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What is friendly fraud & how can you deal with it?

What is friendly fraud and how can you deal with it?

‘Friendly fraud’ is a contradiction in terms. There’s nothing friendly about fraud, especially when your customer is behind it. 

Sometimes also known as ‘first-party fraud’ or ‘chargeback fraud,’ friendly fraud is when a legitimate customer contacts their issuer to chargeback a card purchase, claiming they don’t recognize or didn’t make it. They then keep the goods or benefit from the service purchased without paying for it.

Around one-third of all disputed payments are friendly fraud, according to a 2018 study by Javelin Research. That’s no small problem, given that chargebacks are a $30 billion a year headache for the industry.

Friendly fraud is worse for merchants selling online or through mobile channels. 41% of their chargebacks are attributable to friendly fraud compared to 35% for physical store-based merchants. In-app digital goods merchants have it harder still. Nearly half of the chargebacks they experience are thought to be the result of friendly fraud.

Friendly fraud vs chargeback fraud

Chargeback fraud and friendly fraud are essentially the same thinking, however, the term friendly fraud is used to describe when a customer has initiated a chargeback for an issue that should have been resolved by other means—for example, through customer service or better billing descriptors.


The bottom line is that friendly fraud is both a burden and a cost for merchants. And in this article, we’ll help you understand:

  • What friendly fraud is and how it happens
  • The industries most at risk from friendly fraud
  • The steps you can take to combat friendly fraud

Friendly fraud is on the rise

Chargebacks are not a problem that is going away. In fact, a recent study that was conducted by, found that 27%of retailers had seen their chargeback rates increase in the last six months. And, as much as 10% of consumers admit that they would consider ‘playing the system’ by fraudulently initiating a chargeback in tight economic circumstances.

Businesses can't afford to ignore these statistics. Especially when facing difficult global economic headwinds.

3 industry verticals susceptible to friendly fraud

Friendly fraud is a risk for merchants in every industry. Yet, in some sectors, the risk is especially acute.

Video gaming

Friendly fraud is a common problem in the video gaming industry. This type of fraud may occur when a gamer decides to spend money on upgrade packs to beat a certain level and regret it later. Or, as we’ve seen in many headlines in recent years, it can also occur when purchases are made without the cardholder’s permission – kids using their mum’s credit card to make purchases without asking.


Online retailers are at constant risk of friendly fraud simply due to how easy it is for a consumer to say they didn’t receive the goods they ordered or that the goods are faulty. The growth of ecommerce due to the COVID-19 pandemic has seen instances of friendly fraud reach new heights.


While the travel industry has always dealt with its fair share of friendly fraud – the International Air Transport Association estimates that airline fraud costs airlines and travel agencies more than $800 million per year – the COVID-19 pandemic supercharged the risk. Airlines and other travel companies have received a wave of chargebacks over the past year, with travelers looking to get their money back from canceled trips. And while many of these chargebacks are legitimate, many are also likely to be instances of deliberate or friendly fraud.

Is friendly fraud preventable?

When it comes to fraud, nothing is completely preventable. But, there are measures that will help you keep your friendly fraud rates to a minimum. For businesses that have high chargeback rates, these measures will be an important step to bringing this rate down. 

Authenticating transactions is one of the measures that will prevent chargebacks. Analyzing transaction data will allow you to predict which transactions are likely to result in friendly fraud, you can then challenge those transactions. A digital fraud tool that makes use of machine learning and rules will help to stop suspicious activity before it becomes a dispute. 

If the transaction has already gone through, though, there are still steps you can take. Pre-disputes resolution tools should form part of your fraud strategy. This will allow you to resolve the dispute before the chargeback process starts. You can then resolve it before it counts toward your dispute ratio. 

A disputed resolution tool will then help you to easily manage your chargebacks and should increase your chances of winning disputes. This includes knowing what evidence to send for which dispute and doing this all through an easy-to-use dashboard. 

Practical tips to deal with friendly fraud

There are a few ways that you can deal with friendly fraud so that it doesn't have a big impact on your business. Here are a few practical tips:

  1. Clearly communicate your returns policy

  2. Keep the customer updated

  3. Improve your customer service

  4. Make your billing descriptors clear

  5. Consider delaying billing

  6. Recurring transactions should be canceled promptly

This is by no means an exhaustive list. Find out more about this topic here.

Discover if your payment service provider is ready to help you fight fraud

Your PSP should be a critical partner in your fight against fraud, friendly or not. Here are three questions you can ask to find out whether they’ve got the tools and expertise you need.

How much data are you leveraging to combat fraud?

Robust fraud protection requires lots of payment data — the more granular the better. The more a system knows, the more it can recognize when something looks odd.

Do you have in-house fraud experts?

The best fraud prevention strategies leverage both best-in-class technology and human expertise. The data may show you what’s happening, but it’s the experts that can tell you why and what to do about it.

How quickly can you solve this problem for us?

Any provider that says they can solve your problem quickly is misleading you. Fraud is fluid. If it’s stopped in one place, it’ll move to another. It’s a long-term game. And you need a payment provider that recognizes and is there to support you fight fraud for the long term.

Overcoming friendly fraud

Dealing with customer disputes, chargebacks and instances of friendly fraud are a reality of accepting payments. But there are plenty of tactics and tools at your disposal to minimize friendly fraud and all the costs and complexities involved.

Our disputes API provides recommended solutions and advice on responding to each dispute, helping you with case-by-case decision-making, resolving disputes faster and reducing the administrative costs involved.