When PayPal flags too many orders, the issue isn’t always fraud. Sometimes, real customers get blocked while fraud slips through anyway. And if your checkout rejection rate is climbing but your chargebacks aren’t, that’s a red flag that your fraud settings might be too aggressive.
Let’s walk through how PayPal fraud prevention works, why it can cause false declines, and what you can actually tweak to keep orders flowing without opening the floodgates to fraud.
What’s Causing the False Declines?
PayPal uses automated risk models to flag transactions based on dozens of signals like device ID, location mismatch, velocity checks, buyer history, and more. While many of these checks catch obvious fraud, they can also backfire.
Here are common reasons legit customers get blocked:
- IP address mismatch: The buyer’s VPN or mobile hotspot triggers location mismatches.
- High-risk ZIP codes: Some ZIPs get flagged due to past chargeback activity, even if your buyer is clean.
- First-time customers: New accounts are treated with extra suspicion, even if the purchase looks normal.
- Item-risk scoring: Selling digital goods or anything resellable can push your risk score up.
Most sellers only find out these patterns are blocking real buyers after sales start dipping and support tickets pile up.
PayPal Fraud Settings You Can Adjust
If you’re using PayPal’s built-in Fraud Management Filters or advanced tools like the Enterprise Fraud Management API through Fraud Protection Advanced (FPA), here’s where to start:
1. Review Decline Reasons in the PayPal dashboard
Start with the declined transactions report under Risk Management. Look for repeat patterns. Are international orders getting flagged? Are certain product SKUs always involved? This gives you a baseline to work from.
2. Fine-tune filters, don’t disable them
You can modify filters like:
- AVS mismatch: Instead of blocking mismatches, you can choose to review or flag them.
- High-risk countries: Instead of blanket blocking, try limiting order value or requiring phone confirmation.
- Velocity checks: Relax thresholds slightly if they’re blocking high-volume customers.
3. Add exceptions for known good behavior
If a buyer or IP has a clean history, whitelist them. PayPal allows IP and email exceptions so you don’t punish repeat buyers for previous filter rules.
4. Use “Review” instead of “Reject”
Set your filters to send suspicious orders to manual review instead of outright decline. This slows things down slightly but prevents good orders from disappearing without a trace.
5. Connect PayPal with other platforms for cross-checking
Shopify, WooCommerce, or third-party risk tools can give additional context to suspicious orders. If PayPal flags a sale but Shopify’s own fraud check gives it a pass, that might help justify a manual review instead of an auto-decline.
Why This Balance Matters
Letting fraud slip through hurts. But so does rejecting real buyers who never come back. With chargeback rates already under scrutiny from card networks and PayPal’s own policies, like the Seller Protection limits, every decline carries weight.
A heavy-handed fraud setup can kill your conversion rate. And unlike chargebacks, you won’t always get clear data showing how many sales you missed.
You need real control, not a black box. That’s why regular reviews and small adjustments are better than a total filter overhaul. Having decent knowledge of fraud prevention tips is useful as well.
Final Takeaway
PayPal fraud prevention shouldn’t come at the cost of conversions. Most sellers don’t realize how much money they’re losing to false declines until the damage is done. By reviewing your filter settings and using a measured approach, you can keep risk low without locking out real customers.
FAQ: PayPal Fraud Prevention
Why are legitimate PayPal payments being declined?
Legit payments can be declined due to IP mismatches, VPN use, new buyer accounts, or overly strict filters. It’s common for first-time customers to trigger false positives in PayPal’s risk system.
Can I disable PayPal’s fraud checks completely?
You can disable some filters, but PayPal still runs baseline risk checks on all transactions. It’s better to adjust thresholds or move filters to “review” instead of turning them off entirely.
What does PayPal consider a high-risk transaction?
High-risk factors include international billing or shipping mismatches, digital goods, past chargeback activity from that ZIP code or device, and unusual order velocity.
How do I whitelist customers in PayPal?
You can create exception rules for certain emails, IP addresses, or buyer countries within the Fraud Management Filters settings if you're using PayPal's Business or Enterprise tools.
Can I appeal a blocked PayPal transaction?
There’s no direct appeal process for a declined order, but you can contact PayPal support to identify what triggered the block and request adjustments or explanations.
Keep False Disputes Off Your Radar Too
Aggressive fraud filters may block orders, but chargebacks can still sneak in later, especially if you’re not monitoring dispute trends across platforms. Chargeblast helps merchants catch early signs of dispute risk and filter out problem buyers before they hit your chargeback ratio.
Real-time alerts, pattern detection, and automation tools keep your team ahead of chargebacks without slowing sales.
