Recurring Billing

What is Friendly Fraud?

Friendly Fraud or Chargeback Fraud occurs when a consumer purchases a product/service online using a credit card and later claims a chargeback for the same instead of raising a refund from the merchant.

What does Friendly Fraud look like? How’s it different from Chargeback Fraud?

Friendly Fraud typically happens when your customer is not satisfied with your product/service; some examples could be the shipment didn’t reach in time or there was a discrepancy between what was agreed upon to that of what was delivered.

When the customer is honest about a reasons for the chargeback claim, it is deemed a ‘friendly fraud’. But in recent years, after the surge of e-commerce and cloud products, the occurrence of such friendly frauds have risen. Fraudsters and cyber attackers use this dispute process to claim a chargeback despite having received the goods/services. Such dispute claims with malicious intent are labeled as Chargeback Frauds.

The effects of such fraud are beyond just the cost of goods. There are other additional implications such as:

  • Additional chargeback fees.

  • Loss of transaction fees.

  • Overhead expenses to dispute charges.

  • The threat of being listed as a high-risk merchant.

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How can you minimize Friendly/Chargeback Fraud?

Chargebacks are often thought of as an inevitable evil that businesses have to live with, but it can be minimized to a fair degree by getting a few basics right:

  • Notification to customers before every recurring payment.

  • Having a mechanism to capture goods/services delivery.

  • Enabling customers to claim refunds or cancellations easily to avoid chargebacks.

  • Regular and timely communication with your customers.

  • Use of a billing system software to detect any malicious behavior and automatically block such customers.

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