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Friendly Fraud

Prerequisites

Before addressing friendly fraud, understand:

TL;DR
  • Friendly fraud = Legitimate cardholder disputing a valid transaction they actually made
  • 60-80% of chargebacks are friendly fraud, not true fraud
  • Win with Compelling Evidence 3.0: device match, IP geolocation, post-purchase login
  • Prevent with clear descriptors, easy refunds, and purchase confirmations
  • Different from first-party fraud (never-pay schemes) and third-party fraud (stolen identity)

Your customer bought it. Used it. Then called their bank and said they didn't.

The Issuer's Reality​

When a cardholder calls their bank to dispute, I don't see your beautiful evidence PDF yet. I see a transaction line item and a frustrated customer on the phone. If your descriptor is vague ("PAY*ACME" instead of "ACME WIDGETS"), you've already lost ground. The agent has 3 minutes to handle this call.

The bank's incentive: We want to keep the cardholder happy. They pay us interchange on every future purchase. You're a stranger who might never transact again. If you want to win a dispute, you have to make it impossible for me to side with my customer without breaking network rules.

That's the game. Now let's talk about how to play it.

Cross-Reference

See also Fraud vs. Friendly Fraud in the Chargebacks section.

Why Customers Do This​

Intentional Abuse​

  • Buyer's remorse disguised as fraud claim
  • "Cyber shoplifting" – get goods and money back
  • Exploiting merchant fear of chargeback ratios
  • Testing what they can get away with (see refund fraud)

Unintentional/Gray Area​

  • Forgot about subscription renewal
  • Didn't recognize merchant name on statement (see descriptors)
  • Family member made purchase (but knew them)
  • Genuinely confused but not malicious

Scale of the Problem​

StatisticSource
60-80% of chargebacks are friendly fraudIndustry estimates
40% of consumers who file a chargeback will do it again within 60 daysChargebacks911
Average merchant loses 1.5% of revenue to friendly fraudLexisNexis

Detection Indicators​

Strong Signals (Tier 1 Indicators)​

Use these in your evidence framework:

IndicatorSuggests Friendly Fraud
Delivery confirmed to billing address✅ Strong (CE 3.0)
Digital product accessed post-purchase✅ Strong
Customer contacted support before dispute✅ Strong
Device matches prior purchases✅ Strong (CE 3.0)
Customer logged in after purchase✅ Strong

Supporting Signals (Tier 2 Indicators)​

IndicatorNotes
Repeat customerEstablished relationship
Multiple prior successful transactionsPattern of legitimate use (CE 3.0 requires 2+)
IP matches billing locationCardholder present (see AVS)
No velocity indicatorsNot part of fraud attack

Fighting Friendly Fraud​

What I See on My Screen (Issuer Perspective)​

When representment comes in, I'm scanning for reasons to uphold your chargeback reversal. Here's what actually makes me pause:

  1. Visa CE 3.0 device match – If the device that disputed is the same device that made 3+ prior purchases with no disputes, that's hard to ignore.
  2. IP geolocation to billing address – Cardholder claims fraud, but IP was 2 miles from their billing address? That's awkward for them.
  3. Post-purchase login/access – For digital goods: if they logged in and used the product after the purchase date, they're lying.
  4. Support ticket before dispute – They contacted you about a problem, you offered a refund, they said "no thanks," then disputed? Document that.

What doesn't help: 15-page PDFs, screenshots of your TOS, generic delivery confirmations. I have 4 minutes to review your case.

Pre-Dispute Prevention​

  1. Clear merchant descriptors – "ACME INC" not "PAY*ACME". When the cardholder looks at their statement and doesn't recognize it, they call us. By then, you're already behind.
  2. Purchase confirmations – Email/SMS with line items. Make it obvious what they bought.
  3. Delivery confirmation – Photos work for physical goods. But Visa CE 3.0 credential matching is stronger than a photo.
  4. Easy refund path – Every customer who gets a refund from you is a dispute you never see.

Blacklisting Considerations​

Balance Required

Blacklisting friendly fraud abusers protects you, but:

  • False positives damage customer relationships
  • May violate network rules if too aggressive
  • Document evidence before blacklisting

Blacklist Criteria Suggestions​

Consider blacklisting after:

  • 2+ lost disputes from same customer
  • Clear evidence of abuse pattern
  • Customer admitted abuse (support recordings)

Next Steps​

Seeing friendly fraud chargebacks?

  1. Review Compelling Evidence 3.0 - Know what wins disputes
  2. Check your descriptors - Reduce "I don't recognize" claims
  3. Set up alerts - Resolve before they become chargebacks

Want to prevent friendly fraud?

  1. Improve descriptor clarity - Clear statement display
  2. Implement device fingerprinting - Build CE 3.0 evidence
  3. Make refunds easy - Refund is cheaper than chargeback

Ratio getting too high?

  1. Follow the playbook - Crisis response
  2. Understand network thresholds - Know the limits
  3. Consider blacklisting repeat abusers - Protect yourself