Friendly Fraud

Simple definition
When a shopper wrongly starts a chargeback.
Expanded definition
A situation where a legitimate transaction is disputed by the cardholder, often due to forgetfulness or misunderstanding.


Merchants strive to keep customers satisfied. But in some cases, "satisfied" customers take advantage by committing friendly fraud – unlawful chargebacks on legitimate purchases. While disruptive, understanding techniques for uncovering friendly fraud can help merchants separate deceitful cardholders from genuine disputes.

Defining Friendly Fraud

Friendly fraud refers to chargeback abuse where cardholders request reversals on transactions they did actually make or intend to make. Motives include:

  • Buyer's remorse - Purchases they changed their mind on
  • Duplicate orders - Items they forgot they already bought
  • Theft - Using stolen payment details
  • Fraud - Pretending transactions are unauthorized
  • Rewards hacking - Churning purchases for points/cash back

Since banks often automatically side with cardholders, friendly fraud causes costly headaches for merchants.

Detecting Friendly Fraud

Look for these indicators of a friendly fraudster:

  • Suspicious timing - Soon after transaction when buyer's remorse likely
  • First-time offender - No history of disputes with your business
  • Odd patterns - Many small charges reversed unlike typical fraud
  • Good history - Otherwise legitimate purchase history
  • Story gaps - Evasive explanations or details not adding up

No single indicator proves friendly fraud. But analyzing circumstances and patterns can reveal deceptive disputes.

Combating Friendly Fraud

Proactively fight friendly fraud through:

  • Customer education on policies before purchase
  • Visible terms and conditions around refunds or returns
  • Thoughtful representment with compelling evidence
  • Blocking serial abusers of policies after warnings
  • Advanced analytics identifying suspicious activity

With vigilance, merchants can curtail fraudsters and maintain a smooth customer experience.

The Bottom Line

Friendly fraud erodes merchant revenue through ill-intended disputes. But by exposing telltale indicators and strengthening prevention, merchants can thwart deceitful chargebacks while still prioritizing genuine satisfaction.