How to Protect Your Business from Friendly Fraud

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How to Protect Your Business from Friendly Fraud

The COVID pandemic has accelerated the growth of e-commerce sales and has further put brick and mortar retailers in more survival trouble than ever before. As the world and our economies begin to adjust to the new normal, so many consumers have moved away from traditional retail sales and have shifted to predominantly online sales and retail delivery services. Some face-to-face retailers are certainly thriving, but just like online e-tailers, they are seeing a rise in credit card fraud. With this shift, true fraud and friendly fraud have become an ongoing problem for e-tailers and retailers of all sizes. But merchants and credit card companies are fighting back. Fraud and chargebacks have always been a problem for online merchants and continue to go on the rise and be a major concern for merchants, payment processors, and card brands. This article focuses on “friendly” fraud and the many ways that merchants can effectively combat it, now more than ever before.

What is Friendly Fraud?

Friendly fraud occurs when a customer files a chargeback instead of trying to first obtain a refund from the merchant. Authorized cardholders dispute legitimate charges to their credit cards, pushing the bank to force a refund under the pretense that the merchant made an error, which is primarily not the case. Even well-intentioned customers may accidentally commit friendly fraud because they don't understand the differences between a merchant return and a bank-issued refund, which can be quite costly for a merchant. They assume a chargeback is simply a different way of getting their money back, as a regular return. Other consumers knowingly abuse loopholes in the chargeback rules. These “cyber-thieves” are maliciously attempting to get something for free, ripping the merchant off in the process. Its costs e-tailers millions of dollars yearly. As fraud incidents increase and businesses lose more and more revenue, many merchants wonder if there is anything they can do to prevent friendly fraud. The answer, of course, is a resounding “yes”!

Fraudulent activity is rampant, but there are several steps merchants can take to help reduce incidents, including:

  • Providing rapid and exceptional customer service for purchase inquiries, preferably 24 hours a day (NETbilling offers this service - inquire within).
  • Making sure the billing descriptor is easily recognizable.
  • Using delivery confirmation for shipped goods with tracking numbers.
  • Communicating regularly with customers.
  • Granting returns, refunds, and cancelations when requested.
  • Notifying customers before charging for recurring payments.

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