CNP Expo: Don’t Get Burned by Friendly Fraud

May 22, 2013

Chargebacks are costing companies millions. A panel discussion at the 2013 CNP Expo on Wednesday morning examined best practices and techniques to avoid chargebacks and the “friendly fraud” that sometimes causes them. The first step, panelists said, is understanding the root cause of chargebacks and recognizing the difference between friendly fraud and criminal fraud.

“Friendly fraud is really buyer’s remorse. The card issuer has tagged it as fraud,” said Michael Mallon, Accertify product manager. “The approach is very different. We try to identify the behavior up front.”

Retailers are working to streamline the chargeback process, which has reduced their profit in the past. Families often generate chargebacks, usually when a child uses a parent’s credit card without permission. Businesses need to address situations like that quickly because they can fester, incurring more costs.

“The best way to attack that is to prevent it,” said Frans Roosen, Ron Allen Enterprises COO. “If you don’t handle it, that one chargeback turns into [more].”

Roosen suggested that companies should make sure the terms and conditions on their Website are accurate and they should use a third party, if necessary, to verify transactions. Roosen said his company has reduced chargebacks significantly.

The panel noted that social media is starting to be used as a weapon for merchants fighting chargebacks, according to Jason Hogsed, trust and safety manager for online ticketing merchant StubHub. Social media can be used to uncover fraud if a customer tries to get a chargeback for tickets when they actually attended the event, Hosged said. Social media could place them at the game or concert, giving StubHub proof that the ticket was used as well as paid for.