How to Protect Merchants from Friendly Fraud?

Fraud is the main threat to comfortable online transactions. While some consumers are worried about getting their payment data stolen by the evil geniuses of digital hacking, others become fraudsters with(out) even knowing it. 

Strange enough, this kind of fraud is called friendly fraud, but there’s nothing too friendly about it. 

This article covers what friendly fraud is, how it works, and what merchants can do to reduce it. 

Friendly Fraud Defined

Friendly fraud happens when a legitimate consumer decides to file a chargeback request, having purchased a certain product or service using their debit or credit card.  

It is different from genuine fraud in the sense that there’s no identity theft or unauthorized access to cardholder’s payment data. The consumer themselves makes a payment and then asks for a refund. 

Who Commits Friendly Fraud?

Friendly fraud can be intentional or accidental. 

In the case of intentional friendly fraud, the consumer is aware that they voluntarily entered their payment information and then submits a complaint. Typically, the consumer wishes to get a product or service without, while keeping the money. 

Accidental friendly fraud is not committed with personal gain in mind. For instance, the consumer might not remember ordering a certain product or they’ve ordered it twice. 

This kind of fraud is common with children and teenagers. Millions of youngsters play video games on smartphones and gaming consoles worldwide. Some of them decide to spice things up and buy credit without asking their parents while using their credit cards or digital wallets. Parents often request a chargeback in such cases, not because they want to trick the gaming company, but because they didn’t approve of the transaction. 

Why Do Companies Agree with Friendly Fraud?

The “Customer is always right” principle – and consumer protection legislation – are the two main reasons why companies accept and positively resolve chargeback requests. 

Bank card associations also advocate a consumer-centric chargeback policy, meaning that they approve of such complaints and reimburse consumers. 

But it can’t be that everyone wins. You’re right; merchants that receive chargeback requests and resolve them at consumers’ satisfaction, are charged with additional payment costs and processing fees. 

Chargeback vs. Refund

Bear in mind that a chargeback and a refund are not synonyms. A refund is less painful for the merchant in question because they simply receive a refund request directly from the consumer. If the merchant decides to refund the complaining party, there are no legal implications thereof. There’s also one major benefit: the happy buyer will most likely heap praise on the merchant in question for a user-centric refund policy. A chargeback, on the other hand, is an official complaint that a consumer submits to the card issuer. Most commonly, it’s resolved in the consumer’s favor, meaning that the merchant must pay out the money in question, plus cover the additional fees. 

Consumers and Friendly Fraud Effects

Some consumers keep committing friendly fraud almost as their business plan for ensuring commercial gains. Payment service providers (PSPs) and merchants alike monitor their payment processing procedures, with special focus on chargeback requests. If they discover that a certain consumer files regular chargebacks as a behavioral pattern, that person’s account can be suspended. Consequently, such consumers might be banned from carrying out digital transactions on some websites.  

Banks have their own ways of identifying friendly fraud because chargeback procedures also leech on their resources. Consumers caught behaving dishonestly in terms of unreasonable chargebacks can expect lower credit score or bank account suspension or termination. 

Chargeback-Induced Merchant’s Issues

We don’t have to say that merchants aren’t fond of chargebacks in any form, let alone friendly fraud. However, they’re not the only party that dislikes such situations. 

Credit card companies, banks and payment service providers are all keen on dodging refunds and chargebacks altogether. 

Every merchant with a high chargeback rate typically experiences certain financial damage. On the one hand, this might be due to additional processing fees that their PSP and acquiring bank could incur. On the other hand, a chargeback request originating from friendly fraud might leave the merchant without both the money and the product in question – the buyer doesn’t return the product while they get refunded. 

We can also imagine a situation where a merchant brings a stricter chargeback and refund policy, to reduce their chargeback rate. What could happen here is that they lose a certain percentage of honest customers who don’t get refunded for actual purchase mistakes. 

Last, but not least, honest consumers who weren’t refunded will tell the world about their bad experience with the merchant in question. The same goes for those who managed to trick that very merchant. All this noise in the merchant’s communication channel could spoil their business reputation. 

TPP Intel: Online payment fraud incurs serious losses in the eCommerce industry and many other business fields. Organizations and individuals alike must pay additional attention to stay safe when opening their merchant account and handle all their digital transactions. ThePayPortal is here to cover your back, from handling merchant account services to selecting secure payment gateways

Friendly Fraud Prevention and Reduction Tips

As merchants have a hard time proving that a chargeback is friendly fraud, prevention is the best cure for this condition. 

Here are the recommended steps every merchant should take to keep their chargeback level low and their revenue high:

  • Straightforward refund guidelines. In the world of digital payments and eCommerce in general, every ambiguity can be used against you. Therefore, merchants that have a straightforward refund policy reduce the risk of friendly fraud and chargeback. If the issue is settled between the merchant and the consumer, there’s no need for an official chargeback.
  • Clear product/service descriptions. Dissatisfied customers are more likely to ask for refunds, file chargebacks, and cause damage to merchants. Hence, merchants must describe their products and services as accurately as possible, including any potential defects they’re aware of. 
  • Highlight the price and all the fees. No one likes to order a product at one price, only to learn that it costs more once it’s delivered. Merchants must highlight the product price, shipping fees, and all other potential charges on their e-stores. Also, clearly state the delivery date or shipping period to avoid any dissatisfaction on that side. The more transparent the customer journey – and product travel – is, the less likely you are to receive a chargeback request. 
  • (Re)Mind the recurring transactions. Consumers usually support recurring transactions but there’s a catch: they like the recurring payments they’ve registered to and haven’t forgotten doing that. You must have found yourself in such a position – a stock-photo platform has just withdrawn funds from your bank account, at your astonishment. But you’ve forgotten you registered to that website last month because you needed a few photos for your blog post. To avoid such hassle, merchants should set email reminders and send them out to their subscribed buyers a few days before the due payment date. 
  • Ensure responsive customer service. A dissatisfied customer whose kid has just used their bank card to pay for some silly online game needs just a little of that human touch. If the merchant has provided contact details to kind and ever-present customer support, they won’t have to deal with time-demanding and cost-inducing chargebacks. 
  • Store the payment data for 180 days. Friendly fraud attempts don’t necessarily occur in the close aftermath of the purchase in question. On the contrary, months might pass before those amicable scammers file their request. Merchants that have stored email or smartphone messages, data on the time and date of the purchase, and consumer’s IP address are more likely to prove such demand as friendly fraud. 
  • Blacklist for merchant’s protection. Every merchant needs a bit of Raymond Reddington to repel the potential friendly fraudsters. Every serious business will create a list of buyers who have repeatedly asked for chargebacks and blacklist those who keep emerging as friendly fraudsters. 


Friendly fraud is hard to eradicate because there will always be consumers who act dishonestly. Still, merchants can defend themselves from excessive cases of friendly fraud using the tips above. 

If you need any help with implementing anti-fraud payment policy of any kind or general risk-mitigation measures, ThePayPortal is here to give you an extra hand.