Disputify Blog — What is Friendly Fraud?

Friendly Fraud… You probably weren’t expecting to hear those two words side-by-side in the same context, right? The ironic thing is that “Friendly Fraud” is exactly the opposite!

So how can fraud ever have the reputation of being “friendly” I hear you asking…

I’m sure you have heard of traditional fraud…You know that guy camped up in a basement somewhere in a foreign country, wearing his hoodie, hiding behind a computer as he uses stolen identities and credit cards to make fraudulent transactions online? Yeah, well when it comes to traditional fraud, think of that guy.

What you may not be aware of though is another type of online bandit… One that is so elusive, some may even believe they don’t exist. In fact, this bandit is costing the eCommerce industry, and merchants like yourself, billions of dollars each year… Just like the Boogeyman, what’s so terrifying about them is that you never really see them coming.

This bandit is the (not so) Friendly Fraudster. The soccer mum who loves to buy yoga pants online with her credit card, the teenager who buys video games online, the full-time working professional who has expensive taste but has found a way to get everything at a “discounted price”… These are the friendly fraudsters. They look like us, but their intentions are purely nefarious.

To Put Friendly Fraud into Perspective

What does the soccer mum, the teenager and the working professional all have in common?


When making a purchase online, each of these everyday bandits are using their real names, addresses and their own credit cards.

The Friendly Fraudster is the sneakiest of fraudsters, as their purchase will usually come across as a genuine transaction, when in fact they never had any intention of paying for the goods. They will often spin up a story about their package never arriving, or that the item delivered didn’t match the website description and then file a chargeback and get their money back, along with the item they ordered.

Other Types of Friendly Fraud

Not all Friendly Fraudsters mean to rip you off, sometimes people are just a little bit forgetful. They may file for a chargeback on a transaction that they don’t remember making… We get it, it can happen. Especially in the morning, before work, when you’re breezing over your monthly bank statement you received and you haven’t had time for that first coffee yet.

The concerning factor is that irrespective of the customers intent, Friendly Fraud is eating away at your bottom line as a Merchant. A Lexis Nexis study on the ‘True Cost of Fraud’ points out that for every $1 lost to Friendly Fraud, merchants are actually losing $2.94.

This means for that $50 pair of swimmers that a customer just bought from you, and then disputed, is actually now costing you $150. Imagine the cost of higher ticket price items..

Not only have you lost the product itself (because they’re sitting in the customers’ wardrobe at home), but you’re losing out on the actual cost of that product, the shipping cost associated, and the dispute fees that the bank is now chasing you for. Ugh!

So the question remains.. How are you, as a merchant, to know that these are not all genuine claims? The truth is you’re not! Friendly Fraud is the most difficult to detect, and most fraud solutions on the market don’t pick up Friendly Fraud.

Well… How do I stop this from happening?

That’s a tough one. Banks and card associations are known for almost always siding with the customer when it comes to chargebacks, as most associations have a “Customer First” policy. Even if the merchant has evidence to prove that the customer is trying to cheat the system, this usually doesn’t make much of a difference.

Unfair right?! If a Friendly Fraudster has already caught you out, it’s usually too late. This is why it is important to be preemptive about the matter.

What are your next steps?

  • Integrate with a fraud tool that flags potential fraudsters early on
  • Have a system that allows you to separate between genuine customers and fraudsters just looking for free items
  • Have a system that helps to protect you after the fact as well

We know it sounds daunting, but you’re not on your own… Disputify has you covered!

Start your free trial today.



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