Friendly fraud: What is it and how can businesses help prevent it

Suban Abdulla
·2 min read
Figures suggest that the rise in this type of fraud is due to online shopping and card-less transactions becoming increasingly common in society. Photo: Getty
Figures suggest that the rise in this type of fraud is due to online shopping and card-less transactions becoming increasingly common in society. Photo: Getty

Friendly fraud is on the rise as online shopping gains more popularity - but what is it and how can you protect yourself?

Described as first-party fraud, it is when a consumer purchases a product or service online using their credit card, but then later contacts the credit provider to dispute the charges.

It is different from traditional third-party fraud, which is when someone uses another persons details to make fraudulent purchases, according to Barclaycard.

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What causes friendly fraud?

Figures suggest that the rise in this type of fraud is due to online shopping and card-less transactions becoming increasingly common in society.

What’s more, for commerce merchants it may now account for a higher percentage of fraud losses compared to third-party fraud.

Sometimes customers dispute purchases they have made online for genuine reasons such as, confusion over things like the status of an order or how refund processes work.

Things like delayed deliveries or refunds, can further confuse consumers who will contact their credit providers to state they haven’t received the goods they purchased or refunds from returns.

Shared account between family members can also contribute to friendly-fraud as someone can make a purchase and the other party can dispute the purchase, for example where children and parents share an account.

Buyer’s remorse or financial pressure can also force customers to dispute a purchase they made willingly, in an attempt to get the funds they spent back.

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What can businesses do to help?

Barclaycard suggests sending email reminders with delivery details, package tracking and confirmations to help customers understand what to expect.

Communicating properly with your customers, including delivery delays and increasing the visibility of your terms and conditions (T&Cs) will also help your customers understand their rights better.

Another way to help is through proactive customer service and making it easy for customers to get in contact with your business, in case of any concerns.

Looking for patterns in buying habits and making sure your business processes align with your customers might also help you prevent friendly-fraud practices.