Order Risk Reviews Should Also Focus on Friendly Fraud, Refund Fraud and Abuse

It is understood that manual order reviews are a critical component of fraud prevention strategies, but like risk strategies overall, manual reviews tend to focus on third party fraud and often neglect other forms of fraud and abuse. The harsh reality is that fraud is a broader problem than identity and third party payment fraud. Since the onset of the pandemic, other forms of fraud, such as refund and promotion abuse, have increased. Manual reviews need to broaden the scope accordingly.

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More than 36 percent of Consumers Admit to Friendly Fraud

More than 36 percent of consumers admitted to falsely claiming a transaction was unauthorized or fraudulent while 31 percent falsely claimed a product never arrived, arrived damaged or was unsatisfactory, according to a recent study. While there is overlap of consumers who have made each of these false claims, this represents a meaningful share of consumers who knowing and willingly committed friendly fraud.

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Mobile Wallets Responsible for The Rise in Friendly Fraud

Merchants are less likely to dispute chargebacks on transactions originating from mobile wallets and significantly less likely to win those they choose to represent. Consumers may be more prone to commit friendly fraud with mobile wallet transactions and the dishonest ones may already be exploiting this trend.

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Who Is Looking Out For eCommerce Merchants?

Guest Post Written by: Daryn Griggs, Co-Founder, Payshield, Certified eCommerce Fraud Professional

The events of COVID 19 have seen a massive increase in online shopping around the world including people who have never shopped online before. Naturally with an increase in online shopping comes an increase in online fraud, and the biggest fraud increase? Friendly Fraud!

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Using Compelling Evidence to Combat Chargebacks for Your Business

Guest Post & Case Study by: J. Carlson, Certified eCommerce Fraud Professional

Chargebacks involve quite a few stringent processes and complex procedures. Making sure you provide adequate information when challenging a chargeback dispute is key. One thing that you can do is provide compelling evidence in those cases where the cardholder has claimed Fraud – Card not present (10.4) or Merchandise/Services Not Received (13.1).

Compelling evidence documentation can be used to provide support for various card not present transactions including charges for airlines, digital goods, and recurring billing services. Some forms of documentation that would be accepted as Compelling Evidence are: Purchase details and description of services, Renewal and cancellation terms accepted by the cardholder and proof of a previous transaction that was not disputed.

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Couple Serving 5 Years for $1.2 Million in Friendly Fraud

An Indiana couple made over 2,700 purchases from Amazon over the period of a few years, creating new accounts and morphing their identities to continually report goods as damaged or never having arrived. The professional fraudsters stole more than $1.2 million in electronics, but now each face more than five years behind bars.

Erin and Leah Finan purchased laptops, video game systems, cameras and other electronics from Amazon before reporting the goods damaged. From 2014 to 2016 the couple created hundreds of fake accounts to make thousands of purchases, getting new items sent at no charge. They then resold these electronics to an associate, sentenced to two years, who brought them to the black market.

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Common Chargebacks Often Associated with First Party Fraud

There are many schemes used to defraud eCommerce merchants which range from buying goods with compromised identity and payment account information to consumers using their real information and later abusing either the merchant’s return policies or their issuing bank’s chargeback and dispute process in attempts to keep both the purchased good or service and their money. The latter, schemes known as friendly fraud or first party fraud, are difficult for merchants to protect against because the customer provides real and verifiable data points while the chargeback process tends to favor consumers over merchants. Here I discuss some common chargebacks that merchants may see when a customer is abusing the chargeback and dispute process to commit friendly fraud as well as measures merchants can take to prevent against them.

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Issuing Banks Becoming More Strict with Friendly Fraud Chargeback Claims

In response to an increasing number of consumers making erroneous chargeback claims that a good was never received or a transaction was never authorized, issuing banks have adjusted their chargeback procedures to demand more from consumers initiating the chargeback while also ruling in favor of the merchant more often than before.

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Return Fraud Statistics from the NRF

The National Retail Federation estimates that return fraud cost merchants $14.37 billion in 2011 up from $13.66 billion in 2010. In a survey of over 100 retailers the NRF found that return fraud affects an overwhelming majority of merchants through various types of friendly fraud schemes.

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Repeat Friendly Fraudsters Caught for Commission Scam

Two U.S. brother’s, Andrew and Allen Chiu, we’re blocked from making purchases from Nordstrom.com after excessive chargeback claims and causing the department store significant losses in friendly fraud. The two then moved on to a scam in which they illegitimately earned commission payouts, but they have since been arrested and have pled guilty on charges of wire fraud.

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