Friendly Fraud - how it can impact your business

Customers claiming that they did not make a purchase when they actually did, claiming that a family member used their credit card without their permission, saying a product did not meet their expections, or even buyer's regret - these are all examples of something called "friendly fraud", and it accounts for 20% of fraudulent disputes globally, costing companies around US$4 billion a year.

The difference between traditional and friendly fraud is that the latter is not always intentional, but it still can cost businesses a lot of money and stress in disputing and possibly investigating each claim. One restaurant owner told the BBC that it was having a "negative impact" on his business, as the card provider issues a chargeback fee of £28 plus VAT on top of the owner having to pay back the money, as well as the potential reputational damage.

While chargebacks can be a useful tool for consumers who feel that they have not received a service up to their expectations, it can also be exploited, even with the threat of up to 10 years in prison for anyone convicted of credit card fraud.

Friendly fraud can affect businesses of any size, though Visa claims that it is especially common in industries such as digital goods and subscription services, recurring billing models, high-value retail and travel, and smaller merchants who may not have the time or resources to challenge a chargeback.

Companies who are looking for ways to prevent friendly fraud and dispute chargebacks can click here for further advice.