The Difference Between Friendly Fraud vs Chargeback Fraud

If you run a business with an internet merchant account that manages the payments made on your online store, you may be familiar with chargebacks already. This is when a customer contacts the credit card company to dispute a charge. This can be for a legitimate reason, but the dispute can also be the subject of a customer’s mistake or the result of customer fraud. Accordingly, the differences between friendly fraud vs chargeback fraud is important for businesses with an online component.

If your business doesn’t have an online component, you may want to consider that the COVID-19 quarantine has drastically reduced face-to-face transactions. Getting an internet merchant account to process your customers’ payments online is crucial to stay relevant now, and it will remain an important part of any business plan even after the economy has resumed normal working conditions. This is not only because many economists believe that much of the shift to online transactions may turn out to be permanent, but also because even before the pandemic hit, online transactions were already a large and growing portion of business transactions.

Friendly fraud vs chargeback fraud

Before you blacklist a customer that you suspect of chargeback fraud, it’s important to know the differences between so-called “friendly fraud” vs chargeback fraud. Friendly fraud, refers to a chargeback that was initiated by the customer by mistake, typically because when they looked at their billing records, they did not recognize or remember making the payment in question. People who made a mistake will typically accept the verdict of the fraud case after being presented with evidence showing that the charge is legitimate.

The best way to avoid friendly fraud is to make sure that your business’s name appears on your customer’s billing statement–not the name of your payment processor. So, when you sign up for your merchant account, make sure that it will work this way, in order to drastically reduce the occurence of friendly fraud against your business.

Friendly fraud is a kind of chargeback fraud, so chargeback fraud includes friendly fraud. But chargeback fraud also includes intentional deception on the part of customers who falsely claim not to have received the product or service they ordered or falsely claim that the charge was not legitimate in the first place. These customers are a little harder to “convince” with evidence, of course. Despite being able to show that the customer received a product or used a service or that their billing history paints an accurate picture of their purchases, someone who intended to commit chargeback fraud will often still be adamant about their innocence and that your business is to blame.

The Takeaway

If you have an internet merchant account, knowing the difference between friendly fraud vs chargeback fraud can save you money and resolve issues with your payment processor. The best way to reduce friendly fraud is to make sure that your merchant account will allow your business’s name to appear on Customers who accidentally commit fraud will often be forthcoming with information that will assist them in realizing their mistake. Those who willfully commit chargeback fraud will often be defensive or ignore you altogether. While communication is not a guaranteed way to find out if someone is responsible for fraud, it can be an easy way to start resolving your issues.

To learn more about the differences between friendly fraud vs. chargeback fraud, or to sign up for a merchant account that will make sure that your business’s name appears on your customers’ billing statements, visit Charge.com or call (888) 924-2743.