3 Tips for Eliminating Friendly Fraud

Friendly fraud has become a major burden for many retailers.

In these situations, the customer makes a purchase using a credit card and then petitions the bank or credit card company for a chargeback instead of a merchant-issued refund. In the end, the merchant then becomes responsible for footing the bill for the refund.

According to a recent report, retailers say friendly fraud occurs with 50% greater frequency than third-party fraud. The result for these businesses is a 1% reduction in legitimate sales and a 25% reduction in profits for online businesses.

To help reduce instances of friendly fraud, here are some of the steps your business can take to increase your chargeback protection.

1. Provide better customer service

A number of chargebacks are due to dissatisfied customers. You can preempt these chargebacks by ensuring your customer service team is well-trained in policies and procedures for helping customers that are unhappy with their purchase. That starts by proactively reaching out to them — in a friendly manner — after their purchase has been fulfilled. Send an email, make a quick phone call or reach out with a survey. And if a customer indicates they are not satisfied, work quickly to rectify the situation by offering a refund or exchange. From there, document the full exchange so that you and the rest of your team can learn from it and provide better service in the future. 

2. Make sure your team is trained on credit card procedures

That means they understand what your policies are — from providing identification to getting a signature — when accepting a credit card. 

3. Enlist help from a chargeback company

These companies can offer tools that alert you to chargebacks before they reach the bank’s attention. This will allow you to embed technology in your checkout page that communicates with your customers’ issuing banks to verify identity and validate the transaction. It will also allow you to refund the customer yourself instead of the customer going through the bank for a chargeback.

4. Make sure your refund policy is clear

Having a clearly stated refund policy will not only make it easier for customers to go through your business directly when they are dissatisfied with a purchase, it will also make it more difficult for them to go through their banking institution for a chargeback. 

Chargebacks can have heavy consequences for any retailer. By following these tips, however, you can help limit their impact. 

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