Friendly Fraud

Friendly fraud occurs when a cardholder makes a purchase with their credit or debit card and then disputes the charge with their bank under false pretenses. Despite the seemingly benign name, friendly fraud is a serious issue for merchants and can lead to significant financial losses. It typically involves the cardholder claiming that they never received the goods or services purchased, that the item was not as described, or even denying that they authorized the transaction at all.

This type of fraud is particularly challenging to address because, from the outside, it appears as a legitimate customer dispute, making it hard for merchants and banks to distinguish from actual fraud. Unlike traditional fraud, where stolen card details are used by a third party, friendly fraud is committed by the actual cardholder or someone they have allowed access to their card.

The motivations behind friendly fraud can vary. Sometimes it's a genuine misunderstanding or forgetfulness about a purchase. In other cases, it's a deliberate attempt to exploit consumer protection mechanisms to obtain goods without paying for them. This fraudulent activity not only affects merchants' revenues but also increases operational costs due to the time and resources needed to manage and dispute such chargebacks.

Merchants need to implement robust prevention strategies, such as clear communication about their products and services, detailed tracking information for shipments, and rigorous customer verification processes. These steps can help reduce the incidence of friendly fraud by ensuring that customers have fewer opportunities to make false claims and that evidence is available to refute unjustified chargebacks.