Friendly Fraud in E-Commerce

Published by Marta Jajic on 18. July, 2024

Friendly Fraud in E-Commerce - Challenges and Solutions

In the rapidly expanding realm of e-commerce, friendly fraud is emerging as a significant challenge for businesses. Also known as 'chargeback fraud,' occurs when a consumer makes an online purchase with their credit card and then requests a chargeback from the issuing bank after receiving the goods or services.


What is Friendly Fraud?


Friendly fraud typically involves the cardholder disputing a charge to their credit card, even though the transaction was legitimate. Unlike traditional fraud, where stolen financial information is used to make unauthorized purchases, friendly fraud is committed by the actual cardholder. Statistics are showing upward trend for this:

  • Reports suggest that friendly fraud has been rising, with e-commerce businesses experiencing up to a 41% increase in such incidents over recent few years.
  • In the US alone, friendly fraud is responsible for approx. $11 billion in losses annually.


Prevention and Mitigation Strategies?


  1. Clear communication - Ensure that all communication, from marketing to billing, is clear. Use detailed product descriptions and transparent billing practices to minimize misunderstandings and disputes.
  2. Robust verification processes -Implement tools like 3DS, AVS (Address Verification Service) and CVV checks to verify the cardholder's identity and reduce unauthorized transactions.
  3. Tracking and delivery confirmation - Use delivery confirmation for all shipped items to prove that the goods were delivered
  4. Responsive customer service - Offer a robust customer service experience to resolve disputes before they escalate to chargebacks.
  5. Payment infrastructure - When possible insource solution in order to control data and use it for prevention


How to Avoid Friendly Fraud?



  • Educate your customers - Regularly educate customers about how chargebacks work and the implications of fraudulent disputes.
  • Flexible return policies - Offering a flexible return policy can help reduce the incidence of chargebacks as customers feel more comfortable directly contacting the merchant to resolve issues.
  • Use of data analytics - Leverage data analytics to identify patterns that might indicate friendly fraud and implement more targeted prevention techniques. How? By using your own payment infrastructure on the acquiring side, like our own IPG39 or Switch39


While friendly fraud presents a growing challenge in the e-commerce landscape, understanding its dynamics and implementing strategic measures can significantly mitigate its impact. By fostering transparency, enhancing customer interaction, and utilizing technology-driven solutions, businesses can protect themselves against this modern-day menace and enhance their operational resilience.


Can we help? Yes we can! Check our portfolio on the website or reach to us at sales@field39.com and let's talk.

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