In April 2020 alone, the number of fraudulent transactions increased by around 35%. There are so many types of fraud to keep an eye on now, from friendly fraud to chargeback fraud and beyond. But what is friendly fraud, and how does it compare to other types of fraud you may encounter?
This article aims to answer these questions and allow you to take action to prevent being a victim of fraud in your workplace. By learning, you can discuss your options with your colleagues and come to decisions about what your next steps should be. So, get started and help protect your business moving forward.
Chargeback fraud is a type of malicious activity related to the buying of goods or services. This method of eCommerce fraud involves buying something and then requesting a chargeback from your bank.
A chargeback is when the customer disputes having bought an item with the bank. The bank then refunds the item, although in this case, the buyer knows that they still have the item and as such is acting illegally.
As merchants often get charged a fee by the bank when a chargeback happens, this can be especially hard on their profits. In that situation they have both paid a fee and do not have the original item or service, meaning they are running at a loss.
As opposed to chargeback fraud, where the act of eCommerce fraud is malicious, friendly fraud is more often an accident. Sometimes, a cardholder may review their transactions at the end of a month and not recognize one of the purchases that they have made. In this situation, they can contact the bank and let them know, and the bank will begin the process of initiating a chargeback.
As the user is not aware of the fact the chargeback is false, it is not malicious. Although, it still has the same effect of the customer getting something they have not paid for, and the company footing the bill for it. This is why such things are as dangerous as chargeback fraud.
When working out if something is friendly fraud versus chargeback fraud, you must look at the intention of the customer. If it is a mistake, then it is likely friendly fraud. You may even be able to resolve the issue with them.
If the customer performed this action on purpose, though, then this is chargeback fraud. This is a form of theft and you should deal with it as such.
Although, chargeback fraud is more detectable. People who often engage in chargeback may have patterns in their behavior. An advanced fraud prevention technology should be able to recognize these patterns and stop the buyer before they engage in such fraud.
After reading the above, you should now understand how to answer the question, "What is friendly fraud?" If you still want to know more, though, we are here to help you.
If you want more help in detecting, and blocking, fraud in your organization you should reach out. Our fraud experts can talk you through our solution offerings to stop ecommerce fraud. Request a demo today and learn more about what Vesta does to protect businesses from card-not-present fraud around the globe.