If a product hasn't been delivered or is of a sub-par quality or, a customer can file a chargeback. It bypasses the customer service process of the merchant. Instead, the customer’s bank or credit card company will return the money to the customer by taking the money directly out of the merchant’s bank account.
The customer or cardholder must have a provable claim, and the merchant’s bank must OK the chargeback for it to go through. This is to reduce illegitimate chargebacks.
‘Friendly fraud’ is when a customer uses the chargeback system to attain a refund, rather than contacting the merchant directly. This can happen both accidentally, when a customer does not recognise a merchants name, and intentionally, when the customer intends to steal from the merchant for gain or profit.
Intentional friendly fraud includes customers that purchase a product with the intention of requesting a chargeback, or get buyer’s remorse. They want their money back, but they also want to keep the purchase, so Instead of arranging a return, they file a chargeback. This is disastrous for the merchant, who incurs not only the product loss, but the value of the product, delivery costs and a chargeback fee on top.
Accidental friendly fraud is when a customer flags up a purchase as illegitimate when it is legitimate. The most common reason this occurs is because products and services are charged on credit or debit cards under a trading name, instead of a name that the customer recognises, which leads the customer to file a chargeback request.
Although the chargeback system was designed to help prevent the merchant from stealing from the customer, there is little that has been done to protect the merchant from the customer. Payment help provide a service that helps merchants to minimise friendly fraud by helping their customers to check unknown or unfamiliar merchants that appear on their bank statements. When a customer checks a payment, they can identify the merchant and determine whether the transaction is legitimate. Delivery tracking can also help merchants identify intentional friendly fraud.
Contact us to learn more about minimising chargeback requests and costs.