Fraud in Shipping Addresses

Fraud is everywhere, and it often seems to sneak up and bite you even when you think you’re being vigilant. Many merchants depend on fraud filters and other software tools to identify and catch fraud for them, and these tools can be indispensable.

Nevertheless, it’s still important for merchants to be able to spot the signs of fraud on their own, especially when manually reviewing borderline cases. One of the best places to look for these indicators is in the purchaser’s shipping address. What signs of fraud can merchants find by taking a closer look at the shipping addresses attached to orders?

The era of COVID-19 has seen a mass movement of consumer activity toward e-commerce spaces, where card-not-present transactions are required and payment card fraud is more difficult to prevent.

Like noxious mushrooms sprouting up after a rainstorm, fraud has flourished under the recent growth of e-commerce.

Fraud losses may have surpassed $20 billion in 2021, growing even more rapidly than the year before. Every instance of true fraud results in a chargeback, costing merchants hard-won revenue and bringing them ever closer to the dreaded excessive chargeback threshold.

Merchants need to marshal every resource they can muster in the fight against fraud, and while automated tools may be essential for stopping the average fraud attempt, there will always be cases that require additional scrutiny and a judgment call on the merchant’s part.

If you throw out every order that carries the slightest whiff of suspicion you’ll end up rejecting lots of legitimate orders and alienating good customers, so merchants have to be willing to engage in manual review. Fraud indicators can be found in all sorts of unlikely places, but the data fields that comprise the shipping address are a good place to start looking—sometimes, they’ll give away the whole game.

How Should Merchants Look for Fraud Indicators in Shipping Addresses?

Merchants should manually review orders when they are flagged by their anti-fraud tools, or when there are other reasons to be suspicious about a particular transaction. False positives are common, so merchants should always do their best to make an accurate determination as to whether or not a transaction is fraudulent.

The consequences for getting it wrong are significant in either direction—you’d either be allowing fraud (and a later chargeback) to go through, or you’d be turning away a real customer.

Fraud is only profitable when the fraudster actually gets something of value by using a stolen card, which means they actually need to receive the goods they’re purchasing somehow. The shipping address is where the fraudster often has to drop the mask and risk exposure.

Here are six questions to ask when you’re looking for signs of fraud in the shipping address:

How Does the Shipping Address Relate to the Billing Address?

When the shipping address and the billing address match, that’s a strong (but not inconclusive) sign that the order is legitimate. If they’re different, take a closer look. It’s quite common for legitimate orders to have different billing and shipping addresses, but there’s usually some geographical proximity.

When these addresses are physically very far apart, that can be a red flag. You can use public records searches to see if both addresses are associated with the same family name, or look for other connections.

If the addresses are distant and have no obvious relationship, that doesn’t mean fraud is certain or even likely—people do buy gifts for friends in far-off countries, after all—but it does mean you should keep examining the transaction for other signs.

Is This a Brand New Shipping Address?

Always check the order history. If the shipping address has been used in the past without incident, it’s probably a valid one.

What Type of Location Is the Shipping Address?

You can always Google an address to see what’s there. The things to look out for are unoccupied residences (the fraudster can swing by to pick up a package without worrying that an occupant will grab it first) and companies that engage in reshipping or freight forwarding services. 

Is There a Lot of Activity at This Shipping Address?

If you’re shipping a lot of orders from different customers to the same address, that can be a cause for concern. High transaction velocity at a particular address can have an innocent explanation (it may be a large corporate headquarters, for instance) but it could be a sign that you’re being targeted by a card testing attack, or that a group of fraudsters has found a viable package drop site.

Does the Shipping Address Agree with the Rest of the Customer Profile?

In addition to the billing address, there’s lots of other customer data you can compare to the shipping address. The customer’s phone number, email address, geolocation, and other information can all be used to corroborate the validity of a distant shipping address or establish that there are no logical connections to be made between the customer profile and the shipping address.

Was the Shipping Address Changed after the Order Was Placed?

Fraudsters may place orders with the same shipping and billing addresses to avoid suspicion, then change the shipping address after the order has been processed.

Sometimes they'll do this on the merchant’s site before the order ships, but often they will contact the shipping company directly to change the address without alerting the merchant.

Merchants should work with their shippers to ensure that they are always notified when a customer changes a shipping address post-purchase. Any time a shipping address changes in this way, the entire transaction should be reviewed for fraud indicators.

Conclusion

If you’re not comfortable with a shipping address for whatever reason, try contacting the customer directly to get more information. If you can’t get in touch with them, or if their contact information was recently changed, those are red flags.

Searching for fraud high and low can get exhausting at times, but merchants have to do everything they can to protect themselves. It’s easier when you’re following a fraud and chargeback defense plan that has been tailored to your business, so don’t hesitate to call in the experts for help if you feel the need.

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