Unfortunately, as a retailer, there are many times when you will be faced with a chargeback. Sometimes they can be done by fraudulent customers while other times they can be done by mistaken customers. Here is a bit more about what is called within the industry as “friendly fraud.”
Friendly fraud is the term applied when a customer requests a chargeback from their bank or credit card company instead of the more traditional method of requesting a return from the company. In most cases, there is no actual malice involved. The customer is unaware that this is considered a negative in the eyes of the company who processes the cards for the company and that they will not be required to return the product. However, no matter what the intentions are, it is still a money-losing proposition for any company involved.
Experts in the industry state that even though there is a difference between the intentions of malicious chargebacks and honest mistakes, the difference is merely on paper because the end result is the same. The company is out both the product and the money and the customer has engaged in what amounts to cyber shoplifting.
There are several other ways that companies suffer from friendly fraud that the typical consumer may not even think about. The company will be out the fees charged to process the credit card in the first place, they will be charged a chargeback fee by the processing company, they will not be able to recoup the amount of money it took to ship the item, and they will have wasted resources in disputing the chargeback.
In term of retail danger, friendly fraud was never typically a danger. This is because, in the past, not as many people shopped online. In fact, online shopping is a relatively new phenomenon. It did not even exist as little as 200 years, for the most part. However, with the explosion of online shopping, companies such as Ethoca have started to offer protection from the threat of unfair chargebacks.
As you can see, this is a problem which can bugger many a company, no matter if they are large or if they are small. The best way to fight against this retail scourge is to learn more about it and to use the services of companies such as Ethoca who can teach the company how to protect their bottom line.