With a massive shift to e-commerce underway, the revenue opportunity for fighting friendly fraud is greater than ever heading into the next year.
So, what is friendly fraud? It’s any time a customer legitimately transacts with a merchant, but initiates a chargeback anyway. The reasons consumers do this can range from forgetful to opportunistic — maybe they got impatient with shipping or forgot to cancel a subscription. Or maybe they just want something for free and are hoping nobody bothers to look into the chargeback request.
The opportunity for friendly fraud has grown in parallel with online transactions. Even before digital transactions took off as a result of the pandemic, chargebacks were becoming more common. In today’s e-commerce-reliant world, friendly fraud has reached new heights. Shoppers who previously purchased in-store are now buying online, due in part to the pandemic shifting consumer behavior and because digital transactions are secure and convenient.
But more and more “friendly fraudsters" are learning about chargebacks. Last March, when travel, entertainment, and other industries were suddenly disrupted, people turned to chargebacks as an “easy” way to recoup their money for canceled trips, events or services. And now the cat’s out of the bag — people who win a dispute are more likely to dispute a charge again.
The bad news: These disputes are often inevitable because they look like legitimate transactions on the surface, making them difficult to prevent.
And the good news: These chargebacks are uniquely winnable because the merchant is not in the wrong. Effectively fighting them drives dollars to the merchant’s bottom line.
