The COVID-19 pandemic has brought about unprecedented changes in the way we live and work. With the majority of the world’s population confined to their homes, online shopping and digital transactions have become the norm. However, this shift towards digital commerce has also led to an alarming increase in first-party misuse and friendly fraud.
A recent industry survey conducted by Chargebacks911, a leading chargeback management company, revealed that there has been a significant rise in first-party misuse and friendly fraud since the start of the pandemic. First-party misuse occurs when a customer disputes a legitimate transaction, while friendly fraud occurs when a customer disputes a transaction they authorized.
According to the survey, 66% of merchants reported an increase in first-party misuse during the pandemic, with 41% stating that they had seen a significant increase. Similarly, 64% of merchants reported an increase in friendly fraud, with 38% stating that they had seen a significant increase.
The reasons behind this increase are varied. One major factor is the financial strain that many people are experiencing due to job losses and reduced income. This has led some customers to dispute legitimate transactions in an attempt to recoup their losses. Additionally, the increased use of online shopping and digital transactions has made it easier for customers to dispute transactions without having to physically visit a store or bank.
The consequences of first-party misuse and friendly fraud can be severe for merchants. Chargebacks can result in lost revenue, increased chargeback fees, and damage to a merchant’s reputation. In some cases, excessive chargebacks can even lead to the termination of a merchant’s account with their payment processor.
To combat this issue, merchants need to take proactive measures to prevent first-party misuse and friendly fraud. This includes implementing fraud detection tools, providing clear and concise transaction descriptions, and offering excellent customer service to address any concerns or issues that customers may have.
In conclusion, the COVID-19 pandemic has brought about a significant increase in first-party misuse and friendly fraud. Merchants need to be aware of this issue and take proactive measures to prevent it from impacting their business. By implementing fraud prevention tools and providing excellent customer service, merchants can protect themselves from the financial and reputational damage caused by chargebacks.
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- Source: Plato Data Intelligence.