What Is Friendly Fraud?

Friendly fraud sees a cardholder file a chargeback against a transaction made on their account, sometimes with the explicit knowledge that they received the product or service.

While it can happen following a genuine mistake, friendly fraud covers both accidental fraud and malicious fraud.

The challenge lies in proving that a cardholder acted maliciously to defraud a company.

Five Examples of Friendly Fraud

Here are some examples of what is considered friendly fraud:

1. Unintentional Friendly Fraud: When a customer makes a purchase but requests a refund from the bank due to either not recognising the transactions in their bank account or forgetting it entirely.
2. Intentional Friendly Fraud: An act of genuine fraud. Here, a consumer makes a purchase knowingly but still requests a refund from the issuing bank.
3. Merchant Error: The issue lies with the merchant with a range of possible reasons such as lack of descriptors on a bank statement, missing products, delivery issues, etc.
4. Family fraud: also known as shared card fraud. An unauthorized purchases is made with a card that is not directly administered by the cardholder e.g: a child buying in-app purchases for a mobile game using their parents’ card.
5. Policy Abuse Fraud: Given the demand from consumers for a seamless returns policy, some buyers will abuse a merchant’s availability of refund requests.

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