Friendly Fraud Is an E-Commerce Nightmare. Is Your Business at Risk?

From hostile intentions to honest mistakes, friendly fraud can be costly for merchants.

Here’s how to protect your business and prevent fraudulent chargebacks.

As a business owner, chargebacks are likely on your radar.

And they should be.

Chargebacks come with fees, headaches, and a potential blow to your company’s reputation.

Research shows that 86% of chargeback cases are friendly fraud, a type of chargeback fraud.

To make things worse, 50% of friendly fraudsters do it again within 90 days.

This type of chargeback activity will only increase as online shopping becomes more popular.

Without the right protection, a business may end up giving out free product and cash.

And something tells us you don’t want to be that business.


What is friendly fraud, anyway?

Friendly fraud is far from friendly.

It happens when a customer makes an online purchase with their own credit card, receives the goods, and then files a seemingly innocent claim for a chargeback.

The reason? They “don’t recognize the charge” or “never received the product.”

Yet, the customer used their real name, address, and e-mail.

Everything is legitimate, except for their intentions.

Essentially, friendly fraud takes advantage of the chargeback process in order to snag a refund.

It also sets back the merchant a pretty penny.

In fact, 2016 LexisNexis® The True Cost of FraudSM Study shares that 28% of e-commerce fraud losses are caused by friendly fraud—more than any other method.


Sometimes, it starts from an honest mistake.

Here’s where things get tricky: Friendly fraud can include genuine mishaps.

According to J.P. Morgan’s 13th Annual 2012 Online Fraud Report, sometimes, a cardholder’s family member had access to their payment information and placed an order.

Think tech-savvy toddlers armed with their parent’s iPad and curious fingers.

Friendly fraud is especially common with subscription services.

Maybe the customer didn’t realize they agreed to recurring billing, or perhaps they forgot to hit the “Cancel” button.

In turn, they want a refund.

And this is where it gets even trickier.

Without a solid protocol in place, you’re more likely to lose the chargeback—and money that is rightfully yours.


Is it possible to prevent friendly fraud?

In a perfect world, all types of fraud could be stopped.

But in real life, it comes down to preparation.

Merchants can take steps to reduce their vulnerability to friendly fraud, and ultimately, overall chargebacks.

Here’s how to make it happen:

  1. Clarify your Terms & Conditions. From the get go, be extremely clear about the nature of the transaction. For cardholders with more dishonest intentions, this can double as a front-line deterrent.
  2. Verify customer identity. According to the 2016 LexisNexis® True Cost of FraudSM Study, this is the biggest challenge for remote merchants. Research recommends adopting a combination of identity verification practices, such as address validation and device identification. While it may not reduce fraud attempt, it can pump the brakes on successful fraud transactions—and all the hits you’ll take.
  3. Require customer action. For example, activation links and confirmation codes can let the customer verify their next move. Document these actions. As a result, you will have traceable proof.
  4. Personalize your service. Communicate with the customer like your business depends on it. (Hint: It does.) Prioritize questions, concerns, and other issues. By making it easy to get in touch, you’ll create less space for misunderstandings.
  5. Require delivery confirmation. Aside from real-time tracking, this service provides the exact date and time an order was delivered. Take it even further with signature confirmation upon delivery. With this type of evidence, you’ll be more likely to win a chargeback on supposedly missing items.

Limiting and handling chargebacks is a job within itself.

Yet, if you want to make money and grow your business, it’s crucial to patch up these loopholes.

That’s where we come in.

As a business owner, your plate is already full.

You don’t have the time to figure out how your procedures can be improved and protected from friendly fraudsters.

We have your back, though.

This stuff is our thing.

For more than 10 years, we have helped businesses like yours solidify effective systems for avoiding chargebacks in the first place.

And if chargebacks do happen? Our team of financial pros will simplify the process and fight on your behalf.

Now, that is what we call friendly.

To protect your business while saving money, call us at 1-888-256-2845 or get in touch at

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