Identity theft and consumer fraud are synonymous with internet scams. When it comes to fraudulent online activity, the most common offender is seen as a vicious criminal.
However, a different type of fraud is boasting an explosive growth rate when it comes to online transactions – and the criminal behind the scenes is one who is very rarely recognised – the consumer.
“Friendly Fraud” is the term coined to define the act of a consumer making an online purchase and then contacting their bank, stating that the transaction was not their doing, resulting in a chargeback. This has become the number one enemy to ecommerce merchants today.
It is difficult to target or treat because the criminal in these cases is a consumer who is normally the least suspected; protected behind a guise of rationale, subjective interpretation, or even naive ignorance of the fact that there are huge consequences for their actions.
Stable merchant processing is a vital ingredient to ecommerce success and chargebacks can create serious liabilities where this is concerned. In today’s marketplace, merchants must consider proactive efforts that help fight friendly fraud and reduce their likelihood to become a target.
Five top tips to deal with the threat of friendly fraud this Christmas and beyond:
1. Offer 24/7 (online) support options. Merchants who sell through websites but don’t offer online support will have a higher rate of friendly fraud than those who do. We live in an age of instant gratification and a consumer is more likely to contact their bank if the merchant is unavailable to assist with a refund request or cancellation.
2. Obtain proof of delivery on any product shipped. Not obtaining a delivery confirmation receipt leaves merchants open for the claim that a product was not received. At the end of the day, it is the consumer’s word against yours – and typically banks will rule in favour of the consumer, regardless of whether they received the product or not.
3. Keep in good communication with your customers, and document any customer interaction. A monthly newsletter will remind them you are there to assist with any resolution they may require, and work to help lessen the necessity for them to contact their bank. Good documentation of your interactions can also make the difference between winning or losing a chargeback case.
4. Monitor suspicious activity. Multiple product orders using the same shipping address but different credit cards, or IP Addresses that don’t match the billing address are usual suspects to friendly fraud.
5. Fight illegitimate chargebacks. One of the best ways to reduce friendly fraud is to make sure these customers are educated of the consequences involved with their crime. Without taking responsibility to fight back as a legitimate merchant, you are inadvertently endorsing this behaviour. A side benefit is that you will win back some of the revenue you initially lost as a result!
Friendly fraud is not always attributed to criminal or malicious intent. It is probably more likely than not that merchants end up victims of these incidents due to consumer ignorance or negligence – customers don’t want to take extra time to contact the merchant, they can’t find the information they need to reference for their order, they forgot to return a product within the time frame…and the call to their credit card company is a quick solution with seemingly no consequence.
It has taken years of education on the chargeback process to educate consumers about its existence. The good news is there are a lot more merchants than there are credit card companies – working together to correct this problem is key.