Friendly fraud, a term that encompasses various types of chargeback disputes, is becoming increasingly prevalent in the e-commerce landscape. Credit card experts highlight the challenges in identifying friendly fraud, as many consumers may not have malicious intent when disputing transactions. For instance, a customer might not recognize a merchant's name on their credit card statement and file a dispute, which is legally justified under the Fair Credit Billing Act. However, this scenario can still be categorized as friendly fraud. A recent Socure report reveals that 29% of individuals who admitted to first-party fraud claimed it was accidental, while others cited economic hardship or learned behavior from peers. Merchants bear the brunt of these disputes, facing significant financial losses due to chargebacks. The Merchant Risk Council reported that 94% of its members encountered first-party fraud within the last year, resulting in $89 billion lost by merchants, underscoring the urgent need for better fraud detection and prevention strategies.
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