Despite its name, friendly fraud, also known as chargeback fraud, is anything but friendly. It occurs when a customer purchases something online using their own credit card, then asks their bank for a refund (chargeback) once they have received the purchased product or service. Instead of trying to settle any dispute with the merchant, the customer tells their bank that the product was never delivered or “I didn’t do it.” Unfortunately, when a chargeback happens, it’s the merchant who is left accountable for the transaction, no matter what measures they took to make sure the transaction was secure.
eCommerce merchants are often hit very hard with this type of scam. Tighter restrictions and detailed precautionary measures on point-of-sale transactions have encouraged this new fraud trend to grow. The shift to online credit card fraud has become a natural one for criminals. Don’t think that because you’re a small company, you won’t be targeted. Scam artists look at online shops that are more vulnerable to credit card fraud, ones that may not have all the securities in place that a larger business would have to by default.
As a merchant, you might think that to save money and be extra vigilant, you should manage your fraud screening in-house, especially if you’re a small company with a low overall sales volume. Because scam artists are constantly redesigning and upgrading their tactics, you would need to become a fraud expert to keep your business safe, which would leave you with little time to run your company. Think of it this way, to be a scam artist is a full-time job, which means protecting against them should be one too. That is why your best option is to use a Consumer Authentication solution like Cardinal Consumer Authentication. When an online transaction is authenticated with Cardinal, the merchant enjoys liability shift on the transaction, meaning that the issuing bank validates that the buyer is who they say they are, and takes over the liability if the transaction is fraudulent. This is key to helping you avoid fraudulent credit card scams while allowing you to continue what you started, your business.