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 period.
According to a recent industry survey conducted by Chargebacks911, a leading chargeback management company, there has been a significant rise in friendly fraud cases since the start of the pandemic. The survey found that 81% of merchants reported an increase in friendly fraud cases during the pandemic period, with 26% of merchants experiencing a surge of over 50% in such cases.
Friendly fraud occurs when a customer disputes a legitimate transaction with their bank or credit card company, claiming that they did not authorize the purchase or that the product or service was not as described. In reality, the customer may have received the product or service but is trying to avoid paying for it.
The pandemic has created a perfect storm for friendly fraud. With more people shopping online than ever before, there has been a surge in e-commerce transactions. At the same time, the economic uncertainty caused by the pandemic has led to financial hardship for many consumers, making them more likely to dispute transactions to save money.
The Chargebacks911 survey also found that merchants are struggling to deal with the increase in friendly fraud cases. Over 60% of merchants reported that they do not have a dedicated team to handle chargebacks and disputes, while 40% said that they do not have the necessary tools and technology to prevent friendly fraud.
The consequences of friendly fraud can be severe for merchants. Not only do they lose revenue from disputed transactions, 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’s account.
To combat friendly fraud, merchants need to take proactive measures to prevent disputes from occurring in the first place. This includes implementing fraud detection tools, improving customer service, and providing clear and accurate product descriptions. Merchants should also have a dedicated team to handle chargebacks and disputes, and work closely with their payment processors to resolve disputes quickly and efficiently.
In conclusion, the increase in friendly fraud during the pandemic period is a cause for concern for merchants across the world. As e-commerce transactions continue to rise, it is essential for merchants to take proactive measures to prevent disputes and protect their revenue. By investing in fraud prevention tools and improving customer service, merchants can reduce the risk of friendly fraud and ensure the long-term success of their business.
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- Source: Plato Data Intelligence.