The first thing people think of, when it comes to fraud, is definitely not the word “friendly.” However, “Friendly fraud” is a term used to reference a specific type of chargeback in which the customer claims either that they did not receive a purchased item, or that they never made a purchase in the first place.
Overall, fraudulent chargebacks are on the rise, generating losses of over $30 billion and presenting serious issues that need to be addressed by e-commerce merchants. Those losses don’t even take into account the additional money spent on dealing with chargebacks, or the costs of time and labor used when addressing the issue.
Resolving complaints quickly and efficiently makes customers less likely to try and resolve their issues at the bank.
Even though some chargebacks are legitimate and cannot be avoided, friendly fraud chargebacks should be disputed with vigor. They often initially result from legitimate transactions, where a customer fails to recognize a charge on their bank statement or regrets their purchase at a later point. They may then decide to get in touch with their bank to have the charge reversed without going to the merchant first to inquire about the charge or ask for a refund.
So, while the chargeback might not be intentionally fraudulent, the consumer is still misusing the process and this should be addressed. To keep their customers happy, banks have eliminated fees and minimum required payments associated with chargeback requests, so a chargeback is sometimes the go-to response.
Almost any purchase could end up being a friendly fraud transaction. This is because friendly fraud stems from valid transactions. Security measures that are in place, such as CVV and AVS, do not prevent it, and even longtime customers can do it. To reduce the likelihood of this type of fraud occurring, merchants can do the following:
Make Descriptors Easy to Identify
When people look at their credit card statements, if they do not recognize where a charge came from, they are more likely to think it is a transaction that shouldn’t be there. By making your store or business name a recognizable part of the descriptor that appears on their statements, consumers can easily see the origin of the charge.
Maintain an Ethical Business
Be transparent about what your customers are getting and set realistic expectations about services and products that you provide. Customers who feel misled may believe it is pointless to come to you first to take care of issues that they encounter. By avoiding making promises about your services or products that do not hold up, you could see fewer chargebacks and less friendly fraud overall. Also, customers are more likely to treat your business well if you are honest and ethical with them.
Offer Fantastic Customer Service
By offering excellent customer service, 24/7, you can decrease the amount of friendly fraud coming your way. Resolving complaints quickly and efficiently makes customers less likely to try and resolve their issues at the bank. This is beneficial to you as a merchant, allowing you to deal with situations before they become chargebacks.
Fulfill Orders and Return Shipments Smoothly
While delays in shipping can happen, if they are too long, a customer may start to doubt the shipment is coming at all. If this happens, they have a much higher likelihood of requesting a chargeback. The speed at which you fulfill orders can help, as well as having tracking available for items. Returns should also be tracked to help expedite the process and get refunds to customers more quickly.
Also, easily accessible methods of communication with your customers and a faster response rate can be helpful in reducing chargebacks overall. Notifying customers when orders are processed, as well as when recurring payments are being charged, both in advance and after the transaction occurs, can decrease chargebacks.
Consider Outsourcing for Chargeback Resolution Services
Some companies are better with fighting chargebacks than others, and it’s important to find one that offers the services and information you need in a cost-effective and efficient manner. We, ourselves, strive to embody these qualities, answering questions about the tools needed to deal with chargebacks and how to adopt best practices to battle friendly fraud successfully. Merchants should also find out if a service offers immediate responses to incoming chargebacks.
Using VISA's COVID-19 Excessive Disputes Program
Visa operates a suite of compliance programs that are focused on minimizing the impact excessive dispute rates may have on the payments ecosystem. Given the current crisis environment, Visa is modifying the programs to ensure that there is less burden on our clients and merchants impacted by the pandemic.
The Visa Dispute Monitoring Program and Visa Fraud Monitoring Program will both be suspended for merchants in the Travel & Entertainment merchant category codes through the July compliance cycle. Risk will not be sending program identifications to acquirers for T&E merchants during this time period.
The Visa Acquirer Monitoring Program will also be suspended for disputes arising from T&E merchants through the July compliance cycle, with Regional Risk teams empowered to suspend and/or waive VDMP or VFMP fees for non-T&E merchants that can demonstrate they have been directly impacted by the pandemic.
Jonathan Corona has 15 years of experience in the electronic payments industry. As MobiusPay’s EVP, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards set forth by the card associations. MobiusPay specializes in merchant accounts in the U.S., EU and Asia. Follow them @MobiusPay on Twitter, Facebook and IG.
