Online business organizations face numerous risks that can negatively affect their reputation, revenues, and people’s trust. Friendly fraud and friendly fraud chargeback are the two most prominent ones. Most business people consider them to be the same problem. But the reality is that they differ from each other in intent, execution, and prevention strategies. As a business owner, you should be able to distinguish between these two. It will enable you to effectively identify the early red flags of friendly fraud or chargeback fraud and take the right preventative steps. Let’s get comprehensive knowledge about it & analyze the difference between these two fraudulent activities.
What is Friendly Fraud?
In simple words, friendly credit card fraud happens when a customer purchases goods and services with their credit card and disputes the transaction later on, despite receiving them. In most cases, a legitimate cardholder (not a third-party online scammer) makes such a transaction. It is not done with malicious intent. It happens due to confusion, misunderstandings, and forgetfulness. For example, a family member used the individual’s credit card to make a transaction without informing him. Regardless of the reason, it escalates to a chargeback. It means that the company loses the sales amount and repays the requested money to the customer with additional funds.
What is a Fraud Chargeback?
In most cases, chargeback fraud is intentional. It is also called cyber shoplifting. Customers purchase a product, receive and keep it, and then claim the money spent. This type of fraud is a part of organized crime. Scammers exploit it to get their money back from merchants. For example, a swindler buys an expensive product and claims his bank card was stolen. Always keep in mind that it causes tremendous financial losses to Internet-based businesses.
Key Differences Between Friendly Fraud & Chargeback Fraud
Intent Behind the Fraud
Friendly fraud happens without any malicious intention. A customer purchases a product and disputes the transaction due to a misunderstanding, confusion, etc.
On the other hand, chargeback fraud is intentional. A customer buys a product and disputes the transaction later to get his money back. It amounts to illegal online financial embezzlement.
Consumer Awareness
Friendly fraud chargebacks take place when family members make a purchase using an individual’s bank card. In other scenarios, customers fail to recognize the transaction.
In a chargeback fraud, a customer is fully aware of the transaction. He raises the money back claim knowingly to cheat the merchant or bank.
Response and Resolution
Companies can sort out friendly fraud by talking to customers. They just need to remind them of the transaction. Chances are higher that they will admit their mistake and cancel their money back claim.
Business organizations often face difficulties dealing with chargeback fraud. Despite sharing invoices, shipping confirmations, communications, and other evidence, customers are unlikely to withdraw their money return claim.
Legal Implications
Generally, friendly fraud chargebacks are not legally pursued if the money is minimal. Companies often consider them a customer service issue.
Business organizations often gather evidence about chargeback fraud to pursue scammers legally.
Impact on Companies
Friendly fraud is costly to companies. But they can manage it with customer service, account recognition tools, and adequate transaction labeling.
Repeated cases of chargeback fraud are quite harmful to companies. Payment processing firms can suspend their account or blacklist them completely from their platform if they refuse a customer’s request for money reversal.
How to Prevent Friendly Fraud and Chargeback Fraud?
Verify Customers
To minimize the cases of friendly fraud and chargeback fraud, verify customers. Instruct them to register on your shopping portal and provide essential details, such as their original name, Email ID, phone number, residential and shipping address, etc. Confirm their identity with OTP or government-issued documents. Never allow anyone to buy products and services from your website without registration. It will automatically prevent scammers from engaging in chargeback fraud.
Confirm Customer Orders Twice
Due to the increased tendency of online shopping, customers place multiple orders for products and services back to back. Sometimes, especially during festive seasons, they resort to impulsive buying. They purchase goods and services without any immediate need. So, you must confirm their orders twice before processing them further. It will enable you to encounter fake orders from scammers & eliminate chargeback fraud.
Stay Updated About Fraud Trends
Scammers always use new tools and technologies to deceive vulnerable companies and individuals. Update your knowledge about different fraudulent activities and their prevention strategies. You will be able to identify the financial embezzlement in the beginning and stop the damage.
Clarify Your Return and Refund Policies
You should have a clear product return and money refund policies on your website. Customers can go through it while purchasing products and services online and behave accordingly.
Keep Billing Records
You should always keep the billing record for at least 90 days even after the customer has completed the purchase and paid the price. It will help you to protect your interest in the wake of a conflict and minimize the financial losses caused by friendly credit card fraud.
Fighting Fraud With Sky Recoup
At a time when online fraud continues to skyrocket, companies face difficulties in identifying and stopping scammers. Partner with us at Sky Recoup & let our experts act on your behalf. Our team has extensive knowledge about different financial fraud and preventative strategies. They can conveniently investigate scams, chase cybercriminals, and start the process of money retrieval as per the law of the land. Our help alerts you about existing threats, eliminates them, and prepares you to combat future vulnerabilities.
Conclusion
These days, friendly fraud and chargeback fraud happen in quick succession. Business people need to understand the differences between them, identify warning signals of fraud early, and take preventive steps. Following the above-mentioned recommendations will enable you to reduce the cases of friendly fraud and chargeback fraud & protect the company’s resources. Don’t forget to take Sky Recoup in this regard. We work on your behalf and protect your business from fraudulent activities.
