Increased seasonal revenue is great news for retailers, but as retail spending increases so too does the likelihood of ‘friendly fraud’. Fortunately, there are effective ways for you to protect your business.
Despite rising inflation, UK shoppers are expected to increase spending by £4 billion this holiday season, up five per cent from last year. That takes the seasonal total to a whopping £78.7 billion, which is certainly welcome news for retailers – and especially, e-retailers, who are expected to see the bulk of this growth. However, as customer purchases increase, retailers are likely to also experience an increase in ‘friendly fraud’. This occurs when a customer requests a chargeback after making a purchase with their credit card online, but keeps hold of both the goods and the refunded money.
A fraudulent chargeback may occur when a customer claims:
- The item wasn’t delivered
- The purchased item doesn’t match the online description
- They returned the item and have yet to receive a refund
- The order was cancelled but the item was still delivered
- The do not remember making the purchase
Some of these claims may indeed be valid, so it is important that a merchant has the right tools to determine the difference between a false and a legitimate refund request. The key here is knowing as much as possible about your customers and their buying habits. This is particularly important during the upcoming festive season, when online orders and returns are set to reach their annual peak.
Even when a merchant suspects friendly fraud may occur, disputing a chargeback can be time-consuming and expensive. Merchants are all too aware that calling out fraud can have a long-term negative impact on brand and reputation. So, it is sometimes easier or more efficient for the merchant to just ingest the cost of the chargeback, (plus the associated fines, fees and operational expenses) as a cost of doing business—a fact the savvy fraudster uses to their advantage.
In short, friendly fraud is no small issue and certainly not something merchants can afford to ignore. In fact, friendly fraud and chargeback fraud are together responsible for 71 per cent of merchant losses—compared to 29 per cent of revenues lost to so-called ‘true fraud’, such as theft or shoplifting. So, it is important that businesses take friendly fraud seriously and implement appropriate preventive measures.
As stated above, the key here is knowledge. Merchants nowadays have access to a range of innovative anti-fraud technologies that provide valuable customer data, allowing merchants to efficiently identify and prevent fraud—and find weaknesses within their payment environment.
One such solution is Verifi’s award-winning Cardholder Dispute Resolution Network (CDRN), which allows merchants to effectively assess and resolve disputes before they become chargebacks. This industry-leading technology’s ‘closed-loop’ network enables issuers to pause the chargeback process for up to 72 hours, so merchants can address the customer dispute before it is officially filed as a dispute—at which stage the process would usually become lengthy and costly for the merchant.
There’s nothing friendly about friendly fraud! With retail revenues expected to soar over the Christmas and holiday season, there’s no better time for merchants to implement an effective fraud solution to protect their hard-earned profits. To learn more about Verifi’s award-winning solutions, please contact us.