PayPal fraud prevention mistakes can cost you real money. Many merchants believe that enabling PayPal's basic fraud filters is sufficient. The truth is, missed settings and misconfigurations often leave accounts wide open to fraud attacks and chargebacks.
Here are the most common PayPal fraud prevention mistakes merchants make and how to fix them before it's too late.
1. Relying Only on PayPal's Default Filters
PayPal's standard fraud filters catch obvious fraud, like mismatched IP addresses or invalid CVV codes. But they don't catch advanced fraud patterns or triangulation scams targeting your store.
You need to review your Fraud Filter rules under your PayPal settings. Adjust rules to block suspicious patterns common in your product category, like rapid repeat purchases or multiple failed attempts with similar cards.
2. Ignoring Address Verification (AVS) Results
Many merchants skip AVS results when approving orders. AVS checks if the billing address matches what the card issuer has on file. Fraudsters often use stolen cards with mismatched addresses.
Always review AVS responses before shipping. A mismatch or partial match should trigger manual review. This prevents shipping products to fraudulent buyers and risks chargebacks.
3. Allowing High-Risk Countries Without Extra Checks
Some merchants sell globally without applying stricter checks for high-risk countries. Countries with high fraud rates include Nigeria, Vietnam, Indonesia, and parts of Eastern Europe.
If you sell to these regions, add extra verification steps. Require phone verification, IP geolocation checks, and manual order reviews before fulfillment.
4. Not Setting Up Velocity Controls
Velocity controls limit the number of transactions from the same IP, card, or email within a set time frame. PayPal allows merchants to customize these controls, but many skip them.
Without velocity controls, fraudsters can test stolen card numbers rapidly until one works. Set strict limits to block card testing attacks and prevent bulk fraudulent orders.
5. Disabling PayPal Seller Protection by Accident
Some merchants unknowingly void PayPal Seller Protection. Shipping to unconfirmed addresses or using non-trackable delivery services removes Seller Protection eligibility.
Always ship to confirmed addresses and use tracked delivery with signature confirmation for high-value items. This keeps Seller Protection active if a buyer disputes a charge.
6. Overlooking IPN (Instant Payment Notification) Settings
IPN notifies your system when payments are received or refunded. Without proper IPN setup, your store might release digital goods before payment clears. Fraudsters exploit this to get free products.
Test your IPN configuration regularly. Confirm your system waits for completed payments before fulfilling orders or delivering digital access.
7. Skipping Manual Review for Suspicious Orders
Automation speeds up processing, but skipping manual checks on suspicious orders invites fraud. Orders with mismatched shipping and billing addresses, unusual quantities, or rush delivery requests often indicate fraud.
Train your team to spot red flags. Set clear guidelines on when to manually review and approve high-risk orders.
Conclusion
PayPal fraud prevention mistakes are often simple oversights. Review your fraud settings today to fix misconfigurations and reduce your chargeback risk. Small changes in your PayPal setup and order review process can protect your revenue and keep your account safe.
FAQ: Common PayPal Fraud Prevention Mistakes
What is the most common PayPal fraud prevention mistake?
The most common mistake is relying only on PayPal's default fraud filters without customizing settings for your products and buyers. This leaves your account open to advanced fraud attacks.
How do I enable velocity controls in PayPal?
You can set up velocity controls in your PayPal Fraud Filter settings under your account profile. Adjust transaction limits per IP, card, or email to block card testing attacks.
Does PayPal's Seller Protection cover all orders?
No. Seller Protection only applies if you ship to the buyer's confirmed address and use trackable shipping services. Digital goods are also excluded from Seller Protection coverage.
Why is IPN important for fraud prevention?
IPN ensures your system processes orders only after payments clear. Without IPN, digital products can be released before payment confirmation, leading to fraud losses.
Should I manually review every order?
Not every order needs manual review. However, suspicious orders with mismatched information, unusually high quantities, or rush requests should always be checked before approval.
Keep Chargebacks Out of Your Business
Chargeblast helps you stop chargebacks before they happen. With real-time pre-dispute alerts and automated dispute management, you can keep your PayPal account healthy and your profits intact. Book a demo to see how Chargeblast keeps fraud and chargebacks under control.
