True Fraud vs. Chargeback Fraud

Fraud is simple enough to understand on it’s own. By definition, fraud is wrongful or criminal deception intended to result in financial or personal gain.

But when coupled with words like true and chargeback, fraud takes on markedly different meanings; especially for merchants. True fraud, friendly fraud, and chargeback fraud are all subsets of fraud that merchants need to address with fraud prevention and chargeback management.

True Fraud

Also known as identity theft, true fraud begins with payment acceptance from a stolen card. The fraudulent purchase is disputed by the cardholder which results the card account being closed and a new account number and card being issued to the customer.

Friendly Fraud

While closely related to chargeback fraud, friendly fraud involves no malicious intent from the cardholder. Simple forgetfulness, family members making unknown purchases, and misunderstandings of merchant return policies can all be at the root of friendly fraud.

Chargeback Fraud

Chargeback fraud is the fraudulent request for a return or refund in the form of a chargeback. The transaction passed fraud prevention, but is disputed by the cardholder in an attempt to regain the transaction dollar amount while retaining the product or services rendered.


True Fraud
0%
of fraud losses
Friendly Fraud
0%
of fraud losses
Chargeback Fraud
0%
of fraud losses

Friendly fraud and chargeback fraud are responsible for 71 percent of a merchant’s chargeback losses. True fraud represents less than one-third of total fraud losses.

Prevention Methods

Both true fraud and chargeback fraud have technologies and methodologies available to lessen their impact. Due to the nature of friendly fraud, similar prevention methods used for chargeback fraud aid in its prevention as well.

Preventing True Fraud

  • Automated transaction scoring
  • Rules-based filters
  • Transaction/customer profile databases
  • Real-time transaction tracking tools
  • Geolocation
  • Device ID/ Device fingerprinting
  • 3-D Secure tools

Preventing Chargeback Fraud

  • Customer Service
  • Merchant Descriptors
  • Return Policy
  • Product Descriptions
  • Realistic Expectations
  • Shipping/Tracking Info
  • Documenting Conversations

Revenue Recovery

Both friendly fraud and chargeback fraud manifest to merchants in the form of chargebacks. When merchants encounter chargebacks that represent friendly or chargeback fraud, the revenue is recoverable through a response process. However, revenue lost to true fraud is not recoverable.

Recovering Revenue Lost to True Fraud

  • None

Recovering Revenue Lost to Friendly and Chargeback Fraud


The chargeback ecosystem will always consist of a portion of legitimate chargebacks that you can’t recover. But with comprehensive management of the chargeback process, you can recover the revenue lost from chargeback fraud and friendly fraud.

Find out how to reveal true fraud, friendly fraud, and chargeback fraud in your store.