In order to have successful business operations, every company or organization needs to keep an eye on every element that makes those operations a success. From marketing, sales, engineering, accounting, HR to security, business can’t be successful if all of those elements are not doing as well as the others. While most of the businesses try to keep all of them in balance, a lot of them still don’t pay as much attention to the area of security as they should. Fraud and cyber attacks have become an ever present threat that can impact any business or organizations, which is why it is no longer possible to keep your head in the sand and ignore the threats. Since the start of the Covid-19 outbreak, the volume of cyber-crime and cyber-attacks has become significantly more prevalent around the world with the rate of attacks skyrocketing by over 600% compared to previous figures.
Protecting their business from the threat of fraud should become everyone’s priority, but ecommerce shops are under bigger risk than any other sector as they are one of the favorites targets. There are various types of fraud that can impact ecommerce shops from triangulation, transaction fraud, card testing or even an account takeover, but the one ecommerce businesses find hardest to deal with.
What is Friendly Fraud?
Even though this type of fraud is called friendly , it is nothing friendly in any type of fraud as they all cause significant damage to the ecommerce store. It is called friendly because it is conducted by legitimate cardholders and not by fraudsters using stolen card or payment details. SEON’s view on friendly fraud separates them into 5 different categories ranging from accidental to malicious fraud.
Unintentional Friendly Fraud: This happens as a genuine mistake as the customer either didn’t recognize the transaction on their bank account or they completely forgot about the purchase.
Intentional Friendly Fraud: This type of fraud happens when a customer deliberately requests a chargeback from their card provider even though they have knowingly made a purchase.
Merchant Error: According to Braintree, this happens when a customer requests a chargeback because of merchants issues like a delayed delivery, missing products or even unclear merchant descriptors.
Shared Card Fraud: Also known under the name family fraud, CNBC explained that this type of fraud happens when unauthorized purchases are made with the shared card, often by the child that is using parents devices.
Policy Abuse Fraud: This happens when customers take advantage of flexible return or refund policies which is why it is imperative your return policy is accessible and easy to understand.
Protecting your business from friendly fraud
Main problem with friendly fraud is that customers don’t try to contact the merchant in order to resolve the issues but they go directly to the bank requesting a chargeback. This can cause even bigger financial damage to the merchant than just losing a revenue from sale, as they would have to pay a chargeback fee and in the worst case scenario the bank might terminate their account as they consider them a high risk. This is why it is extremely important that merchants are easily reachable and their contact info is clearly stated on their website.
Second step you need to do is to update your return policy and clearly state all the terms and conditions that the customer is required to follow in order for you to process a refund. It needs to be easily understandable and more importantly accessible to prevent unwanted chargeback just because customers didn’t have access to your return policy.
Next, you should implement a cybersecurity protocol that will help protect your business from different types of fraud, including friendly fraud.
86% of chargebacks are likely causes of friendly fraud which means 86% of chargebacks could’ve been prevented by clear return policy and open communication between merchant and customer.