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Friendly Fraud: What Is It & How Do You Stop It?

Working in risk management comes with a certain amount of difficulties. But when the cardholder is in fact the perpetrator, it only gets more complicated.

With the pandemic forcing more consumers to turn to eCommerce, the issues of friendly fraud and more prevalent than ever before.

What Is Friendly Fraud?

Friendly fraud sees a cardholder file a chargeback against a transaction made on their account, sometimes with the explicit knowledge that they received the product or service.

While it can happen following a genuine mistake, friendly fraud covers both accidental fraud and malicious fraud. 

The challenge lies in proving that a cardholder acted maliciously to defraud a company.

Five Examples of Friendly Fraud

Here are some examples of what is considered friendly fraud:

  1. Unintentional friendly fraud: When a customer makes a purchase but requests a refund from the bank due to either not recognizing the transactions in their bank account or forgetting it entirely. 
  2. Intentional friendly fraud: An act of genuine fraud. Here, a consumer makes a purchase knowingly but still requests a refund from the issuing bank. This sometimes can involve what is known as double dipping, including receiving a refund and chargeback while keeping an item.
  3. Merchant error: The issue lies with the merchant with a range of possible reasons such as lack of descriptors on a bank statement, missing products, delivery issues, etc.
  4. Family fraud: Also known as shared card fraud. An unauthorized purchase is made with a card that is not directly administered by the cardholder e.g: a child buying in-app purchases for a mobile game using their parents’ card.
  5. Policy abuse fraud: Given the demand from consumers for a seamless returns policy, some buyers will abuse a merchant’s availability of refund requests. 
Stop Chargebacks & Friendly Fraud

Discover how SEON’s frictionless fraud prevention can help you tackle friendly fraud without impacting the shopper journey.

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How Serious Is Friendly Fraud?

With consumer behavior changing due to the pandemic, digital transactions have increased dramatically resulting in more frequent friendly fraud cases.

According to statistics from Expert Market, friendly fraud is increasing every couple of years at a rate of around 41%, and 86% of chargebacks are “probable cases of ‘friendly fraud’”.

The COVID-19 pandemic has also greatly accelerated the increase in friendly fraud cases, especially for travel and ticketing companies. In many ways, chargebacks have become weaponized by consumers, who know they can put pressure on a company by asking for a refund directly from their bank. This is done to protest a return or cancellation policy, for instance. 

As Elena Emelyanova, Senior Payments and Fraud Manager at Wargaming put it in our podcast:

“I would say that with COVID, it definitely brought some new trends. And what is curious that I see now is that people become more sophisticated and more educated. Even friendly fraud or real fraudsters, they turn to read. We have some cases where we see that people know how to fight chargebacks, or they know the restrictions from our side, from a merchant’s side. People who didn’t understand the difference between refund and chargeback. Now they know about it.”

Consequences of Friendly Fraud to Your Businesses

When a customer bypasses the merchant’s refund policies to go directly to a bank, a chargeback fee is assigned by the acquiring bank to cover any of the related costs.

A merchant typically has 45 days to dispute a chargeback. However, the process can be tedious since the cardholder has the upper hand – unless you can provide specific evidence. 

For merchants, keeping their chargeback ratio as low as possible is imperative to ensure maximum profits. 

Furthermore, the cost of shipping the original item has to be factored in with other operational costs.

friendly fraud vs chargeback fraud

How to Prevent Friendly Fraud

Despite being in a weak position when faced with a dispute, merchants can take several steps to combat friendly fraud and minimize risks.

The first is to prevent malicious friendly fraud. It is essentially the same process as preventing standard chargeback fraud. You want to link an ID to the card, but also log information to prove the buyer’s intent. 

If the data provided by the customer is investigated via a social media lookup tool and it returns a different person than the name on the card, you can then ask for further verification, such as signing an authorization document, or a face ID selfie.

When it comes to managing friendly fraud after a refund request, the first step is to communicate with the customer. You can understand whether it was chargeback fraud or friendly fraud, and treat it as an opportunity to gain insights into the customer experience.

Incorporating social media lookup details in the chargeback dispute process can also make the bank decide in your favor. While a cardholder can claim that the transaction was unauthorized, if you can prove there was no attempt to resolve the issue from their side, you convince the bank they aren’t acting in good faith.

Finally, family fraud, or first-party fraud, is extremely hard to dispute. For many businesses, it’s easier to issue a refund directly to the customer. This saves money on chargeback fees and preserves your chargeback rate too.

friendly fraud figures stats

Key Challenges When Fighting Friendly Fraud

A major issue in separating the two cases is that, from the point of view of an anti-fraud system, both of these transactions will look legitimate. The buyer has physical access to the card and is often the same person who is ordering the item or service. 

Fraud prevention systems find friendly fraud hard to spot since it’s committed by legitimate customers doing legitimate transactions.
There are no patterns to spot, no way to detect malicious intentions, it sometimes comes down to a matter of “your word vs mine”.

Another key issue is the lack of awareness from the consumer of chargeback fees. A recent study by Expert Market revealed that 81% of cardholders have filed a chargeback out of “convenience”.

The consumers’ preference for convenience and lack of payments knowledge ultimately means that merchants are facing further losses to their revenue.


Blacklisting a customer is the worst-case scenario. But sometimes, it’s the best option. 

Before it comes to that, however, you can implement effective chargeback management software that mitigates risk without impacting your frictionless user experience.

At SEON, we believe merchants can take control of the chargeback processes by integrating social media lookup into your KYC process.

You can read more about how we do it in our case studies with a crypto exchange or marketing software to see how SEON can decrease your friendly fraud rates today.

Still Not Sure if We Can Help?

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Frequently Asked Questions

Do banks investigate friendly fraud?

When a chargeback is claimed, often the issuing bank immediately refunds the customer with a provisional credit to that customer’s account. It is then up to the merchant if they wish to dispute and then an investigation will take place.

How do you know if a chargeback is friendly fraud?

Sadly it’s near on impossible to 100% confirm if friendly fraud as the customer can simply deny any claims.

How do you prove friendly fraud?

For merchants, proving friendly fraud is a challenge, because it is a form of first-party fraud, where the fraud is being committed by the legitimate cardholder. You can prove friendly fraud to the bank or any other stakeholder by demonstrating that you have used best safety practices throughout the ordering, payment and fulfillment process. C

Can machine learning detect friendly fraud?

Machine learning can be trained to detect unusual patterns in purchases and other behavior, so it can flag potential cases of friendly fraud. What’s more, it always improves over time, so it is more likely to do so in the longer run.

You might also be interested in reading about:

Learn more about:

Data Enrichment | Browser Fingerprinting | Device Fingerprinting | Fraud Detection with Machine Learning & AI


  • Qredible: In-App Purchases: Consumer Protection Rights in the UK
  • Expert Market: Chargeback Fraud Statistics 2021: Everything You Need to Know About Chargeback Fraud
  • Justice – United States Department of Justice: New Orleans Man Sentenced To Six Years in Prison for Charges Related To Credit Card Fraud Conspiracy
  • Razorpay: Here’s Why Blacklisting Customers Is Bad for Your E-Commerce Business

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Author avatar
Bence Jendruszak

Bence Jendruszák is the Chief Operating Officer and co-founder of SEON. Thanks to his leadership, the company received the biggest Series A in Hungarian history in 2021. Bence is passionate about cybersecurity and its overlap with business success. You can find him leading webinars with industry leaders on topics such as iGaming fraud, identity proofing or machine learning (when he’s not brewing questionable coffee for his colleagues).

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