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Fraud vs. Friendly Fraud

TL;DR
  • True fraud = Stolen card/identity, cardholder is the victim
  • Friendly fraud = Cardholder disputes their own legitimate purchase
  • This distinction determines your response strategy: fraud prevention vs. evidence collection
  • 60-80% of chargebacks are friendly fraud, not true fraud
Prerequisites

This page assumes familiarity with:

Understanding the critical distinction between true fraud and friendly fraud (first-party misuse).

Definitions​

True Fraud (Third-Party)​

An unauthorized transaction where the legitimate cardholder did not participate:

  • Stolen card credentials
  • Account takeover
  • Identity theft

Friendly Fraud (First-Party Misuse)​

A legitimate transaction disputed by the actual cardholder:

  • "I don't recognize this" (but made the purchase)
  • Family member made purchase without disclosure
  • Buyer's remorse disguised as fraud claim
  • Intentional abuse of chargeback process

Why It Matters​

AspectTrue FraudFriendly Fraud
Cardholder InvolvementNoneDirect
Representment PotentialLowHigh
Prevention MethodFraud detectionEvidence collection
LiabilityOften merchantDisputable

Detection Indicators​

Signs of Friendly Fraud​

  • ✅ Delivery confirmed to billing address
  • ✅ Device fingerprint matches prior purchases
  • ✅ IP geolocation consistent with cardholder
  • ✅ Customer contacted support before dispute
  • ✅ Digital goods accessed after purchase

Signs of True Fraud​

  • ⚠️ Shipping address differs from billing
  • ⚠️ New device/browser fingerprint
  • ⚠️ IP from different country
  • ⚠️ Multiple failed payment attempts
  • ⚠️ No prior customer relationship

Next Steps​

Dealing with friendly fraud?

  1. Review compelling evidence - Build winning cases
  2. Improve descriptors - Reduce recognition disputes
  3. Set up device fingerprinting - Prove cardholder involvement

Dealing with true fraud?

  1. Implement 3DS - Get liability shift
  2. Review prevention options - Stop fraud before it happens
  3. Enhance detection - Catch more fraud earlier

Trying to classify disputes?

  1. Check detection indicators - Score the signals
  2. Review third-party patterns - True fraud signs
  3. Review friendly fraud patterns - First-party abuse