The Hidden Problem of Friendly Fraud

Monica Eaton-Cardone has been featured as’s “Guest Perspective” this month, discussing the widely misunderstood topic of friendly fraud. Eaton-Cardone explains that although the name may imply congeniality, there is nothing friendly about it at all. Friendly fraud takes place when cardholders file chargebacks through their banks, when they did in fact place and authorize the transaction.

As Eaton-Cardone discusses in detail, there are ways that customers can commit friendly fraud both intentionally and unintentionally. When consumers file chargebacks due to confusion over their bank statements or the purchase being made by a child or family member, it is accidental friendly fraud. However, when a customer makes a purchase with the intention of receiving a refund and keeping the product, this is known as cyber shoplifting.

The importance of understanding friendly fraud and its repercussions is rising, especially in Europe, with the rise of eCommerce transactions. “In Europe, e-commerce is growing at close to 20 percent per year—faster than the U.S.—with revenues in 2015 expected to reach $202 billion.”

Eaton-Cardone stresses the urgency that must be applied to preventing and fighting back against unwarranted chargebacks. “Globally, the actions of ‘ordinary’ consumers are costing merchants $11.8 billion each year in friendly-fraud losses according to Visa, compared to $2.7 billion in identity theft.”

“In 2014, each dollar of fraud cost the merchant $3.08—a figure that’s rising and threatening to overwhelm businesses.”

These are not the only alarming numbers that Eaton-Cardone brings to the attention of merchants. Friendly fraud is becoming increasingly alarming as it has been reported that 86% of cardholders bypass the merchant all together and file transaction disputes with their banks. But fraudsters don’t stop there. Eaton-Cardone reports that according to Visa, 40% of cardholders who fraudulently file chargebacks will do it again within 2 months’ time.

Eaton-Cardone not only discusses the risks of ignoring friendly fraud, but also suggests a two pronged approach in dealing with these types of disputes: defense and offense. To read all about her methods for controlling fraud and fighting chargebacks, read the article in full.