Exploring the Various Friendly Fraud Tactics Employed by Consumers

Friendly Fraud Tactics

In the world of online transactions, friendly fraud has become an increasingly prevalent issue for merchants and service providers. This term describes a situation where a consumer makes a purchase with legitimate intentions but later disputes the charge.

Unlike typical fraud where criminal intent is clear, friendly fraud involves deception by customers who exploit the system. Businesses may experience severe effects, including monetary losses and higher operating expenses.

For businesses looking to safeguard themselves and lower chargebacks, it is essential to comprehend the different strategies used by customers. In this article, we will discuss different forms of friendly fraud and offer insights into how businesses can address them.

What is Friendly Fraud?

Ethoca defines friendly fraud as a consumer disputing a lawful transaction with a financial institution or credit card company. Fraudsters usually claim that they never purchased the products or did not get them. This type of fraud is characterized by its deceptive nature. The consumer may have indeed made the purchase but later decided to file a chargeback.

According to The Paypers, friendly fraud attempts have surged significantly during past economic downturns.

This has resulted in merchants incurring costs nearly double the transaction amount. Often, the intention behind friendly fraud is to receive a product or service without paying for it, exploiting the refund process.

Unlike malicious fraud, which involves stolen identities or card details, friendly fraud is carried out by the cardholders themselves. The motivations can range from buyer’s remorse to attempting to gain an unjust financial advantage. Understanding this behavior helps businesses implement strategies to mitigate such risks.

Friendly Fraud Chargeback

A chargeback is a reversal of a transaction initiated by the card issuer after a dispute is raised by the cardholder. In cases of friendly fraud, the consumer may claim that the transaction was unauthorized or that the item was not received. According to Forbes, friendly fraud is estimated to account for between 40% and 80% of all chargeback requests.

This process can be problematic for merchants, as it often results in losing both the sale and the product or service provided. Additionally, merchants face chargeback fees and may suffer from higher processing costs if they experience a high volume of disputes.

To address friendly fraud chargeback, businesses need to provide clear transaction records and communication channels to counteract false claims effectively. Implementing robust fraud prevention measures and educating consumers about legitimate dispute procedures can also help minimize chargebacks.

Account Takeover Fraud

Account takeover fraud occurs when a fraudster gains unauthorized access to a consumer’s account and makes purchases or transactions using their details. Consumers might later dispute these transactions as fraudulent, not realizing that their account was compromised. According to a post by Security.org, account takeover has been experienced by around 29% of Americans at some point in their lifetime.

For businesses, detecting account takeover fraud involves monitoring unusual account activity and implementing strong authentication measures. Educating customers about securing their accounts and recognizing phishing attempts is also crucial. Prompt response to suspicious activities can help mitigate the impact of such fraud.

Family and Friend Fraud

According to Chargebacks911, family and friend fraud happens when a person close to the cardholder makes unauthorized purchases using their credit card. This often occurs without the cardholder’s direct consent but might not be immediately reported as fraud.

In some cases, the cardholder may later claim that they did not authorize these transactions to avoid personal conflict or embarrassment. Businesses may find it challenging to distinguish between genuine fraud and internal misuse.

To combat this, merchants should establish clear protocols for handling disputes and offer education on secure payment practices. Regular account monitoring and transaction alerts can also help in detecting and preventing such fraud.

Return Fraud

Return fraud involves a consumer purchasing items and then returning them for a refund, often while keeping the original product. This form of friendly fraud can also include cases where the consumer returns counterfeit goods but claims they were unsatisfied with the original product.

Retailers face financial losses from both the returned merchandise and the refund issued. CNBC reports that retailers anticipate 16.5% of holiday returns, totaling $24.5 billion, to be fraudulent this year. Effective measures to counteract return fraud include implementing strict return policies, requiring proof of purchase, and conducting thorough investigations into suspicious return patterns.

Using technology to track and analyze return data can also help identify and prevent fraudulent activities. Encouraging transparency and setting clear guidelines for returns can protect businesses from potential abuse.


What is the difference between friendly fraud and true fraud?

Friendly fraud involves a consumer who disputes a legitimate transaction, claiming it was unauthorized or that the product was not received. True fraud, however, involves criminal activities like stolen identities or card details used without the cardholder’s knowledge. The key difference is the goal and source of the deception.

What is the difference between fraud and chargeback?

Intentional deceit, such as utilizing credit card information that has been stolen to make illicit transactions, is called fraud. Reversing a transaction that was started by the customer or their bank is known as a chargeback. It often happens due to disputes over the legitimacy or satisfaction of the purchase. Essentially, fraud is the act, while a chargeback is the response to that act.

How to stop family fraud?

Prevent family fraud by monitoring account activity and setting up alerts for unusual transactions. Teach family members the value of protecting personal data and keeping an eye on account statements. Preventing unwanted access can also be aided by putting strong account security measures in place, such as multi-factor authentication.

To summarize, friendly fraud causes financial losses and administrative headaches for firms, making it a serious concern. While malicious intent may be absent, the deceptive nature of friendly fraud tactics necessitates robust countermeasures.

To reduce risks, businesses can put in place robust authentication procedures, transparent communication channels, and fraud protection technologies. Educating consumers about responsible purchasing behavior and dispute resolution processes can further contribute to a healthier online transaction environment.


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