All You Need to Know About Chargeback Fraud

As more people find eCommerce convenient, many business owners are on the receiving end of dishonest customers. Through illegitimate chargebacks, many businesses lose out on potential revenues. Learn more about fraud chargeback and steps you can take to prevent it.

What is Friendly Fraud?

A customer may dispute a transaction based on various reasons. However, not all chargebacks filed by customers are legitimate. There are three major types of fraud that can lead to chargebacks:

• Legitimate disputes
• Friendly fraud
• Criminal fraud

Criminal fraud is the use of stolen credit card numbers to make purchases. Although not a type of fraud, legitimate disputes also lead to chargebacks. This happens when a customer has legitimate grounds for filing a chargeback, such as receiving different goods from what they purchased online.

Friendly fraud occurs when a customer makes a genuine purchase but does not recognize the charge in their bank statement. It may seem accidental, but not all friendly fraud is accidental. Common reasons for fraudulent chargebacks include:

• The buyer no longer wants the purchased product but doesn’t want to inform the merchant
• The buyer did not understand the purchase process
• A family member used the cardholder’s information for purchases without notifying the owner of the card
• The buyer hoped to get goods for free

Overall, when the buyer disputes a transaction with their bank without contacting the merchant, it’s considered friendly fraud, especially if the intention is to get something for free. Essentially, the buyer abuses the chargeback process to obtain goods for free.

Preventing Chargeback Frauds

Any chargeback can be damaging to your business. Taking the following steps will help you prevent friendly fraud in your business.

Implement Digital Fraud Solutions

A digital fraud tool can prevent fraud before it happens. These tools make it possible to stop any suspicious transactions. Ethoca chargeback solutions include using these tools to help you discover trends that lead to chargebacks. Find a good solution provider to help you uncover the trends.

Good Customer Service

To avoid legitimate chargebacks by disappointed customers, you should train your staff to respond to customer issues quickly. Good customer service can prevent friendly chargebacks that arise from customer confusion.

Additional steps you can take to prevent friendly fraud include

• Advertising that matches products
• Maintaining a blacklist
• Keeping accurate data
• Offering refunds

Conclusion

There is nothing friendly about friendly fraud. Your business will still lose money, and sometimes the product too. Implement the recommended steps to ensure your business is immune to these types of chargeback disputes.