizes the importance of strengthening security across the board, which is why Sky Pilot users on Shopify can now benefit by leveraging this fraud analysis tool. 

Sky Pilot allows merchants to unlock new revenue streams by selling digital files ranging from photo editing filters to comedy videos to knitting patterns. Giving customers immediate access to content purchased, Sky Pilot offers an on-brand customizable delivery experience.

Learn about a new integration with Wistia for a seamless video marketing solution.

Sky Pilot was designed to solve a specific problem many merchants confront: How can I make it simple and seamless for customers to download what I’m selling?

Bringing this fraud analysis configuration to Sky Pilot merchants can help free them of reputational risk, says Camilla Giovannini, senior product manager at Shop Circle. “With post-pandemic growth in online fraud, merchants have to ensure they keep enhancing their fraud controls.”

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How can merchants enable Sky Pilot’s manual approval of high risk orders?

When merchants seek to turn on this useful function, the actions taken are as simple as a finger-snap. When using Sky Pilot, merchants can head to Settings > Delivery Settings > Fraud Prevention.

After turning on this setting, it will temporarily refrain from delivering the digital product to orders that are marked as “High” risk based on Shopify’s assessment. With this feature enabled, merchants will need to manually approve the delivery of the digital items to an order that is marked as high-risk for fraud. 

AI and machine learning play a role in assessing risky orders. Shopify’s fraud recommendations are powered by machine learning algorithms that are trained on historical transactions across all Shopify stores. The recommendations offer merchants the advantage of years of fraud detection experience, and Shopify continuously improves these algorithms to better identify fraudulent orders.

In a blog post, Shopify stresses how this tool flags medium or high risk orders so that merchants can take follow-up preventive measures such as:

• Confirming the shipping address using a map to ensure that it’s not a fake location or doesn’t look like a residential building. 
• Verifying the customer’s identity by sending them an email.
• If need be, canceling the order.
• Adding the account to a block list.

If there’s any time to take fraud seriously, it’s now. Shopify’s same blog post reports that the e-commerce surge resulting from the COVID-19 pandemic has also led to a 62% increase in e-commerce fraud attempts among small- and medium-sized businesses.

Giovannini says, “It’s fundamental that merchants rely on software to protect their customers, and that’s why we see immense value in Sky Pilot merchants taking advantage of Shopify’s fraud analysis tool.”

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