Friendly fraud – Ways to prevent it


In February 2020, there are more than 2.8 billion credit cards in the world. It results from increased user interest in virtual banking and encourages customers to make online purchases provided by banks. Despite all the attempts by financial institutions to improve the security of all participants in an online transaction, the risk of fraudulent transactions remains high.

An example of improper gain is friendly fraud.

Friendly fraud

Imagine a situation where a customer purchases a product or service and pays by credit card online.

An ordinary user, after making a payment, receives the goods and leaves a review on the site. Fraudsters, after the merchant has sent the goods, declare that they have not made the payment.

At the same time, they demand a refund from the business owner or write a request to the bank, claiming that their data has been stolen.

The reimbursement procedure can take several months and most often the decision is not made with the merchant.

Thus, the fraudster receives the goods for free, and the merchant – a blow to his reputation.

How to protect yourself from friendly fraud?

First, use the Verified by Visa and MasterCard SecureCode programs. These are additional security measures for online payment processing. The trader will be able to considerably reduce the number of chargeback and losses caused by friendly fraud.

We also recommend that you process all transactions with 3D secure technology. It provides for the entry of a one-time secret code during a payment, which arrives on the cardholder’s phone. In this case, in the event of fraudulent transactions, full responsibility lies with the issuing bank.

When shipping goods to customers, use Address Verification System (AVS) which is another anti-fraud method. It is an electronic system that allows you to verify the address provided by the customer when purchasing with a credit card, with the address of the card holder according to the issuing bank.

Thus, it becomes possible to verify whether the person paying for the purchase is the real cardholder.

Be sure to keep documents confirming that the buyer received the goods in full accordance with the declared characteristics.

Also, keep all information about the transaction and your consumer, including email correspondence, delivery tracking, and receipts. Post the refund terms on the website and make sure your customers are aware of them.

Take the opportunity to create a “blacklist” that will block payments by stolen card number and contain a list of unscrupulous customers who have already committed fraud transactions with payments on your website.

The bottom line

In this article, we have analyzed the methods of dealing with friendly fraud. It is one of the most common methods used by scammers. According to forecasts, by 2023, losses due to fraud will amount to $ 130 billion. The methods listed above will definitely help to avoid many problems with the treatment.

Finally, we would like to note that the best anti-fraud mechanism is still a reliable payment processor that can competently apply all security tools and minimize losses.

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