Friendly Fraud is not as kind and pleasant as it sounds – especially when it is impacting your business. This type of fraud begins with a legitimate transaction, followed by a chargeback claiming that the cardholder did not authorize the purchase. The transaction is immediately refunded and the merchant is left frustrated, scraping for evidence that the consumer is not telling the truth.
- Instant Refund – Upon notification of an unrecognized charge, in most cases the cardholder will be refunded immediately, whether the claim is legitimate or not.
- Instant Chargeback – Merchants do not have the opportunity to provide proof of a legitimate transaction before funds are charged back. An investigation of whether or not a claim is valid will follow if the merchant follows up with a dispute.
- Convenience – Consumers are becoming increasingly chargeback happy because it is more convenient to get an instant refund than going through a merchant’s protocol to cancel an order or make a change.
- Manipulation – Consumers are aware that they have leverage to negotiate the terms of their purchases regardless of a merchant’s policies and procedures.
Can It Be Beat?
Sometimes. When preventative measures fail and you receive a chargeback that you suspect may be friendly fraud, you are left with a few options:
- Dispute – Never assume that a chargeback dispute is not worthwhile. The credit card company may reverse the charges in your favor, or the consumer may drop the dispute once they realize you are initiating an investigation.
- Allow the customer to say “Oops” – If you are confident that a consumer is intentionally or accidentally committing friendly fraud, inquire about the chargeback and allow them to correct their mistake while saving face. Approaching a customer aggressively will likely put them on the defense and you will not get the result you are seeking. Portray that you are giving the customer the benefit of the doubt and politely ask if the chargeback was a mistake. If it was, ask if they would still like the product or if they would like to arrange a return.
- Talk to the Credit Card Company – Initiate dialogue with the credit card company you accepted the payment through. Talk to them about what they are currently doing to protect the merchants they work with and ask if they are willing to take accountability for some or all of the chargeback. Credit card companies want to keep consumers happy, but they want to keep merchants happy as well.
Do not justify friendly fraud as cost of doing business without putting up a fight. With friendly fraud rates on the rise, merchants together must strive to put more pressure on credit card companies, banks, and consumers surrounding this problem and remedy the flaws in the system.