Friendly fraud is a common method of stealing money from merchants. It’s more difficult to catch than you might think because it usually involves a customer claiming that the purchase is a scam. A consumer may have forgotten that they made the purchase, or they may not recognize the name of the merchant. Even if the person is a genuine customer, he may still accept the refund. This is a common tactic of friendly fraudsters.
While merchants can’t stop friendly fraudsters from committing this crime, they can reduce their risk and mitigate the impact of complaint-based friendly fraud. The first step is to identify the underlying issues that encourage the conduct. Then, merchants can investigate the chargeback data and trace disputes back to the original marketing source. By analyzing chargeback data, merchants can improve their marketing campaigns by targeting the elderly demographic.
It is difficult to detect
There are four main types of friendly fraud. The first type is referred to as first-party fraud. This type of fraud involves the actual consumer acquiring goods from a merchant and subsequently claiming that they did not make or receive the items. This type of fraud is often hard to detect because the fraudsters use their own identities and are largely immune to any normal customer verification methods. These types of fraud are particularly difficult to detect because they can use your credit card information in the process.
In addition to being difficult to detect, friendly fraud costs businesses a significant amount of money. In 2016, businesses paid $4.8 billion to friendly fraudsters. In addition to the costs of researching claims and producing documentation, merchants must also pay large chargeback fees to prevent this type of fraud. These charges not only hurt business profits but also lead to cash flow problems and damaged customer relationships. Additionally, merchants with high chargeback rates are at risk of increased processing fees, longer funds hold times, and even suspension or termination of their merchant accounts.
In some cases, consumers who file friendly fraud will file fraudulent claims against a merchant even though they were not ill-intentioned. They may simply forget that they made a purchase and don’t recognize the name on the bill. Other consumers who are dissatisfied with a purchase might file a chargeback with their bank and have a recurring pattern of fraudulent activities. As a result, friendly fraud is difficult to detect, so it is important to keep a list of bad customers.
Issue refunds
To avoid chargebacks and avoid friendly fraud, businesses should try to establish and maintain good customer relations. When customers make errors or call first, they can refresh authorizations. Refunding transactions in these cases can be done before the card issuer or bank gets involved, which can save chargeback fees and enhance customer satisfaction. Here are a few tips for handling chargebacks and friendly fraud:
First, always acknowledge that a customer is entitled to a refund. Friendly fraud looks similar to other types of fraud. The purchase is either missing or does not match the product description online. Customers often dispute the charge with their banks. In some cases, a customer’s credit card may be compromised or the order is cancelled before delivery. To prevent this, businesses should analyze transaction data. Issue refunds or decline the charge when they are suspicious.