3 ways business owners can prevent friendly fraud

Friendly fraud is on the increase as online shopping becomes more popular. Read our guide on what it means and how to help prevent it – or call Unique ID:321148/08000294864* to find out how our solutions and services can best support your business.      

Friendly fraud, or first-party fraud, happens when a customer makes an online purchase for a product or service using their credit card, but later contacts the credit card issuer to dispute the charge.

Confusion over things like the status of an order or how the refund process works can cause customers to raise a dispute with their issuer

Friendly fraud differs from traditional third-party fraud, which involves someone using another person’s details to make a fraudulent transaction. In fact, in many cases friendly fraud claims may be made for genuine reasons and can be caused by several different factors.

This type of fraud has been on the increase in recent years as online shopping and card-not-present transactions have become increasingly common – statistics suggest that for e-commerce merchants, friendly fraud may now account for a higher percentage of fraud losses than traditional fraud1.

What causes friendly fraud, and what can business owners do to help prevent it? Here’s what you need to know.

Common causes of friendly fraud

Customer confusion

Confusion over things like the status of an order or how the refund process works can cause customers to raise a dispute with their issuer. For example, if a customer experiences a delay in an order being delivered they may contact their issuer stating that they have not received the goods that they paid for. Another example is a customer who has already requested a refund from the merchant, but contacts their issuer to dispute the transaction because they haven’t yet received the funds back.

Familial fraud

Family members using shared accounts can lead to purchases being made and then later disputed by the account owner. This is especially common where children or teenagers have access to an account and can make a purchase without the cardholder’s knowledge or approval at the time.

Buyer’s remorse

General financial pressures can cause customers to raise disputes for purchases that they have willingly made. Customers may change their mind after making a purchase, driven by a desire to recoup the funds that they have spent, and contact their issuer to do so.

Payment fraud

What can I do to prevent friendly fraud?

As friendly fraud can often occur for genuine reasons, it’s impossible to prevent it completely. However, there are a number of steps that you can take as a business owner to help tackle the issue. Remember it’s also in your interest to resolve disputes and create positive outcomes for the customer where possible – this will help to make it more likely that the customer will return to you for repeat business.

1. Make sure you’re communicating clearly

  • Increase the visibility of your T&Cs so that your customers understand their rights and what to expect
  • Provide prompt email confirmations, package tracking, and delivery notifications

2. Be proactive in your customer service

  • Make it easy for customers to get in contact and to request returns
  • Communicate any delivery delays, and extend returns policies if necessary 

3. Understand your customer

  • Make sure your processes align with what your customers expect
  • Look for patterns in buying habits so that you can spot unusual activity
Payment fraud

Helping you to take payments securely

For more useful information on chargebacks and retrievals, check out our dedicated help page.

Alternatively, speak to our experts to find out how our range of payment solutions can help your business.

  • Call us on Unique ID:321148/08000294864 
  • *Monday to Friday, 9am – 5pm