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POSitive Processing Blog 

Is Friendly Fraud Putting Your Business at Risk
Wednesday, May 29, 2019


Fraud, Fraud Prevention, Chargebacks  With more and more skimming devices being found on ATM’s and gas pumps and merchants experiencing data breaches more frequently, we are often versing ourselves on how to protect ourselves from these fraudulent criminals. But we often forget to guard ourselves against one of the biggest threats there are: The Friendly Fraudster.

The Friendly Fraudster is a customer with impeccable digital risk profiles that pass every fraud screening test but make authorized purchases and later claim them as unauthorized. They order a product or service and provide legitimate billing and shipping information. After receiving their order, they contact the merchant or their card issuing bank and dispute the charge.

Some of the various false claims they can make are:
·  Their order never arrived.
·  The service was never rendered.
·  They don’t recognize the transaction.
·  The transaction was unauthorized.
·  The goods were damaged.

While this isn’t the traditional eCommerce fraud you imagine, Friendly Fraud is a very real threat and merchants should be aware.
Consider this:

·  Merchants lost $11.8 billion to cases of friendly fraud in 2012 and 40% of consumers who engage in friendly fraud will do so again within the next 90 days.
·  Friendly Fraud has risen 41% since 2011 and 86% of chargebacks are linked to friendly fraud.
·  Friendly Fraud is one of the top three threats to eCommerce, according to the FBI.

So what can you do when a customer goes bad?
1.  Clearly communicate: Merchants should be upfront and clear with customers about their policies and practices and then immediately email order invoices. This will lessen the possibility of the charge being disputed.

2.  Know your customer: Use chargeback data and customer service data to analyze a customer’s profile and identify abusive claim patterns. If the same customer, shipping address, etc. is repeatedly associated with claims, it is likely that they are committing friendly fraud.

3.  Enforce stricter order processing: Once repeat offenders are identified, make signatures mandatory for proof of delivery for all future orders. Both the signature and now higher shipping fee should be red flags for the customer that he is under scrutiny. Ultimately, the goal is to frustrate fraudsters.

4.  Put customers on notice: Notify customers in writing that no further refunds will be issued due to repeated, unwarranted claims.  

5.  Leverage chargeback representment: Engage in chargeback representment—it informs the card issuer that more due diligence is required the next time the customer requests a bank issued refund.

The bottom line is being vigilant is key to stopping ALL types of fraud, and to be vigilant you must be knowledgeable. Know your risks. Know your equipment. Know your customers. Contact us for more information on how you can better protect your business.



  • B2B and E-Commerce Solutions
  • Data Security and Fraud Prevention
    • 05/29/2019 - Is Friendly Fraud Putting Your
    • 04/29/2019 - Gift Cards: The Gift That Thie
    • 04/03/2019 - Chargebacks: What Are They and
    • 02/13/2019 - 3 Tips To Protect Your Busines
    • 11/12/2018 - Are you PCI Compliant?
    • 03/14/2018 - Merchant Guide: 10 Essential T
    • 02/12/2018 - Common Business Scams and How
    • 02/09/2018 - Data Security Fast Facts
    • 01/17/2018 - Vulnerability Scanning vs. Pen
    • 01/17/2018 - BBB Warns of Email Scams This
    • 01/10/2018 - Arm Your Business Against Cybe
    • 11/15/2017 - MERCHANT FRAUD ALERT, 11-15-20
    • 09/22/2017 - Have You Heard How OMEGA’s Dat
    • 08/02/2017 - MERCHANT FRAUD ALERT, 08-02-20
  • FI Partner Program
  • Gift Cards and Customer Rewards
  • Just For Fun
  • Miscellaneous
  • Mobile Payments
  • OMEGA in the Community
  • OMEGA Merchants, News, and People
  • OMEGA Spotlight
  • Payments Industry
  • Point-of-Sale Systems
  • Products and Services
  • Short-Term Capital Funding

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