The Cart Blog

Risk Management Features from Shopify - starring AVS

I spoke earlier this week with Tobias Lütke from Shopify about the new risk management features in the latest Shopify release. Tobias said,

In this update, we concentrated on order flow management with some special
attention to risk assessment. Our clients are now informed about all
the risks which can be deducted from an order, such as address
validation failure, order placed in a high risk country but shipped
somewhere else, and similar problems in a friendly and clear way.

For items such as electronics and jewelry which can significant resale value, risk management is an important area in e-commerce, and I’m excited to see Shopify move on this issue.

One of the drivers of this work was this report from Wells Fargo about the characteristics of fraudulent transactions.

We essentially took the information from this PDF and use all the
available information from the payment gateway to present an overview
of risks to our customers in the most user friendly way : a check-mark
if no problems are found or a full text explanation of what is amiss.

Shopify found the best bang for the buck came from these checks:

• AVS (Address Verification Service) - the statistics on AVS no match are compelling: 100% of counterfeit cards fail, 90% of cards stolen from the mail fail, and 65% of lost or stolen cards fail.
• Checking the IP address of the client and comparing its geocode with the billing address

Here’s a screenshot of a transaction that has been decisioned positively:

Now here’s a screenshot of a transaction that is considered risky:

You can see “Risk Assessment” items in the center column towards the bottom. Very impressive!