Friendly Fraud

Friendly Fraud

“Friendly Fraud” is a term that gets banded around a lot when talking about online payments. You may have heard it in relation to chargebacks. But what does this oxymoronic phrase mean?

What is Friendly Fraud?

Occasionally referred to as “First Party Fraud”, Friendly Fraud occurs when a customer disputes a payment they made online for goods or services. As opposed to Third Party Fraud, which is when a person uses another person’s payment details to purchase something, Friendly Fraud relates to a charge a customer made using their own payment information.

Causes of Friendly Fraud

Buyer’s Remorse – With the cost of living becoming an ever-increasing concern, more and more customers are experiencing guilt or regret with purchases they have made. This can lead them to contact their issuer and recoup their funds.

Confusion – Customers may experience confusion attempting to get a refund directly from the Merchant or be unsure of their order status. This can lead them to bypass the Merchant and contact their issuer directly to receive the funds and cancel their order.

Shared Accounts – People who make payments using shared bank accounts can cause issues. The other people that are named on the account may see the transaction and not be aware of it, causing them to cancel it with their issuer out of fear of it being an illegitimate purchase.

How to Prevent Friendly Fraud

• Make Returns Easy – Merchants with a clear and easy-to-navigate return policy have a higher customer retention rate. As well as this, if it is easy for the consumer to return their product for a full refund, they are less likely to create a chargeback with their bank.
• Send Products on Time – Establish realistic delivery and processing time frames. Similarly, providing consumers with a tracking method will allow them to follow their purchases and have an exact time to expect their products.
• Avoid Miscommunication – It is important that Merchants ensure that all descriptions of products and services are accurate. This will prevent miscommunications and ensure that consumers are receiving the products they thought they were getting.

If you’re concerned about any kind of Fraud, we would welcome exploring the options with you – including using tools within the Gateway as well as Third Party systems. Click here for more information.

Stay up to date with all the latest news from Cardstream by joining our mailing list here.