How to avoid fraud and disputes with Stripe

First off, what is fraud and dispute exactly?

Often frauds happen when a credit card or credit card number has been stolen or used without the permission of the rightful owner. This is usually noticed by the rightful owner when reviewing their credit card statement, after which he or she will file for a dispute to receive a refund of their money.

How can you as a shop owner prevent fraud?

The first thing we would recommend anyone using Stripe to do is to make sure the rules for CVC (card verification code) and postal code checks are enabled in your Stripe dashboard. We would recommend rejecting any charges that fail the CVC and postal code checks, as these are at high risk of being fraudulent.

1. To find the rules for the CVC and postal code checks, log in to Stripe and go to Radar in your dashboard.

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2. In the next window, click Rules, and you'll see all the rules set up for your account. You can read more about how to manage the rules for your account here (you'll find the description of the CVC and postal code rules under "Traditional bank checks").

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Keep in mind that fraudulent charges are the Stripe account owner's responsibility, therefore it is your responsibility to make sure you do everything you can to prevent fraud. Except for the above, this also includes looking out for and identifying potential fraud. It is up to you as shop owner to check customer data before sending out any order, as you are the one who possess the most information about your customer at the time of purchase. If you spot anything out of the ordinary, don't send out an order before investigating the case further. Stripe has put together a list of great tips of things to look out for:

  • Unusually large orders (either number of items ordered or an expensive item/dollar amount)
  • Many smaller transactions made with similar or the same card numbers, especially over a short duration
  • Many transactions made with the same card but different shipping addresses, or many cards with the same shipping address
  • Use of obviously or likely-fake information in the transaction (such as fake phone numbers or gibberish email addresses like asdkf12495@freemailexample.com)
  • Shipping to a freight forwarder.
  • Billing addresses that do not match the card’s country of origin (the country in which it was issued). Review the credit card’s country of origin in a charge’s payment detail in the Stripe dashboard. The billing address provided should match this country. Where the shipping country that does not match the card’s origin or is a country typically not shipped to, it is important to take extra steps to verify the legitimacy of the charge.
  • Inconsistencies in customer details across multiple purchases, e.g. seeing the same e-mail address but a different name provided for another payment.
  • Many failed attempts by the same customer name/email address - your declined charges can provide very valuable information and should be regularly reviewed! The same customer might have many failed charge attempts, and if each failure is associated with a different credit card, any successful charge carries much greater risk for fraud.
  • Any request that you run a charge through manually, either through your Stripe dashboard or your shop - fraudsters may make this request in order to have the charge run with your local IP address instead of their own.
  • Any request to “overcharge” a card and pay out a third party (driver, shipper/freight company, etc.) via a different payment method (check, wire transfer, cash, money order, etc.)
  • Watch for customers who ask to change the shipping address after the order is placed. Fraudsters may use a legitimate address to obtain a successful charge but later ask that products be shipped elsewhere.

Consider reaching out to customers making potentially suspicious charges by phone or e-mail to confirm customer and charge details. A phone number that doesn’t belong to the customer or an e-mail that bounces may indicate a fraudulent charge; a nonsensical or evasive answer is, similarly, typically a good indication of potentially fraudulent behaviour.

What to do if you suspect you found a fraudulent charge?

It is recommended that you do not ship the order but instead issue a full refund as soon as possible for any charge that you believe have been made without the rightful card owner's authorization. Stripe recommends that you issue refunds for any potentially fraudulent charges through their "Refund and report fraud" function on the detail page of the transaction. The difference between this and issuing a regular refund, is that you at the same time file a fraud report to Stripe.

3. To find this option please go to "Payments" in your Stripe dashboard.

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4. Select the transaction that you believe is fraudulent, and you will find the Refund and report fraud button.

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As long as you follow these guidelines, you have done what you could to protect yourself and your business against fraud. Never hesitate to contact us or Stripe if you have any questions on the topic–we'd be glad to help!

 

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