The Three Types of Fraud

True Fraud vs. Friendly 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.

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 amount while retaining the product or services rendered.

Chargeback Fraud
0%
of fraud losses

Friendly Fraud

While closely related to chargeback fraud, friendly fraud involves no malicious intent from the cardholder. Simple forgetfulness, family members making unknown purchases, or an un clear merchant descriptor can all be at the root of friendly fraud.

Friendly Fraud
0%
of fraud losses

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.

True Fraud
0%
of fraud losses

Prevention Methods

Each type of payment fraud has technologies and methodologies available to lessen their impact.

How to Prevent Chargeback Fraud

  • Customer Service
  • Easy/Clear Return Policy
  • Product Descriptions
  • Realistic Expectations
  • Shipping/Tracking Info
  • Documenting Conversations
  • Real-time Resolution

How to Prevent Friendly Fraud

  • Customer Service
  • Clear Merchant Descriptors
  • Product Descriptions
  • Shipping/Tracking Info
  • Documenting Conversations
  • Real-time Resolution

How to Prevent True Fraud

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

How to Stop Chargeback and Friendly Fraud with Real-time Resolution

Real-time Resolution (RTR) is a first-of-its-kind solution that catches invalid disputes at the source and prevents them from being filed. RTR in the Chargeback App enrolls merchants in Visa Merchant Purchase Inquiry (VMPI)—allowing for real-time communication of customer, order, and product detail to the issuing bank and customer. This data allows the dispute analyst to decide if the dispute is invalid and prevent it from being filed. In cases of friendly fraud, the additional data helps jog the cardholder’s memory about the purchase. And in cases where the cardholder is trying to intentionally misuse their chargeback rights, the extra layer of confirmation acts as a critical deterrent from proceeding with the dispute.

Revenue Recovery

Both friendly fraud and chargeback fraud can manifest to merchants in the form of disputes. 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

  • Can be recovered with a dispute response document

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.

Experience the Results of RTR for Yourself

Find out how RTR can help your business stop friendly fraud and chargeback fraud by scheduling a meeting with on of our dispute experts. They’ll work with you to understand your company’s unique situation, and what kind of impact you can expect RTR to have on your bottom line.

Schedule a Meeting