Follow Us! ThumbsUp 20 8089 2900
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 recognising 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.
  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 purchases 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.

Find out how

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, friend 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.”

How Does Friendly Fraud Affect Online 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.

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 Scams

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 words 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 mitigate 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?

Partner with SEON to reduce fraud by 60% with the #1 fraud detection software<

Book a Demo

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.

What are the main types of chargebacks?

Chargebacks are often categorized into three areas: friendly fraud, merchant error or true fraud. 

You might also be interested in reading about:

Learn more about:

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

Sources used for this article:

  • 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

Share article

See a live demo of our product

Click here

Author avatar
Bence Jendruszak

Get our latest newsletter

Join over 6000 companies in getting the latest fraud-fighting tips