What is "Friendly Fraud"?

“Friendly fraud” is chargebacks made by regular credit card holders who made a genuine transaction and received the product yet claim they were not responsible for the whole transaction or they claimed they have not received the product. This kind of fraud is also known as “It Wasn’t Me” chargeback.

Unlike professional fraudsters, regular credit card holders engage in this kind of fraud not as a living but for different reasons such as:

  • Unhappy customer service
  • Disgruntled with the received product
  • Does not have money to pay for the product
  • Malicious intent

Whatever the reason, the one that is truly at a loss is not the card holder nor the bank, but the merchant. The merchant has to shoulder the cost of a loss product, the shipping cost, and the loss time and effort during processing.

In order to protect businesses from “friendly fraud”, we give these 5 tips to merchants:

  • Save the IP address where the transaction originated
    Saving the IP address information of the transaction can be used as good evidence to present when a customer attempts “friendly fraud.” It will be difficult to claim that it was not them who made the transaction if it originated from their home computer. One of ePayAlert’s risk parameters checks for the IP address.
  • Check the historical record of the credit card
    By checking the historical negative record of the credit card, you can prevent “friendly fraud” before it happens. Negative Historical Record is one of the risk parameters of ePayAlert in assessing whether an online transaction is fraudulent or legitimate and is able to determine if the card has previous records of multiple chargebacks.
  • Enroll in a bank’s 3D Secure service
    Merchants can enroll in one of our partner bank’s 3-D Secure services which protects merchants from chargebacks. Click here for more information about 3-D secure services.
  • Ask for a signature during delivery
    Requiring a customer’s signature on the acknowledgement and delivery receipt that was delivered in a customer’s own house is one of the strongest evidence that can be presented during a dispute.
  • Keep all communication records
    Merchants should keep a copy of emails, chat logs, or SMS with their customers. These records and personal information can help to prove that the customer participated in the transaction.