Should You Block VPN and Proxy Users to Prevent Chargebacks

What’s the Connection?

If you’ve noticed that VPN or proxy users are triggering more chargebacks, you’re not alone. Fraudsters love using these tools to hide their identities and dodge fraud detection systems.

However, blocking VPN traffic outright could result in false declines and lost revenue. You need a smarter approach.

Why Fraudsters Use VPNs and Proxies

VPNs and proxies help fraudsters:

1. Hide their real location to bypass geolocation rules
2. Mask IP addresses to stay under the radar of fraud systems
3. Blend in—fraud forums recommend using VPNs as a basic tactic

Are All VPN Users Fraudsters?

Definitely not.

Many legitimate customers use VPNs to protect their privacy, access content while traveling or for work-related security. If you’re business is in:

• Digital goods 
• B2B or enterprise services 
• Remote-first industries

You will see VPN use from real, paying customers.

How to Manage VPN Fraud Without Killing Conversions

If you’re selling in a category with high chargeback risk—like online gaming, iGaming, or ticketing—blocking VPN users might make sense. But for most businesses, a nuanced fraud strategy is the way to go.

Here’s how to protect your revenue without blocking your best customers:

1. Combine Risk Signals—Don’t Rely on Just One

• Layer VPN fraud detection with device fingerprinting, IP reputation and behavioral analytics. 
• Use tools like IPQualityScore or TransUnion TruValidate.
• Don’t block based on VPN alone—look for multiple red flags before declining a transaction.

2. Categorize VPN Types

• 🟢 Corporate VPNs – Low risk
  Used by businesses and remote teams. Generally safe to allow. 
• 🟡 Residential VPNs – Medium risk
  Legit users mixed with potential fraud. May require extra verification. 
• 🔴 Anonymous Proxies (Tor, data centres) – High risk
  Frequently used by fraudsters. Consider blocking outright.

3. Add Extra Verification for Risky Transactions

• Use step-up authentication (like SMS or email verification). 
• Manually review high-value or suspicious transactions.

​​4. Watch Chargeback Trends Like a Hawk

• Track chargebacks from VPN vs. non-VPN users. 
• Use that data to fine-tune fraud rules and adjust your risk model.

Fraud prevention isn’t one-size-fits-all, and blocking every VPN user isn’t a long-term solution. The real win is building a smarter, data-driven strategy that keeps fraud out while keeping conversions high. That’s where the right payments partner makes all the difference.