Friendly fraud

As of February 2020, there are over 2.8 billion credit cards in the world. It is a result of an increased interest of users in virtual banking and encouraging customers to make purchases online provided by banks. Despite all attempts by financial institutions to improve the security of all participants in an online transaction, the risk of fraudulent transactions is still high.

One example of improper gain is a friendly fraud.

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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 sending the goods, declare that they did not make the payment.

At the same time, they either ask for a refund from the business owner or write an application to the bank, claiming that their data was stolen.

The refund procedure can take several months and most often the decision is not made towards 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 of all, use the Verified by Visa and MasterCard SecureCode programs. They are additional security measures for online payment processing. The merchant will be able to significantly reduce the number of chargebacks and losses caused by friendly fraud.

We also advise you to process all transactions with activated 3D-secure technology. It provides for entering a one-time secret code when making a payment, which comes to the cardholder’s phone. In this case, in the case of fraudulent transactions, the entire responsibility lies with the issuing bank.

When shipping goods to customers, use the 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 client when purchasing with a credit card, with the address of the cardholder according to the issuing bank.

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

Be sure to keep documents confirming the fact 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, the delivery tracking, and receipts. Post the refund terms on the website and make sure your customers are familiar with them.

Take the opportunity to create a “blacklist” that will block payments by stolen card numbers and will contain a list of unscrupulous customers who have previously committed fraudulent 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 fraudsters. According to forecasts, by 2023, losses from fraud will amount to $ 130 billion. The methods listed above will certainly help to avoid many problems in processing.

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