Red Flags: Indicators of Friendly Fraud

Chargeback fraud is an expensive problem for card-not-present merchants, and it’s a growing problem too. Visa estimates friendly fraud costs nearly €12 billion each year.

Ideally, merchants will prevent friendly fraud before it happens. However, that is easier said than done! Fortunately, there are several steps a merchant can take to hopefully keep fraudsters away. One of those tactics is to be on the lookout for suspicious behaviour.

Potential Signs of Friendly Fraud

There are several fraud red flags merchants should be mindful of. These actions can be a result of true criminal fraud or friendly fraud. Either way, you’ll want to keep an eye on transactions with the following characteristics.

  1. New customers are great, but they are also suspicious. Successful customer retention is a goal for a reason; loyal customers are better customers. A new shopper that hasn’t established a relationship with you might simply be looking for a new mark.
  2. Larger orders bring more profits; but if a chargeback is filed, they also bring more losses. Criminals like large orders because they have big profitability for them too. Watch for larger-than-normal transactions that include several items contributing to an expensive total or single big-ticket items.
  3. Check on orders that are comprised of several of the same item. Who—besides a criminal–would really want that t-shirt in all the sizes available?!
  4. If a fraudster has no intention of paying for the purchase, they won’t mind the extra cost associated with rush shipping. Keep an eye out for orders that must arrive quickly.
  5. It is easy to say an item was lost or broken during delivery if it heads overseas.
  6. Watch out for multiple orders on a single card (or multiple cards with the same billing address) that are being sent to various locations.
  7. Be wary of customers who call to check the status of their order. They might be laying the groundwork for a claim that the transaction wasn’t delivered.
  8. Follow up with repeat customers who have an order that deviates from the norm. This could include different items purchased or a different shipping address used. Maybe someone else in the family is making a purchase the primary cardholder won’t want to pay for. Or maybe a criminal has accessed the card.

Keep a close eye on transactions. Verify suspicious behaviour and information before processing the transaction. True customers will appreciate the extra effort you make to keep their finances safe.

By preventing chargeback fraud, a merchant will retain more profits, reduce losses, and ensure the longevity of their operation.

If you’d like help preventing friendly fraud, let us know. We’ll conduct a free chargeback analysis to identify potential problems and solutions.