Traditionally, credit card fraud has been associated with criminals exploiting the system with stolen card credentials. Now that e-commerce sales have dramatically increased due to the pandemic, another form of fraud has been gaining momentum – friendly fraud.
Friendly fraud occurs when a customer makes a purchase with a credit or debit card and then disputes the charge with their bank, even though they don’t have a legitimate reason to do so. Examples of this type of fraud, also known as chargeback fraud, might happen when a customer has long-forgotten a recurring subscription, or claims an item wasn’t delivered or that they simply don’t remember making the purchase.
It has become so problematic, it can account for up to 75 percent of all chargebacks, according to Visa Inc. As with all disputed card transactions, which includes items purchased with stolen card credentials, the merchant must provide proof the transaction was legitimate to avoid a chargeback.
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