What is Friendly Credit Card Fraud, & How Can it Be Prevented?

What is Friendly Credit Card Fraud, & How Can it Be Prevented?

Friendly fraud has been on the rise, and it costs merchants billions of dollars a year in losses and may account for nearly half of all chargebacks.  I laugh at the term "friendly fraud" because there's absolutely nothing friendly about it.

Friendly Fraud affects all merchants.  It occurs when a customer buys something online, and then they claim that they either did not receive the item or did not order it in the first place. Instead of contacting your company directly and complaining to get a refund that way, the customer bypasses your friendly customer service entirely.  They reach out directly to the credit card company and get their refund by charging back. (See what I mean about it not being very friendly?)

The problem is getting worse.  Consumers have become aware of the chargeback process, and often don't keep their patience long enough to handle a problem through the company who provided the goods or services. Frequently, customers will reach out to a company, and if they don't receive an immediate response or an immediate resolution, they are already on the phone to the credit card company to escalate the issue. This is one of the reasons credit card companies have a waiting period to dispute a charge that is not identity theft or card fraud.

While customers have become savvier and less patient, merchants have become disillusioned with even attempting to dispute a chargeback, because they can be so difficult to win. This has created an environment where your own customers start costing you big money in losses and chargeback fees, which is basically the equivalent of shoplifting.  Like I said, not very "friendly."

You may not be able to stop all Friendly Fraud from happening, but you can make efforts to avoid it as much as possible.


1- Introduce your Billing Name to Your Customers

Make it crystal clear to your customers the name of the company that will be making the charge to their credit card. This alone will save you money and chargebacks. This goes for affiliate programs too, who don't tell their affiliates what name will be on the cheques or wires that will be used to pay them. It creates confusion, fear, and anger when people do not recognize who they are paying, and they are far more likely to recognize what they purchased if you tell them what your company name is or your merchant account label. We all know that a lot of customers do not pay any attention to fine print, but many do, so use it to your advantage and introduce your company during the checkout process.

2- Avoid Unexpected Charges

There are parts of the online industry that do not have great reputations of being open and honest. Some companies rely on customers throwing up their arms and giving up to make more money. Don't be that company. Tell people how much they're going to be billed, and when they will be rebilled.  If there are additional billings or services that will be charged for, make that clear as well. Yes, it means you will probably make less money.  But, having a bunch of pre-checked cross sales and the resulting chargebacks later is a recipe for a terminated merchant account and that's going to cost you a whole lot more.  Just because you can do it, does not mean you should.  Be smart about it.

3- Make it Easy to Get a Refund or Cancel

It’s as simple as making it clear to your customers what your refund policy is, and how easy it is to get one. Some businesses thrive on it being difficult for people to cancel, and its built into their profit margins that a certain amount of people won't bother because it’s too difficult.  If you do have a refund policy and people know about it, they are more likely to buy, and they are more likely to contact you if there is a problem instead of calling the credit card company. The same goes for cancellations. If you make it easy to sign up online, you should make it just as easy to cancel online. If they are required to make a phone call to cancel, they may fear a high-pressure sales associate and call to chargeback instead.

4- Stand Behind Your Product and Service

Did you know that adding a "Money Back Guarantee" or a "Satisfaction Guarantee" increases sales and that most people never take advantage of it? It puts people at ease and when you make them feel more comfortable. Making money is about building trust with your customers. Think of trust as wallet lubricant.

A friend of mine told me a story about buying a car and getting a "free trip to Las Vegas" with the purchase. They were going to buy the vehicle anyway, but it seemed like a great deal to get a free trip with it. After the purchase they attempted to redeem the voucher.  It was provided by a company unassociated with the car dealership.  None of the process could be done online, via email, or over the phone. The travel company forced the customer to do everything through snail mail. After months of back and forth trying to redeem the Vegas trip, they gave up out of frustration.  They told their friends and family about the experience which in turn would result in none of them ever buying a car from that dealership, either.  All because of an intentionally difficult redemption model for the purpose of driving profits.

5- MobiusPay Chargeback Resolution Service

Even if all these preventative measures fail to stop your happy go lucky customer from calling up their credit card company, MobiusPay's Chargeback Resolution Service proactively stops disputes before they become a chargeback.  MobiusPay aggressively works to prevent losses, fines, and penalties, and potentially saving your entire merchant account.  No need to pay for chargeback mitigation services, we provide this to clients at no additional cost, because that is the friendly thing to do.

If you need preventative measures against chargebacks, drop us an email for a commitment free discussion at info@mobiuspay.com 

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