The COVID-19 pandemic has brought about unprecedented changes in the way we live, work, and interact with each other. As businesses across the world struggle to stay afloat, a new report has revealed an alarming increase in first-party misuse, also known as friendly fraud, during the pandemic.
According to a recent industry survey conducted by Chargebacks911, a leading dispute mitigation and loss prevention firm, there has been a significant rise in friendly fraud cases since the outbreak of the pandemic. The survey found that 81% of merchants reported an increase in friendly fraud cases in 2020, with 66% of those cases being first-party fraud.
Friendly fraud occurs when a customer disputes a legitimate charge on their credit card statement, claiming that they did not authorize the transaction or that the product or service was not delivered as promised. In many cases, however, the customer is actually trying to get a refund for a purchase they made but no longer want or cannot afford.
First-party fraud is a type of friendly fraud where the customer intentionally makes a false claim against their own account. This can include claiming that a product was never received or that a charge was fraudulent when it was actually authorized by the customer.
The pandemic has created a perfect storm for first-party fraud. With millions of people losing their jobs or experiencing financial hardship, many are turning to friendly fraud as a way to get their money back. Additionally, the shift to online shopping has made it easier for customers to dispute charges without having to go through the hassle of returning a product.
The consequences of friendly fraud can be devastating for businesses. Not only do they lose revenue from the disputed transaction, but they also face chargeback fees and penalties from payment processors. In some cases, excessive chargebacks can even lead to the suspension or termination of a merchant account.
To combat friendly fraud, businesses need to take proactive measures to prevent it from happening in the first place. This includes implementing fraud detection tools, improving customer service, and providing clear and transparent refund policies. It is also important for businesses to educate their customers about the consequences of friendly fraud and the impact it can have on small businesses.
In conclusion, the increase in first-party misuse, also known as friendly fraud, during the pandemic is a cause for concern for businesses across the world. As the pandemic continues to impact our lives, it is important for businesses to take proactive measures to prevent friendly fraud and protect their bottom line. By implementing fraud prevention strategies and educating their customers, businesses can minimize the impact of friendly fraud and ensure their long-term success.
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- Source: Plato Data Intelligence.