Noam Grinberg, Head of Risk Management at SafeCharge, gives 7 tips to online merchants to minimise the problem of friendly fraud.

“Friendly” fraud? It sounds ironic doesn’t it? This is a term for chargeback fraud, where a consumer makes an online transaction with their own credit card and subsequently requests a chargeback from their card issuer after the event, denying they had the goods or claiming they did not make the transaction.

Friendly fraud can vary a lot between types of online transactions. Some industries (for example financial services) are more affected by friendly fraud as the transactional amounts are much higher than in other sectors, and it is easier for the users to process chargebacks, claiming that they didn’t receive the service or didn’t authorise a transaction. In financial service business it is estimated that 70 % of the total transactions reported as fraud are friendly fraud, so it’s a big problem.

So how can online merchants reduce the risk of friendly fraud? It’s best to use a third party payment provider that can offer 3D Management where security is increased and conversion is reduced. Use sophisticated real-time rules engines that can block or flag suspicious sales, a risk platform to handle the system’s alerts and negative/positive lists. Have a system that can support combatting friendly fraud by setting limits and flagging excessive users but is also built to primarily address real fraud users.