What is Friendly Fraud?

What is Friendly Fraud

Understanding the Friendly Fraud

Card not present (CNP) credit and debit card transactions provide the perfect environment for what’s commonly referred to as friendly fraud.

A CNP transaction as a payment card transaction where the cardholder does not or cannot physically present the card for a merchant’s visual examination. At the time of order delivery and payment. Such as for mail-ordering transactions by mail or fax, or over the telephone or internet.

Therefore, friendly fraud occurs when a consumer makes an online shopping purchase with their own credit card and then requests a chargeback from the issuing bank after receiving the goods or services.

Categories of Friendly Fraud 

Intentional Friendly Fraud

The deliberates falsification of facts by a consumer which is intended to deceive a merchant.

Reasons for intentional friendly fraud may have to do with buyer’s remorse. Perhaps the buyer has an impulse purchase for an amount that exceeds their comfort level or their financial circumstances. Suddenly changes take place. And, they wish they can get back money or maybe, their spouse doesn’t approve of the purchase.

Then, there are fraudsters who commit online shoplifting by buying merchandise online and then disputing the transaction after the merchandise reach home. In this way, they can enjoy the merchandise for free, just like shoplifters at brick-and-mortar stores.

Unintentional Friendly Fraud 

When a buyer mistakenly disputes a legitimate transaction without the intent to defraud a merchant.

Typically, unintentional friendly fraud is the result of forgetting about a purchase, not recognizing the transaction details shown on their credit card or bank statement. And, not knowing about a purchase by another cardholder on the account.

Online businesses collectively lose billions of dollars each year due to friendly fraud. As a result, it is crucial for merchants to take necessary steps to help prevent fraud before it happens. So, know about the Steps that include:

  • Cross-checking cardholder information.
  • Making sure IP addresses for orders match delivery locations.
  • Confirming order details with customers should anything look suspicious

Hence, merchants also need to be vigilant about watching out for pending chargebacks and aggressively fighting fraudulent chargeback claims.

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Friendly Fraud


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