Chargebacks are a common issue that occurs in any business that accepts payments. A chargeback happens when a customer disputes a transaction and requests the money back from their bank. But, did you know that chargebacks can occur even when the customer made the purchase? Yes, that is called friendly fraud or chargeback fraud. In this blog post, we will take a deep dive into friendly fraud, how it occurs, its impact on businesses, and how to identify it.
Friendly fraud is a term used to describe when a customer requests a chargeback for a legitimate purchase made with their credit or debit card. It happens when customers forget they made a purchase, or someone else used their card without their permission and they want to dispute it. Essentially, friendly fraud is a form of false chargeback claims or unintended chargebacks.
Friendly fraud can hurt businesses as it can result in the loss of revenue, lengthy and costly chargeback disputes, and affect the merchant’s reputation and credit score. The business may face increased fees, penalties, and even lose their ability to accept payment from a credit/ debit card in the future. It is, therefore, essential to identify, prevent, and manage friendly fraud.
To prevent friendly fraud, businesses can use several methods. Firstly, businesses should send clear and detailed receipts to customers to remind them of their purchases. Customers can also be contacted to confirm chargeback requests. Additionally, merchants can also use fraud detection services to catch any unusual chargeback activities.
Identifying friendly fraud can be challenging as it is disguised as legitimate chargeback requests. However, there are signs businesses can look out for. Common indicators of friendly fraud include frequent chargebacks by the same customer, chargebacks on high-priced items, and short-lived accounts that barely pass a verification process. Merchants should also check their order history and look out for unusually large orders or several orders from the same billing/shipping address.
Businesses can also use chargeback response services to manage and dispute chargebacks. Chargeback response services allow businesses to improve their chargeback management process and reduce future friendly fraud chargeback disputes. These services provide real-time notifications of chargeback requests and assistance in providing relevant evidence to prove that the transaction was legitimate.
In conclusion, friendly fraud is a growing problem that can cost businesses significant losses in revenue and damage to their reputation. However, businesses can prevent, identify, and manage friendly fraud by sending detailed receipts, using fraud detection services, and checking order history and chargeback activities. Using chargeback response services also helps mitigate friendly fraud disputes and protect businesses from hefty penalties and revenue loss. By understanding friendly fraud and implementing strategies to prevent and manage chargebacks, businesses can continue to operate with peace of mind and protect their bottom line.