POSitive Processing Blog
Is Friendly Fraud Putting Your Business at Risk
Wednesday, May 29, 2019
BEWARE THE FRIENDLY FRAUDSTER
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.
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.
· 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?
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.
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.
customers on notice: Notify customers in writing that no further refunds
will be issued due to repeated, unwarranted claims.
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.
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